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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>As filed with the Securities and Exchange
Commission on July 9, 2012 </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right"><B>No.&nbsp;333-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>UNITED STATES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SECURITIES AND EXCHANGE COMMISSION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Washington, D.C. 20549</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>FORM S-1</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>REGISTRATION STATEMENT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><I>UNDER</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><I>THE SECURITIES ACT OF 1933 </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>MANDALAY DIGITAL GROUP, INC.<I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><I>(Exact name of registrant as specified
in its charter)</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 34%; font-size: 10pt; font-weight: bold; text-align: center">Delaware</TD>
    <TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 32%; font-size: 10pt; font-weight: bold; text-align: center">6794</TD>
    <TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 32%; font-size: 10pt; font-weight: bold; text-align: center">22-2267658</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><I>(State or other jurisdiction of</I></B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><I>incorporation or organization)</I></B></P></TD>
    <TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><I>(Primary Standard Industrial</I></B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><I>Classification Code Number)</I></B></P></TD>
    <TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><I>(I.R.S. Employer</I></B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><I>Identification Number)</I></B></P></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>4751 Wilshire Boulevard, Third Floor</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Los Angeles, California 90010</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(310) 601-2500</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><I>(Address, including zip code, and
telephone number, including</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><I>area code, of registrant&rsquo;s principal
executive offices)</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Peter Adderton</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Chief Executive Officer</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>4751 Wilshire Boulevard, Third Floor</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Los Angeles, California 90010</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(310) 601-2500</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in"><B><I>(Name, address,
including zip code, and telephone number, including area </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><I>code, of agent for service) </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><I>With Copies to:</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Robert H. Platt, Esq.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Manatt, Phelps&nbsp;&amp; Phillips, LLP</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>11355 West Olympic Boulevard</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Los Angeles, CA 90064</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(310)&nbsp;312-4000</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(310)&nbsp;312-4224 Facsimile</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this registration statement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">If any of the securities being registered
on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the
following box.&nbsp;&nbsp;<FONT STYLE="font-family: Wingdings">&thorn;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same offering.&nbsp;&nbsp;<FONT STYLE="font-family: Wingdings">&uml;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">If this Form is a post-effective amendment
filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.&nbsp;&nbsp;<FONT STYLE="font-family: Wingdings">&uml;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">If this Form is a post-effective amendment
filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.&nbsp;&nbsp;<FONT STYLE="font-family: Wingdings">&uml;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.&nbsp;See the definitions
of &ldquo;large accelerated filer,&rdquo; &ldquo;accelerated filer&rdquo; and &ldquo;smaller reporting company&rdquo; in Rule 12b-2
of the Securities Exchange Act of 1934.&nbsp;(Check one):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 19%">Large&nbsp;accelerated&nbsp;filer</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 52%; font-family: Wingdings">&uml;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 25%">&nbsp;Accelerated&nbsp;filer</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; font-family: Wingdings">&uml;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Non-accelerated filer</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Wingdings">&uml;<FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;&nbsp;(Do not check
    if a smaller reporting company)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;Smaller&nbsp;reporting&nbsp;company</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Wingdings">&thorn;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CALCULATION OF REGISTRATION FEE </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Title&nbsp;of&nbsp;Each&nbsp;Class&nbsp;of <BR>Securities&nbsp;to&nbsp;be&nbsp;Registered</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Amount <BR>to&nbsp;be<BR> Registered</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Proposed<BR> Maximum<BR> Offering&nbsp;Price<BR> Per&nbsp;Share</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Proposed<BR> Maximum<BR> Aggregate <BR>Offering&nbsp;Price</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Amount&nbsp;of <BR>Registration&nbsp;Fee</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 30%">Shares of common stock, <BR>par value $0.0001 per share</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 30%; text-align: center; padding-left: 10pt">23,310,473(1)(2)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">$0.745 (3)</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">$17,366,302</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">$1,990.18</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-size: 10pt">(1)</FONT></TD><TD><FONT STYLE="font-size: 10pt">Consists of 17,989,047 issued and outstanding shares of common stock and 5,321,426 shares of
common stock issuable upon the exercise of certain warrants to purchase common stock.&nbsp;The shares registered are offered for
resale by the selling stockholders named in the prospectus.</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(2)</TD><TD>Pursuant to Rule 416 under the Securities Act of 1933, as amended, there is also being registered hereby such indeterminate
number of additional shares of common stock of the registrant as may be issued or issuable in respect of the registered shares
to prevent dilution resulting from stock splits, stock dividends, stock distributions and similar transactions.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-size: 10pt">(3)</FONT></TD><TD><FONT STYLE="font-size: 10pt">Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c)
under the Securities Act of 1933 and based on the average of the high and the low price of common stock on July 5, 2012,
as reported by the OTC QB market operated by OTC Markets Group, Inc.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>The registrant hereby amends this registration statement
on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which
specifically states that this registration statement shall thereafter become effective in accordance with Section&nbsp;8(a) of
the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities
and Exchange Commission, acting pursuant to said Section&nbsp;8(a), may determine.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; color: #DE1A1E"><B>The information in this prospectus is not
complete and may be changed.&nbsp;The selling stockholders may not sell these securities under this prospectus until the registration
statement of which it is a part and filed with the Securities and Exchange Commission is effective.&nbsp;This prospectus is not
an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale
is not permitted.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; color: #DE1A1E"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="color: #DE1A1E"><B>SUBJECT
TO COMPLETION, DATED </B></FONT><FONT STYLE="color: red"><B>July 9, </B></FONT><B><FONT STYLE="color: #DE1A1E">2012</FONT></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>PROSPECTUS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><img src="logo.jpg"></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 24pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 12.25pt"><B>Mandalay Digital
Group, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 12.25pt"><B>23,310,473 Shares
of Common Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 12.25pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">This prospectus relates to the offering
by the selling stockholders of Mandalay Digital Group, Inc. named in this prospectus of up to 23,310,473 shares of common stock,
par value <B>$</B>0.0001 per share.&nbsp;All of the shares of common stock offered by this prospectus are being sold by the selling
stockholders. These shares include 17,989,047 issued and outstanding shares of common stock and 5,321,426 shares of common stock
issuable upon the exercise of certain warrants to purchase common stock.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 12.25pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 12.25pt">The selling security holders will offer
their shares of our common stock at a fixed price of $1.00 per share until the shares of our common stock are quoted on the OTC
Bulletin Board, or listed for trading or quoted on any other public market, and thereafter at prevailing market prices or privately
negotiated prices.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">The selling stockholders may sell the common
shares to or through underwriters, brokers or dealers or directly to purchasers. Underwriters, brokers or dealers may receive discounts,
commissions or concessions from the selling stockholders, purchasers in connection with sales of the common shares, or both. Additional
information relating to the distribution of the common shares by the selling stockholders can be found in this prospectus under
the heading &ldquo;Plan of Distribution.&rdquo; If underwriters or dealers are involved in the sale of any securities offered by
this prospectus, their names, and any applicable purchase price, fee, commission or discount arrangement between or among them,
will be set forth, or will be calculable from the information set forth, in a supplement to this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">The selling security holders may dispose
of their securities from time to time through one or more of the means described in the section entitled &ldquo;Plan of Distribution&rdquo;
beginning on page  30 of this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">We will not receive any proceeds from the
sale of common stock by the selling stockholders. We will receive proceeds from the selling stockholders from any exercise of their
warrants made on a cash basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">Our common stock is traded on the OTC QB
market operated by OTC Markets Group, Inc. under the symbol &ldquo;MNDL.&rdquo;&nbsp;On July 5, 2012, the closing price
of our common stock was $0.79 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt"><B>Investing in our common stock involves
a high degree of risk.&nbsp;Before making any investment in our common stock, you should read and carefully consider the risks
described in this prospectus under &ldquo;Risk Factors&rdquo; beginning on page&nbsp;7 of this prospectus.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt"><B>You should rely only on the information
contained in this prospectus or any prospectus supplement or amendment thereto.&nbsp;We have not authorized anyone to provide you
with different information.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;<B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful
or complete.&nbsp;Any representation to the contrary is a criminal offense.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>This prospectus is dated &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2012 </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"><B>TABLE OF CONTENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 90%">&nbsp;</TD>
    <TD STYLE="width: 4%; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 6%; text-align: center">Page</TD></TR>
<TR>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 12pt; text-indent: -12pt">CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">ii</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 12pt; text-indent: -12pt">ABOUT THIS PROSPECTUS</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">iii</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 12pt; text-indent: -12pt">WHERE YOU CAN FIND MORE INFORMATION</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">iii</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 12pt; text-indent: -12pt">PROSPECTUS SUMMARY</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">1</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 12pt; text-indent: -12pt">RISK FACTORS</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">7</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 12pt; text-indent: -12pt">SELLING STOCKHOLDERS</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">27</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 12pt; text-indent: -12pt">DETERMINATION OF OFFERING PRICE</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">30</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 12pt; text-indent: -12pt">PLAN OF DISTRIBUTION</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">30</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 12pt; text-indent: -12pt">USE OF PROCEEDS</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">32</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 12pt; text-indent: -12pt">MARKET PRICE OF AND DIVIDENDS ON COMMON STOCK
    AND RELATED MATTERS</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">32</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 12pt; text-indent: -12pt">BUSINESS</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">38</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 12pt; text-indent: -12pt">MANAGEMENT&rsquo;S DISCUSSION AND ANALYSIS
    OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">44</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 12pt; text-indent: -12pt">DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
    GOVERNANCE</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">65</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 12pt; text-indent: -12pt">EXECUTIVE COMPENSATION</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">68</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 12pt; text-indent: -12pt">DIRECTOR COMPENSATION</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">73</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 12pt; text-indent: -12pt">SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
    AND MANAGEMENT</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">75</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 12pt; text-indent: -12pt">CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    AND DIRECTOR INDEPENDENCE</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">77</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 12pt; text-indent: -12pt">DESCRIPTION OF CAPITAL STOCK</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">80</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 12pt; text-indent: -12pt">LEGAL MATTERS</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">83</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 12pt; text-indent: -12pt">EXPERTS</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">83</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 12pt; text-indent: -12pt">FINANCIAL STATEMENTS</TD>
    <TD>&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: center">F-1</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">This prospectus contains
forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Our forward-looking statements relate to future events or our future performance and
include, but are not limited to, statements concerning our strategy, future operations, future financial position, projected expenses,
prospects and plans and objectives of management. Other statements contained in this prospectus that are not historical facts are
also forward-looking statements.&nbsp;&nbsp;You can sometimes identify forward-looking statements by our use of forward-looking
words like &ldquo;may,&rdquo; &ldquo;will,&rdquo; &ldquo;could,&rdquo; &ldquo;should,&rdquo; &ldquo;expects,&rdquo; &ldquo;intends,&rdquo;
&ldquo;plans,&rdquo; &ldquo;anticipates,&rdquo; &ldquo;projects,&rdquo; &ldquo;believes,&rdquo; &ldquo;estimates,&rdquo; &ldquo;seeks,&rdquo;
&ldquo;predicts,&rdquo; &ldquo;potential,&rdquo; or &ldquo;continue&rdquo; or the negative of these terms and other similar expressions
and terminology.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">We caution investors
that any forward-looking statements presented in this prospectus, or that we may make orally or in writing from time to time, are
based on the beliefs of, assumptions made by, and information currently available to, us. Although we believe that the plans, objectives,
expectations and intentions reflected in or suggested by our forward-looking statements are reasonable, those statements are based
only on the current beliefs and assumptions of our management and on information currently available to us and, therefore, they
involve uncertainties and risks as to what may happen in the future.&nbsp;&nbsp;Accordingly, we cannot guarantee that our plans,
objectives, expectations or intentions will be achieved.&nbsp;&nbsp;Our actual results, performance (financial or operating) or
achievements could differ from those expressed in or implied by any forward-looking statement in this prospectus as a result of
many known and unknown factors, many of which are beyond our ability to predict or control, and those differences may be material.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">For further discussion
of these and other factors see the sections in this prospectus entitled &ldquo;Management&rsquo;s Discussion and Analysis of Financial
Condition and Results of Operations&rdquo; and &ldquo;Risk Factors.&rdquo; This prospectus and all other written and oral forward-looking
statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements
contained in or referred to in this section.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">Our forward-looking
statements speak only as of the date they are made and should not be relied upon as representing our plans, objectives, expectations
and intentions as of any subsequent date.&nbsp;&nbsp;Although we may elect to update or revise forward-looking statements at some
time in the future, we specifically disclaim any obligation to do so, even if our plans, objectives, expectations or intentions
change.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ABOUT THIS PROSPECTUS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">You should rely only
on the information contained in this prospectus. We have not authorized any person to provide you with different or inconsistent
information. If anyone provides you with different or inconsistent information, you should not rely on it. Neither we nor the selling
stockholders are making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should
assume that the information appearing in this prospectus is accurate only as of their respective dates. The Company's business,
financial condition, results of operations and prospects may have changed since such dates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">Unless otherwise indicated
or unless the context requires otherwise, all references in this prospectus to the &ldquo;Company,&rdquo; &ldquo;the registrant,&rdquo;
&ldquo;we,&rdquo; &ldquo;us,&rdquo; and &ldquo;our&rdquo; mean Mandalay Digital Group, Inc., a Delaware corporation, including
our wholly-owned subsidiary Twistbox Entertainment, Inc. (&ldquo;Twistbox&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>WHERE YOU CAN FIND MORE INFORMATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">We file annual reports,
quarterly reports, current reports, proxy statements and other information with the Securities and Exchange Commission, or SEC.&nbsp;You
may read or obtain a copy of these reports at the SEC, public reference room at 100 F Street, N.E., Room 1580, Washington, D.C.
20549, on official business days during the hours of 10:00 am to 3:00 pm.&nbsp;You may obtain information on the operation of the
public reference room and its copy charges by calling the SEC at 1-800-SEC-0330.&nbsp;The SEC maintains a website that contains
registration statements, reports, proxy information statements and other information regarding registrants that file electronically
with the SEC.&nbsp;The address of the website is www.sec.gov.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">We have filed with
the SEC a Registration Statement on Form S-1&nbsp;under the Securities Act&nbsp;with respect to the shares of common stock being&nbsp;offered
by this prospectus.&nbsp;This prospectus is part of that registration statement.&nbsp;This prospectus does not contain all of the
information set forth in the registration statement or the exhibits to the registration statement.&nbsp;For further information
with respect to us and the shares offered by the selling stockholders pursuant to this prospectus, you should refer to the registration
statement and its exhibits.&nbsp;Statements contained in this prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete, and you should refer to the copy of that contract or other documents filed as
an exhibit to the registration statement.&nbsp;You may read or obtain a copy of the registration statement at the SEC&rsquo;s public
reference room and website referred to above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt"><B>&nbsp;</B></P>

<DIV STYLE="padding: 3pt; border: Black 1pt solid">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PROSPECTUS SUMMARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt"><I>This summary highlights
information contained throughout this prospectus and is qualified in its entirety to the more detailed information and financial
statements included elsewhere in this prospectus. This summary does not contain all of the information that should be considered
before investing in our common stock.&nbsp;Investors should read the entire prospectus carefully, including the more detailed
information regarding our business, the risks of purchasing our common stock discussed in this prospectus under &ldquo;Risk Factors&rdquo;
beginning on page&nbsp;7 of this prospectus and our financial statements and the accompanying notes beginning on page F-1 of
this prospectus.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Our Company</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Mandalay Digital Group,
Inc. (&quot;Mandalay&quot; or the &quot;Company&quot; or, in the first person as &ldquo;we&rdquo; &ldquo;us&rdquo; and &ldquo;our&rdquo;),
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,&nbsp;the Company&nbsp;reincorporated
in the State of Delaware under the name Mandalay Media, Inc.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On May 11, 2010, Mandalay
Media, Inc. merged into its wholly-owned, newly formed subsidiary, NeuMedia Inc., with NeuMedia as the surviving corporation. NeuMedia
issued: (1) one new share of common stock in exchange for each share of outstanding common stock of Mandalay Media, Inc. and (2)
one new share of preferred stock in exchange for each share outstanding preferred stock of Mandalay Media, Inc. as of May 11, 2010.
The preferred and common stock of NeuMedia had the same status and par value as the respective stock of Mandalay Media, Inc. and
NeuMedia acceded to all the rights, acquired all the assets and assumed all of the liabilities of Mandalay Media, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On October 27, 2004,
and as amended on December 17, 2004, NeuMedia 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 &ldquo;Plan of Reorganization&rdquo;). Under
the Plan of Reorganization, as completed on January 26, 2005: (1) NeuMedia&rsquo;s net operating assets and liabilities were transferred
to the holders of its secured notes in satisfaction of the principal and accrued interest thereon; (2) $400,000 was transferred
to a liquidation trust and used to pay administrative costs and certain preferred creditors; (3) $100,000 was retained by NeuMedia
to fund the expenses of remaining public; (4) 3.5% of the new common stock of NeuMedia (140,000 shares) was issued to the holders
of record of NeuMedia&rsquo;s preferred stock in settlement of their liquidation preferences; (5) 3.5% of the new common stock
of NeuMedia (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 NeuMedia (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, NeuMedia and its subsidiaries
were engaged in providing business-to-business transaction management services designed to simplify trading between buyers and
suppliers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Prior to February 12,
2008, NeuMedia was a public shell company with no operations, and controlled by its significant stockholder, Trinad Capital Master
Fund, L.P.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">From February 12, 2008
to October 23, 2008, our sole operations were those of our wholly-owned subsidiary, Twistbox. In October 2008, we acquired AMV
Holding Limited and its subsidiaries, a mobile media and marketing company. On June 21, 2010, we sold AMV Holding Limited and its
subsidiaries.</P>

</DIV>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

<DIV STYLE="padding: 3pt; border: Black 1pt solid">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Current Operations</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Mandalay is at the convergence of Internet
media content and mobile communications. We are an established provider of mobile services enabling mobile content distribution
and transactions serving Mobile Operators, End Consumers, and Original Equipment Manufactures (OEM&rsquo;s) of mobile devices and
tablets. Our software as a service (&quot;SaaS&quot;) based platform delivers a mobile services platform that works with mobile
operators and third-party publishers to provide portal management, user interface, content development and billing technology that
enables the ecosystem required for the global distribution of mobile content. Our platforms enable our customers to implement an
intuitive user experience and storefront, enabling the discovery, purchase and download of mobile content. Our integrated solutions
address the mobile ecosystem spanning mobile optimized websites, mobile applications, mobile merchandising and content management,
mobile messaging, mobile advertising, mobile billing and predictive analytics. Our solutions allow our customers to drive loyalty,
generate revenue and reengineer business processes to capture the advantages of their mobile-enabled customer base. Our predictive
analytics capabilities allow our customers to recommend the right solution to their end-customer based upon the consumers&rsquo;
tastes and preferences. We are headquartered in Los Angeles and have offices in Europe to support global sales and marketing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Digital Turbine</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On December 28, 2011,
the Company acquired the assets of Digital Turbine Group, LLC, the developer of Digital Turbine (&ldquo;DT&rdquo;), a technology
platform that allows media companies, mobile carriers, and their OEM handset partners to take advantage of multiple mobile operating
systems across multiple networks, and offers solutions that allow them to maintain their own branding and personalized, one-to-one
relationships with each end-user. DT&rsquo;s cross-platform user interface and multimedia management system for carriers and OEMs
can be integrated with different operating systems to provide a more organized and unified experience for end-users of mobile content
across search, discovery, billing, and delivery. Other aspects of the platform, such as a smart content discovery toolbar, allows
carriers and OEMs to control the data presented to their users while giving the end-user a more efficient way of finding and purchasing
the desired content.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">With the acquisition
and integration of the assets of Digital Turbine, the Company will be able to provide an end-to-end, modular platform to the Company&rsquo;s
existing carrier customers. The combined Digital Turbine offering allows new and existing customers to choose from a fully outsourced,
smart mobile ecosystem to more efficient, modular components that can be integrated with different operating systems to provide
a more unified experience for end-users of mobile content across search, discovery, billing, and delivery.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Based upon the initial
launch data, the Company believes there is an opportunity to integrate its DT platform with new and existing mobile carriers. Mobile
carriers are facing increased competition from competing mobile application storefronts and improved user experiences from other
retailing, social networking, and operating system providers including Apple, Google, Amazon, and Facebook. As a result, operators
are looking for new, innovative solutions for how they better manage their existing user experience. The DT platform can be &ldquo;white-labeled&rdquo;
to allow operators to custom tailor their own unique branding experience to the customer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition to improved
user experiences, many operators are looking for end-to-end solutions for their mobile storefronts that include procuring and programming
the content, managing the content experience, ingesting content into the content management system (CMS), securely installing and
de-installing applications from the device, and integrating with the back-end elements such as billing interfaces, analytics, settlement,
and reporting.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Twistbox Entertainment, Inc.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Twistbox Entertainment,
Inc. (&ldquo;Twistbox&rdquo;) is a global publisher, developer and enabler of mobile content and data services across mobile networks.
Twistbox provides its services in over 14 countries supporting over 50 carriers. Since operations began in 2003, Twistbox has developed
an intellectual property portfolio that includes a proprietary mobile publishing platform covering: tools that automate device
management; distribution and billing technology; a mobile games development, distribution and retail platform; and a content ratings
system adopted by wireless carriers globally to assist with the deployment of age-verified content. Twistbox has leveraged its
intellectual property and carrier-class platforms to secure agreements with leading mobile operators throughout the world including,
among others, Vodafone, Telefonica, Orange, and Hutchison&rsquo;s 3.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are considering
the future status and role of Twistbox in relation to our focus on the DT platform. Although it is our only active business, Twistbox
revenues have been declining, which we expect to continue for the foreseeable future. At the same time, we intend to seek to leverage
its existing customer base for offerings by DT. While we believe the offering of DT&rsquo;s platform to Twistbox customers is an
attractive strategy, it entails significant risks, some of which are described in &ldquo;Risk Factors&rdquo;, and include the possibility
that Twistbox may operate at a deficit while we need to make investments to effectively launch DT, which, in turn, entails business
and financial risks and the possibility of needing additional capital and the associate dilution.</P>

</DIV>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; color: blue">&nbsp;</P>

<DIV STYLE="padding: 3pt; border: Black 1pt solid">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Twistbox&rsquo;s target
customers are the highly-mobile, digitally-aware 18 to 40 year old demographic. This group is a leading consumer of new mobile
handsets and represents more than 50% of mobile content consumption revenue globally. In addition, this group is very focused on
consumer lifestyle brands and is much sought after by advertisers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On February 12, 2008,
the Company completed its acquisition of Twistbox Entertainment, Inc. pursuant to an Agreement and Plan of Merger entered into
on December 31, 2007, as subsequently amended by the Amendment to Agreement and Plan of Merger dated February 12, 2008, with Twistbox
Acquisition, Inc., a Delaware corporation and a wholly-owned subsidiary of NeuMedia (&ldquo;Merger Sub&rdquo;), Twistbox Entertainment,
Inc. (&ldquo;Twistbox&rdquo;), and Adi McAbian and Spark Capital, L.P., as representatives of the stockholders of Twistbox, as
part of which Merger Sub merged with and into Twistbox, with Twistbox as the surviving corporation (the &ldquo;Merger&rdquo;).
Following the Merger, Twistbox became the sole operating subsidiary of NeuMedia until the acquisition of AMV Holding Limited, a
United Kingdom private limited company (&ldquo;AMV&rdquo;) on October 23, 2008 as described further in this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The principal offices of Mandalay Digital Group, Inc. are located
at 4751 Wilshire Boulevard, Third Floor, Los Angeles, CA 90010. The principal offices of our subsidiary Twistbox are headquartered
at 14242 Ventura Boulevard, 3rd Floor, Sherman Oaks, California 91423. The telephone number at our principal executive office is
(310) 601-2500. Our website address is www.mandalaydigital.com<FONT STYLE="color: red">. </FONT>Information contained on our website
is not deemed part of this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Recent Developments</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 10pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">On May 23, 2012,
the Company received the written consent from stockholders holding a majority of its outstanding common stock to permit (but
not require) the Board of Directors of the Company to amend its Amended and Restated Certificate of Incorporation to (i)
effect a reverse stock split of the Company&rsquo;s common stock at any time prior to April 26, 2013, by a ratio of not less
than one-for-two and not more than one-for-ten, with the exact ratio to be set at a whole number within this range as
determined by the Board of Directors in its sole discretion (the &ldquo;Reverse Stock Split&rdquo;) and (ii) to increase the
number of authorized shares of the Company&rsquo;s capital stock to 202,000,000 shares of stock, of which 200,000,000 shares
would be common stock and 2,000,000 shares would be preferred stock (the &ldquo;Authorized Stock Increase&rdquo;). The
written consents to the Reverse Stock Split and the Authorized Stock Increase included consents with respect to 15,510,476
shares (representing 18.8% of our common stock as of May 23, 2012) held by stockholders who had previously agreed to vote in
favor of such proposals in separate voting agreements they entered into in connection with their purchase from the Company of
the stock being registered hereby.  The shares being registered hereby of selling stockholders Adage Capital Partners, L.P.
and William C Powers Trust Dtd 12/19/09 were included in such shares subject to the voting agreement. In addition, such
stockholders, pursuant to the written consent, also approved the Company&rsquo;s Amended and Restated 2011 Equity Incentive
Plan of the Company, and related forms of Equity Incentive Plan Notice of Grant Restricted Stock Agreement, and Notice of
Grant and Stock Option Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">Notwithstanding receipt
of stockholder approval of the Reverse Stock Split and the Authorized Stock Increase, the Board of Directors reserves the right,
without further action by the stockholders, to elect not to proceed with the Reverse Stock Split and/or the Authorized Stock Increase
if, at any time prior to the filing of a Certificate of Amendment for the Reverse Stock Split and/or Authorized Stock Increase,
the Board of Directors, in its sole discretion, determines that it is no longer in the Company&rsquo;s best interest and the best
interests of the Company&rsquo;s stockholders to proceed with the Reverse Stock Split and/or Authorized Stock Increase.</P>

</DIV>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<DIV STYLE="padding: 3pt; border: Black 1pt solid">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>The Offering</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">This prospectus relates to the resale from
time to time by the selling stockholders identified in this prospectus of up to 23,310,473 shares of our common stock.&nbsp; These
shares include 17,989,047 issued and outstanding shares of common stock and 5,321,426 shares of common stock issuable upon the
exercise of certain warrants to purchase common stock (see &ldquo;&ndash;Background&rdquo;). No shares are being offered for sale
by us.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 96%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 51%">Common stock outstanding prior to offering</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 47%">85,953,136 (1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 12.25pt; text-indent: -12.25pt">Common stock equivalents outstanding prior to offering</TD>
    <TD>&nbsp;</TD>
    <TD>86,053,136 (2)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 12.25pt; text-indent: -12.25pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 12pt; text-indent: -12pt">Common stock offered by the selling stockholders</TD>
    <TD>&nbsp;</TD>
    <TD>23,310,473 (3)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 12pt; text-indent: -12pt">Common stock to be outstanding after the offering</TD>
    <TD>&nbsp;</TD>
    <TD>91,274,562 (4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="color: blue">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: blue">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 12pt; text-indent: -12pt">Use of Proceeds</TD>
    <TD STYLE="color: blue">&nbsp;</TD>
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We will not receive any proceeds from the sale of the 23,310,473
        shares of common stock offered by the selling stockholders under this prospectus.</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">However, we will receive up to $3,049,998 in the aggregate from
        the selling stockholders if they exercise in full, on a cash basis, all of their unexercised warrants to purchase 5,321,426 shares
        of common stock.</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="color: blue">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: blue">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 12pt; text-indent: -12pt">OTC QB market symbol</TD>
    <TD>&nbsp;</TD>
    <TD>&ldquo;MNDL.&rdquo;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>




<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 96%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 4%">(1)</TD>
    <TD STYLE="width: 96%">As of June 23, 2012.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>(2)</TD>
    <TD>As of June 23, 2012. Based on 85,953,136 outstanding shares of our common stock and 100,000 shares of common stock issuable upon conversion of our outstanding shares of Series A Convertible Preferred Stock (based on an assumed conversion price of $1.00 per share).</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>(3)</TD>
    <TD>These shares include 17,989,047 issued and outstanding shares of common stock and 5,321,426 shares of common stock issuable upon the exercise of certain warrants to purchase common stock. Of these shares of common stock issuable under warrants, 964,284 are not exercisable by the holder prior to March 19, 2013 and 357,142 are not exercisable by the holder prior to June 7, 2013.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>(4)</TD>
    <TD>Based on the number of shares of common stock outstanding as of June 23, 2012. Assumes the full exercise of the unexercised warrants held by the selling stockholders as of June 23, 2012 to acquire 5,321,426 shares of common stock and that no other outstanding warrants and options are exercised.</TD></TR>
</TABLE>

</DIV>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; color: blue">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; color: blue">&nbsp;</P>

<DIV STYLE="padding: 3pt; border: Black 1pt solid">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Background</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In connection with
the private placement transactions referred to below, we agreed with certain stockholders to register the shares of common stock
acquired in such transactions, including the shares of common stock underlying warrants to purchase common stock issues in such
private placements. In addition to these shares, we have also included certain other shares as referenced below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">On
June 15, 2012, the Company issued 150,000 shares of common stock of the Company to Merriman Capital, Inc. under the terms of a
restricted stock agreement </FONT>as consideration for financial and capital markets advisory services for the Company performed
by Merriman Capital, Inc. The Company agreed to register the securities purchased in this offering. Merriman Capital, Inc. is a
broker-dealer. <FONT STYLE="color: black">The shares vest over one year. </FONT>We have been advised that Merriman Capital, Inc.
acquired such shares in the ordinary course of business, not for resale, and did not, at the time of purchase, have any agreements
or understandings, directly or indirectly, with any person to distribute such securities other than this registration statement<FONT STYLE="color: black">.
</FONT>We relied on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of
common stock under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: 27.35pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: 27.35pt">On June 8, 2012 (the &ldquo;June
2012 Offering&rdquo;), the Company sold 1,428,571 shares of its common stock and a warrant to purchase 357,142 shares of common
stock to an accredited investor for an aggregate purchase price of $1,000,000. The warrant has an exercise price of $0.70 per share
(subject to adjustment) and a five year term from the date of issuance. The warrant may not be exercised prior to the first anniversary
of the date of issuance. The Company agreed to register the securities purchased in this offering. The securities were issued pursuant
to the exemption provided by Section 4(2) of the Securities Act of 1933, as amended, for transactions by an issuer not involving
any public offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: 27.35pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: 27.35pt"><FONT STYLE="color: black">In
March 2012</FONT> (the &ldquo;March 2012 Offering&rdquo;)<FONT STYLE="color: black">, the Company sold an aggregate of </FONT>3,857,143<FONT STYLE="color: black">
</FONT>shares of its common stock and warrants to purchase an aggregate of 964,284 shares of common stock to accredited investors
for an aggregate purchase price of $2.7 million. Each warrant has an exercise price of $0.70 per share (subject to adjustment)
and a five year term from the date of issuance. Each warrant may not be exercised prior to the first anniversary of the date of
issuance. The Company agreed to register the securities purchased in this offering. The securities were issued pursuant to the
exemption provided by Section 4(2) of the Securities Act of 1933, as amended, for transactions by an issuer not involving any public
offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: 27.35pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: 27.35pt">In March 2012, the Company
entered into a Convertible Note Financing Binding Term Sheet (the &ldquo;Adage Term Sheet&rdquo;) with Adage Capital Partners,
L.P. (&ldquo;Adage&rdquo;), pursuant to which the parties agreed to restructure certain terms of the convertible note financing
consummated on December 29, 2011. In connection with the restructuring, $7,037,333, representing the entire outstanding principal
amount and all accrued and unpaid interest thereon under the Subordinated Convertible Promissory Note in the original principal
amount of $7,000,000 issued by the Company to Adage (the &ldquo;Adage Note&rdquo;), was converted into 10,053,333<B> </B>shares
of common stock of the Company effective as of March 1, 2012, and the exercise price of the warrant to purchase common stock of
the Company issued to Adage in connection with the purchase and sale of the Adage Note was changed to $0.70 per share, subject
to adjustment. As a result of the change to the exercise price, the warrant gives Adage the right to purchase up to 2,500,000 shares
of common stock of the Company, subject to adjustment. We relied on Section 3(a)(9) of the Securities Act of 1933, as amended,
as providing an exemption from registration for this transaction and relied on Section 4(2) of the Securities Act of 1933, as amended,
as providing for an exemption for the original issuance of the Adage Note and warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: 27.35pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: 27.35pt">In September 2009, the Company
issued a warrant to purchase 1,200,000 shares of common stock to Vivid Entertainment, LLC at an exercise price of $1.25 per share.,
which included an obligation to register such shares in connection with a registration by the Company. In January 2011, the warrant
terms were amended and restated to provide the vendor with a warrant to acquire 1,500,000 shares of common stock at an exercise
price of $0.25 per share and the Company issued to the vendor 2,500,000 shares of common stock under the terms of a restricted
stock agreement.</P>

</DIV>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt"><B>&nbsp;</B></P>

<DIV STYLE="padding: 3pt; border: Black 1pt solid">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Plan of Distribution</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">The selling security
holders will offer their shares of our common stock at a fixed price of $1.00 per share until the shares of our common stock are
quoted on the OTC Bulletin Board, or listed for trading or quoted on any other public market, and thereafter at prevailing market
prices or privately negotiated prices.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">The selling stockholders
themselves directly, or through their agents, or through their brokers or dealers, may sell their shares from time to time, in
(i)&nbsp;privately negotiated transactions, (ii)&nbsp;in one or more transactions, including block transactions in accordance with
the applicable rules of the OTC QB market operated by OTC Markets Group, Inc. or any other stock exchange, market or trading facility
on which our shares are traded or (iii)&nbsp;otherwise in accordance with the section of this prospectus entitled &ldquo;Plan of
Distribution.&rdquo;&nbsp;To the extent required, the specific shares to be sold, the names of the selling stockholders, the respective
purchase prices and public offering prices, the names of any agent, broker or dealer and any applicable commission or discounts
with respect to a particular offer will be described in an accompanying prospectus supplement.&nbsp;In addition, any securities
covered by this prospectus which qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to this
prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">For additional information
on the methods of sale, you should refer to the section of this prospectus entitled &ldquo;Plan of Distribution,&rdquo; beginning
on page 30.</P>

</DIV>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 27pt"><B>RISK FACTORS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt"><I>Investing in our common stock involves
a high degree of risk. Current investors and potential investors should consider carefully the risks and uncertainties described
below together with all other information contained in this prospectus before making investment decisions with respect to our common
stock. If any of the following risks actually occurs, our business, financial condition, results of operations and our future growth
prospects would be materially and adversely affected. Under these circumstances, the trading price and value of our common stock
could decline, resulting in a loss of all or part of your investment. The risks and uncertainties described in this prospectus
are not the only ones facing us. Additional risks and uncertainties of which we are not presently aware, or that we currently consider
immaterial, may also affect our business operations.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt"><B>Risks Relating to Our Business</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>The Company has a history
of net losses, may incur substantial net losses in the future, and may not achieve profitability.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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 past periods should not be considered indicative of our future performance.
In fact, in future periods, our revenues could decline as they have in recent years. Accordingly, we may not be able to achieve
profitability in the future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Also, should Twistbox
continue to incur significant losses and not become profitable, we might have to sell all or part of Twistbox, or terminate operations,
which could adversely impact our operating results and financial condition, as well as our ability to qualify for a listing on
a senior exchange, and to finance possible acquisitions that we have considered.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&#9;In addition, assets
acquired under the DT acquisition have not yet begun to generate revenues. If there are delays in the integration of DT or if we
are unable to successfully negotiate with carriers or mobile operators or if these negotiations cannot occur on a timely basis,
we may not be able to generate revenues through the DT assets in the foreseeable future or at all.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are considering
the future status and role of Twistbox in relation to our focus on the DT platform. Although it is our only active business, Twistbox
revenues have been declining, which we expect to continue for the foreseeable future. At the same time, we intend to seek to leverage
its existing customer base for offerings by DT. While we believe the offering of DT&rsquo;s platform to Twistbox customers is an
attractive strategy, it entails significant risks, some of which are described in &ldquo;Risk Factors&rdquo;, and include the possibility
that Twistbox may operate at a deficit while we need to make investments to effectively launch DT, which, in turn, entails business
and financial risks and the possibility of needing additional capital and the associate dilution.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt"><B><I>We have a limited
operating history in an emerging market, which may make it difficult to evaluate ourbusiness.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">maintain our current, and develop new, wireless carrier relationships, in both international and domestic markets;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">maintain and expand our current, and develop new, relationships with compelling content owners;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">retain or improve our current revenue-sharing arrangements with carriers and content owners;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">continue to develop new high-quality products and services that achieve significant market acceptance;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">continue to develop and upgrade our technology;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">continue to enhance our information processing systems;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">increase the number of end users of our products and services;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">execute our business and marketing strategies successfully;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">respond to competitive developments; and</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">attract, integrate, retain and motivate qualified personnel.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>Our financial results could
vary significantly from quarter to quarter and are difficult to predict.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Twistbox's revenues
are declining and are expected to continue to decline. 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. In addition, some payments from carriers that we recognize as revenue on a cash basis may be delayed unpredictably.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">In addition to other
risk factors discussed in this section, factors that may contribute to the variability of our quarterly results include:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">the number of new products and services released by us and our competitors;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">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;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">the popularity of new products and services, and products and services released in prior periods;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">changes in prominence of deck placement for our leading products and those of our competitors;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">the expiration of existing content licenses;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">the timing of charges related to impairments of goodwill, intangible assets, royalties and minimum guarantees;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">changes in pricing policies by us, our competitors or our carriers and other distributors;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">changes in the mix of original and licensed content, which have varying gross margins;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">the seasonality of our industry;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">fluctuations in the size and rate of growth of overall consumer demand for mobile products and services and related content;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">our success in entering new geographic markets;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">foreign exchange fluctuations;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">accounting rules governing recognition of revenue;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">general economic, political and market conditions and trends;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">the timing of compensation expense associated with equity compensation grants; and</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">decisions by us to incur additional expenses, such as increases in marketing or research and development.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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. Our failure to meet market expectations would likely result in decreases in the trading price of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>We currently rely on wireless
carriers to market and distribute some of our products and services and thus to generate some of 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.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">The future success of
our on-deck business 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
portion 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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&rsquo;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Many other factors outside
our control could impair our ability to generate revenues through a given carrier, including the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">the carrier&rsquo;s preference for our competitors&rsquo; products and services rather than ours;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">the carrier&rsquo;s decision not to include or highlight our products and services on the deck of its mobile handsets;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">the carrier&rsquo;s decision to discontinue the sale of some or all of products and services;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">the carrier&rsquo;s decision to offer similar products and services to its subscribers without charge or at reduced prices;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">the carrier&rsquo;s decision to require market development funds from publishers like us;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">the carrier&rsquo;s decision to restrict or alter subscription or other terms for downloading our products and services;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">a failure of the carrier&rsquo;s merchandising, provisioning or billing systems;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">the carrier&rsquo;s decision to offer its own competing products and services;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">the carrier&rsquo;s decision to transition to different platforms and revenue models; and</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">consolidation among carriers.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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&rsquo;s subscribers and the revenues they afford us, which could materially
harm our business, operating results and financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>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.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">We have both exclusive
and non-exclusive licenses and licenses that are both 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 our licenses, and such termination would harm
our business, operating results and financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>Inferior on-deck placement
would likely adversely impact our revenues and thus our operating results and financial condition.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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&rsquo;
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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>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.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">We believe that establishing
and maintaining our brand is critical to retaining and expanding our existing relationships with wireless carriers, content licensors,
and mobile publishers as well as developing new relationships. Promotion of the Company&rsquo;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 attracts 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&rsquo; 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>We currently rely on third-party
billing aggregators to provide end-users with access to some of our products and services through premium short message system
(Premium SMS), WAP billing and other technologies. The loss of, or a change in, any of these significant third-party relationships
or the use of mobile billing technologies could reduce the number of transactions initiated by these end-users and thus materially
reduce our revenues.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Our off-deck business
is dependent upon access to available traffic and billing aggregators that use mobile billing technologies to deliver and bill
for our products and services. If we were to lose one or more of these relationships, or if there is a material change or limitation
in the use of certain billing technologies, we would experience a significant reduction in the number of transactions initiated
by end-users and thus material reduction in our revenues.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>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.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; color: green"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>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.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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 &ldquo;day-and-date&rdquo; launch, which could materially harm our business, operating
results and financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>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.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>As a result of a majority
of our revenues from on-deck distribution channels 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.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">If any of our primary
carriers is unable to fulfill its payment obligations to us under our carrier agreements with them, our revenues attributable to
on-deck distribution could decline significantly and our financial condition will be harmed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; color: green"><B><I>&nbsp;</I></B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; color: green"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Risks Related to Our Market</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>The markets in which we
operate are highly competitive, and many of our competitors have significantly greater resources than we do.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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
&ldquo;on-deck&rdquo; or &ldquo;off-deck&rdquo; positioning, brand, quality and price. We compete for wireless carriers for &ldquo;on-deck&rdquo;
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 compete for platform deployment contracts amongst other mobile platform companies. We also compete for experienced
and talented employees.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Our primary competitors
for the on-deck distribution channels as well as the provisioning of platform services include Mondia Media, Motricity, net mobile
AG, Jesta Digital, Buongiorno (acquired by NTT DOCOMO), Mobile Streams and Gameloft, and for end-users via our direct-to-consumer
off-deck services they include Zamano plc, Playphone, Inc, Jesta and Flycell Inc.&nbsp;&nbsp;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. DT, whose principal customers
would be carriers, would face competition from any carriers who decided to distribute their own products or services. In addition,
while we are not aware of any non-carriers who are seeking to offer the equivalent scope of services as the DT platform, various
of the competitors mentioned above (and new competitors entering the mobile platform space) currently offer or could in the future
offer components of DT&rsquo;s platform, and may seek to expand their offerings to compete with DT on a comprehensive basis, especially
if DT&rsquo;s model and approach meets with success.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Some of our competitors&rsquo;
and our potential competitors&rsquo; advantages over us, either globally or in particular geographic markets, include the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">significantly greater revenues and financial resources;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">stronger brand and consumer recognition regionally or worldwide;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">the capacity to leverage their marketing expenditures across a broader portfolio of mobile and non-mobile products;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">more substantial intellectual property of their own from which they can develop products and services without having to pay royalties;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">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;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">greater resources to make acquisitions;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">lower labor and development costs; and</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">broader global distribution and presence.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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. If we are unable to compete effectively or we are not as successful as our competitors in our target markets, our sales
could decline (or inhibit generation of sales, in DT's case), our margins could decline and we could lose market share (or in DT's
case, fail to penetrate the market), any of which would materially harm our business, operating results and financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>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.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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, are
not marketed effectively through our direct-to-consumer operations, 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, marketed effectively and initially adopted, a subsequent shift in our carriers, the entertainment preferences of end
users, or our relationship with third-party billing aggregators could cause a decline in the popularity of, or access to, our
offerings could materially reduce our revenues and harm our business, operating results and financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>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.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify">&nbsp;<B><I>We currently rely
on the current state of the law in certain territories where we operate our &ldquo;off-deck&rdquo; direct-to-consumer business
and any adverse change in such laws may significantly adversely impact our revenues and thus our operating results and financial
condition.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Decisions that regulators
or governing bodies make with regard to the provision and marketing of mobile content and/or billing can have a significant impact
on the revenues generated in that market. Although most of our markets are mature with regulation clearly defined and implemented,
there remains the potential for regulatory changes that would have adverse consequences on the business and subsequently&nbsp;our
revenue.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>We rely on our current understanding
of regional regulatory requirements pertaining to the marketing, advertising and promotion of our &ldquo;off-deck&rdquo; direct-
to-consumer products and services and any adverse change in such regulations, or a finding that we did not properly understand
such regulations, may significantly impact our ability to market, advertise and promote our products and services thereby adversely
impact our revenues and thus our operating results and financial condition.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Our off-deck business
relies extensively on marketing, advertising and promoting its products and services requiring it to have an understanding of the
local laws and regulations governing its business.&nbsp;&nbsp;In the event that we have relied on inaccurate information or advice,
and engage in marketing, advertising or promotional activities that are not permitted, we may be subject to penalties, restricted
from engaging in further activities or altogether prohibited from offering our products and services in a particular territory,
all or any of which will adversely impact our revenues and thus our operating results and financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>The strategic
direction of the Digital Turbine business is not proven or certain.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">The business model that
Digital Turbine is pursuing, white label storefront solutions, is not proven. There are many different types of models including,
but not limited to, up-front fees, revenue shares, per device fees, and advertising. Initial feedback from customers shows preference
for different types of models. This could lead to risk in predicting future revenues and profits by individual customers. In particular,
the &lsquo;free&rsquo; download market is reliant upon mobile advertising and the mobile advertising market is still in a nascent
phase of monetization.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, our strategy
for Digital Turbine entails offering its platform to Twistbox customers. There can be no assurance that we will be able to successfully
market new services and offerings to Twistbox customers. Moreover, in order to credibly offer DT&rsquo;s platform, we will need
to achieve additional operational and technical achievements to further develop the product. While we remain optimistic about our
ability to complete this build out, it will be subject to all of the risks attendant to development efforts as well as the need
to provide additional capital to the effort.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Risks Related to Our Industry</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>Wireless communications technologies
are changing rapidly, and we may not be successful in working with these new technologies.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>The complexity of and incompatibilities
among mobile handsets may require us to use additional resources for the development of our products and services.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">To reach large numbers
of wireless subscribers, mobile entertainment publishers and white label storefront providers 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27.35pt"><B><I>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.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27.35pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27.35pt">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>Our industry is subject
to risks generally associated with the entertainment industry, any of which could significantly harm our operating results.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>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.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27.35pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Mobile handsets require
multimedia capabilities enabled by technologies capable of running applications such as ours. Our development resources are concentrated
in today&rsquo;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>System or network
failures could reduce our sales, increase costs or result in a loss of end users of our products and services.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27.35pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Mobile publishers rely
on wireless carriers&rsquo; networks to deliver products and services to end users and on their or other third parties&rsquo; 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&rsquo; networks. In addition, certain products&nbsp;require
access over the mobile Internet to our servers in order to enable certain features. Any failure of, or technical problem with,
carriers&rsquo;, third parties&rsquo; 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 fail 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&rsquo;, other third parties&rsquo; 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>Our business
depends on the growth and maintenance of wireless communications infrastructure.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27.35pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>Future mobile
handsets may significantly reduce or eliminate wireless carriers&rsquo; 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.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27.35pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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&rsquo;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&rsquo;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&rsquo;
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</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>Actual or perceived
security vulnerabilities in mobile handsets or wireless networks could adversely affect our revenues.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27.35pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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 &ldquo;worm&rdquo; 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>Changes in
government regulation of the media and wireless communications industries may adversely affect our business.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27.35pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Risks Related to Our Management, Employees
and Potential Acquisitions</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>Our business and growth
may suffer if we are unable to hire and retain key personnel, who are in high demand.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">We depend on the continued
contributions of our domestic and international senior management and other key personnel. We have had two people fill the position
of Chief Executive Officer in the last two years. The loss of the services of any of our executive officers or other key employees
could harm our business. Because not all of our executive officers and key employees are under employment agreements or are under
agreements with short terms, their future employment with the Company is uncertain specifically our Chief Executive Officer's and
our Executive Chairman's agreements each have short terms.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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, we conduct principal overseas operations in Germany, an area that, similar to our headquarters region, has a high cost
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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Volatility or lack of
performance in our stock price may also affect our ability to attract and retain our key employees. Some 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>Growth may place significant
demands on our management and our infrastructure.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">develop and improve our operational, financial and management controls;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">enhance our reporting systems and procedures;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">recruit, train and retain highly skilled personnel;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">maintain our quality standards; and</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">maintain branded content owner, wireless carrier and end-user satisfaction.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>The acquisition of other
companies, businesses or technologies could result in operating difficulties, dilution and other harmful consequences.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">We have made acquisitions
and, although we have no present understandings, commitments or agreements to do so (except as otherwise disclosed within this
document), we may pursue further acquisitions, any of which could be material to our business, operating results and financial
condition. Future acquisitions could divert management&rsquo;s time and focus from operating our business, even in instances where
acquisition negotiations are unsuccessful. 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>The acquisition
of Logia Mobile might not be successful, or accretive to long-term shareholder value.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">While we believe that
targeted acquisitions such as Logia Mobile will facilitate accelerated distribution for the DT user experience, there is no assurance
that this will be the case or that we will be able to generate significant growth in revenues from Logia&rsquo;s mobile customers
or from other potential acquisitions. In particular, a significant portion of Logia Mobile&rsquo;s revenue comes from one large
mobile operator customer. and Logia Mobile is reliant upon that customer for a significant portion of its operating cash flow.
In addition, there is no assurance that mobile operators will be successful and continue to want to compete with other mobile storefronts,
and they may decide they simply want to provide network access to their customers. The solutions are complex with many different
components and there is risk in the ability to integrate all of these various components into a single solution.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>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.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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 (&ldquo;SEC&rdquo;
or the &ldquo;Commission&rdquo;) 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
restricted stock and stock options grants as a fundamental component of our employee compensation packages. We believe that such
grants 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 or restricted stock 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Risks Related to the Economy in the
United States and Globally</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>The effects of the recent
recession in the United States and general downturn in the global economy, including financial market disruptions, could have an
adverse impact on our business, operating results or financial condition.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Our operating results
also may be affected by uncertain or changing economic conditions such as the challenges that are currently affecting economic
conditions in the United States and the global economy. If global economic and market conditions, or economic conditions in the
United States or other key markets, remain uncertain or persist, spread, or deteriorate further, we may experience material impacts
on our business, operating results, and financial condition in a number of ways including negatively affecting our profitability
and causing our stock price to decline.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>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.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">We expect international
sales to continue to be an important component of our revenues. Risks affecting our international operations include:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">challenges caused by distance, language and cultural differences;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">multiple and conflicting laws and regulations, including complications due to unexpected changes in these laws and regulations;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">the burdens of complying with a wide variety of foreign laws and regulations;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">higher costs associated with doing business internationally;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">difficulties in staffing and managing international operations;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">greater fluctuations in sales to end users and through carriers in developing countries, including longer payment cycles and greater difficulty collecting accounts receivable;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">protectionist laws and business practices that favor local businesses in some countries;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">foreign tax consequences;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">foreign exchange controls that might prevent us from repatriating income earned in countries outside the United States;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">price controls;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">the servicing of regions by many different carriers;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">imposition of public sector controls;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">political, economic and social instability, including relating to the current European sovereign debt crisis;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">restrictions on the export or import of technology;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">trade and tariff restrictions;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">variations in tariffs, quotas, taxes and other market barriers; and</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol; text-align: justify">&middot;</TD>
    <TD STYLE="text-align: justify">difficulties in enforcing intellectual property rights in countries other than the United States.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Risks Related to Potential Liability,
our Intellectual Property and our Content</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>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.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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&nbsp;obtained patent
protection. Consequently, we may 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>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.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt"><B><I>Litigation may
harm our business.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Substantial, complex
or extended litigation could cause us to incur significant costs and distract our management. For example, lawsuits by employees,
stockholders, collaborators, distributors, customers, competitors or others could be very costly and substantially disrupt our
business. Disputes from time to time with such companies, organizations or individuals are not uncommon, and we cannot assure you
that we will always be able to resolve such disputes or on terms favorable to us. Unexpected results could cause us to have financial
exposure in these matters in excess of recorded reserves and insurance coverage, requiring us to provide additional reserves to
address these liabilities, therefore impacting profits.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>Indemnity provisions in
various agreements potentially expose us to substantial liability for intellectual property infringement, damages caused by malicious
software and other losses.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>We face risks associated
with currency exchange rate fluctuations.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>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.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>We may be liable for the
content we make available through our products and services with mature themes.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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. Additionally,
we could continue to be exposed to these claims and potential liability even if and after we decide to sell such assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>Government regulation of
our content with mature themes could restrict our ability to make some of our content available in certain jurisdictions.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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 &ldquo;immoral&rdquo; influences. Regulation aimed at limiting minors&rsquo;
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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>Government regulation of
our marketing methods could restrict our ability to adequately advertise and promote our content and services available in certain
jurisdictions.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;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 regulate the methods and manner in which
certain of our products and services may be marketed to potential end-users.&nbsp;&nbsp;Regulation aimed at prohibiting, limiting
or restricting various forms of advertising and promotion we use to market our products and services could also increase our cost
of operations or preclude the ability to offer our products and services altogether. As a result, government regulation of our
marketing efforts could have a material adverse effect on our business, financial condition or results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>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.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B>Risks Relating to Our Common
Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt"><B><I>There is a limited
trading market for our common stock.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Although prices for
our shares of common stock are quoted as of the dated of this filing on the OTC QB tier of the OTC Markets (under the symbol MNDL),
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. We were removed from the OTC Bulletin Board in April 2012 due to having
three untimely filings with the SEC in a two-year period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">There is no assurance
that we will regain OTC bulletin board quotation or a listing on any national securities exchange, whose requirements would require
a reverse split of our stock, compliance with other quantitative and qualitative requirements and a subjective evaluation by the
staffs of any such national securities exchange. Even if we attain a listing on a national securities exchange there is no guarantee
we will maintain it.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt"><B><I>The liquidity
of our common stock will be affected by its limited trading market.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Bid and ask prices for shares of our common
stock are quoted on the OTC QB tier of the OTC Markets under the symbol MNDL. There is currently no broadly followed, established
trading market for our common stock. While we are hopeful that 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
QB tier of the OTC Markets 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 to a lower tier would likely decline. In addition, the tier of the
OTC Markets on which we are traded could change. Any change could make it harder for holders of our common stock or potential investors
to access our information and find quotes for our stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>



<P STYLE="margin: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>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.</I></B></P>



<P STYLE="margin: 0"></P>
<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 36pt"></TD><TD STYLE="width: 20pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>quarterly variations in our revenues and operating expenses;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 36pt"></TD><TD STYLE="width: 20pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>developments in the financial markets, and the worldwide or regional economies;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 45.35pt; text-indent: -9.35pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 36pt"></TD><TD STYLE="width: 20pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>announcements of innovations or new products or services by us or our competitors;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 45.35pt; text-indent: -9.35pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 36pt"></TD><TD STYLE="width: 20pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>fluctuations in merchant credit card interest rates;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 45.35pt; text-indent: -9.35pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 36pt"></TD><TD STYLE="width: 20pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>significant sales of our common stock or other securities in the open market; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 45.35pt; text-indent: -9.35pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 36pt"></TD><TD STYLE="width: 20pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>changes in accounting principles.</TD></TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">In the past, stockholders
have often instituted securities class action litigation after periods of volatility in the market price of a company&rsquo;s securities.
If a stockholder were to file any such class action suit against us, we would incur substantial legal fees and our management&rsquo;s
attention and resources would be diverted from operating our business to respond to the litigation, which could harm our business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>The sale of securities by
us in any equity or debt financing, or the issuance of new shares related to an acquisition, could result in dilution to our existing
stockholders and have a material adverse effect on our earnings.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Any sale or issuance
of common stock by us in a future offering or acquisition 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&rsquo; stock ownership. We may also assume additional debt and incur impairment
losses related to goodwill and other intangible assets if we acquire another company, and this could negatively impact our earnings
and results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>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. &nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>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.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">The trading market for
our common stock will be influenced by the research and reports that industry or securities analysts publish about our business
or us. 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>We do not anticipate paying
dividends.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>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.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Our officers, directors
and principal stockholders (greater than 5% stockholders) collectively beneficially own approximately 56% 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>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.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Effective internal controls
are necessary for us to provide reliable financial reports and prevent fraud. In addition, Section&nbsp;404 of the Sarbanes-Oxley
Act of 2002, or the Sarbanes-Oxley Act, requires us to evaluate and report on our internal control over financial reporting. We
are in the process of strengthening and testing our system of internal controls. The process of implementing our internal controls
and complying with Section&nbsp;404 is expensive and time consuming and requires 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 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 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&rsquo;s confidence in our financial statements and harm our stock price. In addition, if we fail to comply with the
applicable portions of Section&nbsp;404, we could be subject 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">During management's annual review of our internal control over financial reporting, we determined the following processes contain material weaknesses as of March 31, 2012: our maintenance of corporate records and contracts and our financial close and reporting process. With respect to our maintenance of corporate records and contracts, we determined there were weaknesses in our record keeping of records, contracts and board minutes. With respect to our financial close and reporting process, we determined there were weaknesses based on the lack of secondary review of key accounting and financial reporting functions.  Our management is in the process of identifying steps necessary to address the material weaknesses existing as of March 31, 2012, including recruiting additional accounting personnel and improving our internal policies and guidelines.  We expect that our remediation efforts will be implemented during the fiscal year ending March 31, 2013.  These efforts may not be sufficient to fully remediate these material weakness and additional material weaknesses may arise.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>Maintaining and improving
our financial controls and the requirements of being a public company may strain our resources, divert management&rsquo;s attention
and affect our ability to attract and retain qualified members for our Board of Directors.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">As a public company,
we are subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act. The requirements of these rules and
regulations has resulted in an increase in our legal, accounting and financial compliance costs, may make some activities more
difficult, time-consuming and costly and may place undue strain on our personnel, systems and resources.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">In order
to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over
financial reporting, we 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&rsquo;s
attention may be diverted from other business concerns, which could harm our business, operating results and financial
condition. We determined we had material weaknesses as of March 31, 2012. See &ldquo;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.&rdquo; These efforts will also involve substantial accounting-related costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;The Sarbanes-Oxley
Act makes it more difficult and more expensive for us to maintain directors&rsquo; and officers&rsquo; liability insurance, and
we may be required in the future&nbsp;&nbsp;to accept reduced coverage or incur substantially higher costs to maintain coverage.
If we are unable to maintain adequate directors&rsquo; and officers&rsquo; insurance, our ability to recruit and retain qualified
directors, and officers will be significantly curtailed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>The ownership interest of
our current stockholders will be substantially diluted if our outstanding securities convertible and/or exercisable&nbsp;into shares
of our common stock are converted and/or exercised.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">As of June 15, 2012,
we had an aggregate of approximately $3,680,000 of Convertible Notes convertible into 18,352,381 shares of our common stock, and
warrants to purchase 18,312,987 shares of our common stock. To the extent our outstanding securities convertible and/or exercisable
into shares of our common stock are converted and/or exercised, additional shares of our common stock will be issued, which will
result in dilution to our stockholders and increase the number of shares of common stock eligible for resale into the public market.
Sales of such shares of common stock could adversely affect the market price of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"><B><I>Shares eligible for future
sale</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">As of June 15, 2012,
51,196,077 of our total outstanding shares are restricted from immediate resale but may be sold into the market in the near future.
This could cause the market price of our common stock to drop significantly. Shares of restricted common stock are generally available
for resale following a six month holding period. As restrictions on resale end, the market price could drop significantly if the
holders of these restricted shares sell them or are perceived by the market as intending to sell them.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SELLING STOCKHOLDERS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">This prospectus covers the resale from
time to time by the selling stockholders identified in the table below of:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 23.75pt"></TD><TD STYLE="width: 12.95pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Up to 17,989,047 issued and outstanding shares of our common stock; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-indent: -12.95pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 23.75pt"></TD><TD STYLE="width: 12.95pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Up to 5,321,426 shares of our common stock issuable upon exercise of warrants.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-indent: -12.95pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">We have filed with
the SEC a Registration Statement on Form S-1, of which this prospectus forms a part, under the Securities Act to register&nbsp;the
resale of shares of common stock by the selling stockholders.&nbsp;The selling stockholders identified in the table below may from
time to time offer and sell under this prospectus any or all of the shares of common stock described under the column &ldquo;Shares
of Common Stock Being Offered in the Offering&rdquo; in the table below. The Registration Statement on Form S-1 was filed pursuant
to the terms of certain registration rights obligations of the Company, including to purchasers in the June 2012 Offering and the
March 2012 Offering, and certain other stockholders as agreed by the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">We have been advised
that each of these selling stockholders acquired our common stock and warrants to acquire shares of our common stock referenced
in the table below in the ordinary course of business, not for resale, and that none of these selling stockholders had, at the
time of purchase, any agreements or understandings, directly or indirectly, with any person to distribute the related common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">We have assumed all
shares of common stock reflected on the table below will be sold from time to time in the offering covered by this prospectus,
but the selling stockholders may sell none or only a portion of the shares of common stock listed in the table below in connection
with the offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">The following table
sets forth, based on information provided to us by the selling stockholders or known to us, the name of each selling stockholder,
the nature of any position, office or other material relationship, if any, which each selling stockholder has had, within the past
three years, with us or with any of our predecessors or affiliates, and each selling stockholder&rsquo;s ownership of our common
stock before this offering based on the number of shares of our common stock owned and the number of shares issuable upon exercise
of warrants, as applicable held by each such selling stockholder.&nbsp; The selling stockholders identified below may have sold,
transferred or otherwise disposed of some or all of their shares since the date on which the information in the following table
is presented in transactions exempt from, or not subject to, the registration requirements of the Securities Act.&nbsp;Information
concerning the selling stockholders may change from time to time and, if necessary, we will amend or supplement this prospectus
accordingly.&nbsp;We cannot provide an estimate as to the number of shares of common stock that will be held by the selling stockholders
upon termination of the offering covered by this prospectus because the selling stockholders may offer some or all of their shares
of common stock under this prospectus. The selling stockholders may also sell, transfer or otherwise dispose of all or a portion
of their shares in transactions exempt from the registration requirements of the Securities Act or pursuant to another effective
registration statement covering those shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">The number of shares
owned are those beneficially owned, as determined under the rules of the SEC, and the information is not necessarily indicative
of beneficial ownership for any other purpose.&nbsp; Under these rules, beneficial ownership includes any shares of common stock
as to which a person has sole or shared voting power or investment power and any shares of common stock which the person has the
right to acquire within 60 days through the exercise of any option, warrant or right, through conversion of any security or pursuant
to the automatic termination of a power of attorney or revocation of a trust, discretionary account or similar arrangement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Selling
    Stockholder</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Shares
    of<BR> Common Stock<BR> Owned Before this<BR> Offering</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Shares
    of Common<BR> Stock Underlying<BR> Warrants Owned<BR> Before this Offering</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Shares
    of Common<BR> Stock Being Offered in<BR> this Offering</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Shares
    of Common<BR> Stock Owned Upon<BR> Completion of this<BR> Offering (1)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Percentage
    of<BR> Common Stock<BR> Outstanding Upon<BR> Completion of this<BR> Offering (2)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 35%; text-align: left"><FONT STYLE="font-size: 8pt">Adage Capital Partners, L.P. (3) (11)</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 8pt">10,053,333</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 8pt">2,500,000</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 8pt">12,553,333</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">William C. Powers &amp; Carolyn C. Powers, Trustees of the Powers
    Trust dtd 12/18/09 (4)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,428,571</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">357,142</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,785,713</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">William C. Powers, Trustee of the William C. Powers Trust dtd 12/18/09
    (5) (11)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2,857,143</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">714,285</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">3,571,428</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Louis Addeo (6)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">142,857</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">35,714</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">178,571</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">McKenna &amp; Associates, LLC (7)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">142,857</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">35,714</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">178,571</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Scott Mather, Trustee of the Mather Family Trust dtd 8/21/08 (8)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">714,286</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">178,571</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">892,857</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Vivid Entertainment, LLC (9)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2,500,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,500,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">4,000,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Merriman Capital, Inc. (10)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,002,913</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">150,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">852,913</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt"></FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">*</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 18.7pt">*</TD><TD>Represents less than 1.00%.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 18.7pt; text-indent: -18.7pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 18.7pt">(1)</TD><TD>Assumes that (i)&nbsp;all of the shares of common stock to be registered on the registration statement of which this prospectus
is a part, including all shares of common stock underlying warrants held by the selling stockholders, are sold in the offering
and (ii)&nbsp;that no other shares of common stock are acquired or sold by the selling stockholder prior to the completion of the
offering. However, subject to any applicable restrictions of transfer agreed to by the selling stockholders (see &ldquo;Plan of
Distribution&rdquo; in this prospectus), the selling stockholders may sell all, some or none of the shares offered pursuant to
this prospectus and may sell other shares of our common stock that they may own pursuant to another registration statement under
the Securities Act or sell some or all of their shares pursuant to an exemption from the registration provisions of the Securities
Act, including under Rule 144.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 18.7pt; text-indent: -18.7pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 18.7pt">(2)</TD><TD>Based on 85,953,136 shares of common stock as of June 23, 2012. Also, assumes the full exercise of the unexercised warrants
held by the selling stockholders as of June 23, 2012 to acquire an additional 5,321,426 shares of common stock and that no other
outstanding warrants and options are exercised nor any shares of Series A Convertible Preferred Stock are converted into shares
of common stock.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 18.7pt; text-indent: -18.7pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 18.7pt">(3)</TD><TD>Acquired 10,053,333 shares of common stock on March 1, 2012 upon conversion of a convertible note held by the selling stockholder
originally issued by the Company in December 2011, and 2,500,000 shares of common stock underlying a warrant issued in December
2011. Adage Capital Partners GP, L.L.C (&ldquo;Adage GP&rdquo;) is the general partner of Adage Capital Partners, L.P. The managing
member of Adage GP is Adage Capital Advisors, L.L.C, whose managing members are Robert Atchinson and Phillip Gross.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 18.7pt; text-indent: -18.7pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 18.7pt">(4)</TD><TD>Purchased in a private placement in June 2012. William C. Powers and Carolyn C. Powers share voting and dispositive power over
the securities, as trustees. The warrants may not be exercised prior to June 7, 2013.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 18.7pt; text-indent: -18.7pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 18.7pt">(5)</TD><TD>Purchased in a private placement in March 2012. William C. Powers has voting and dispositive power over the securities, as
trustee. The warrants may not be exercised prior to March 19, 2013.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 18.7pt; text-indent: -18.7pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 18.7pt">(6)</TD><TD>Purchased in a private placement in March 2012. The warrants may not be exercised prior to March 19, 2013.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 18.7pt; text-indent: -18.7pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 18.7pt">(7)</TD><TD>Purchased in a private placement in March 2012. Andrew McKenna has voting and dispositive power over the securities as managing
member of McKenna &amp; Associates, LLC. The warrants may not be exercised prior to March 19, 2013.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 18.7pt; text-indent: -18.7pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 18.7pt">(8)</TD><TD>Purchased in a private placement in March 2012. Scott Mather has voting and dispositive power over these shares as trustee.
The warrants may not be exercised prior to March 19, 2013.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 18.7pt; text-indent: -18.7pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 18.7pt; text-indent: -18.7pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 18.7pt">(9)</TD><TD>Common stock acquired under a Restricted Stock Agreement, dated January 1, 2011. 1,500,000 shares of common stock underlying
a warrant issued by the Company on September 23, 2009, as amended and restated on January 1, 2011.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 18.7pt; text-indent: -18.7pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 18.7pt">(10)</TD><TD>Common stock acquired under a Restricted Stock Agreement, as consideration for financial and capital markets
advisory services for the Company performed by Merriman Capital, Inc. Merriman Capital, Inc. is a broker-dealer. We have been advised
that Merriman Capital, Inc. acquired the shares being offered under this prospectus in the ordinary course of business, not for
resale, and did not, at the time of purchase, have any agreements or understandings, directly or indirectly, with any person to
distribute such securities other than this registration statement.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B></B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 18.7pt">(11)</TD><TD>The written consents to the Reverse Stock Split and the Authorized Stock Increase included consents with respect to 15,510,476 shares (representing 18.8% of our common stock as of May 23, 2012) held by stockholders who had previously agreed to vote in favor of such proposals in separate voting agreements they entered into in connection with their purchase from the Company of the stock being registered hereby.  The shares being registered hereby of selling stockholders Adage Capital Partners, L.P. and William C Powers Trust Dtd 12/19/09 were included in such shares subject to the voting agreement.</TD></TR></TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DETERMINATION OF OFFERING PRICE </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The selling security
holders will offer their shares of our common stock at a fixed price of $1.00 per share until the shares of our common stock are
quoted on the OTC Bulletin Board, or listed for trading or quoted on any other public market, and thereafter at prevailing market
prices or privately negotiated prices.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The initial offering
price has been determined arbitrarily and does not have any relationship to any established criteria of value, such as book value
or earning per share. Additionally, because there is no established trading market for our common stock, the price of the common
stock is not based on past earnings, nor is the price of the common stock indicative of the current market value of the assets
owned by us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PLAN OF DISTRIBUTION </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">The selling stockholders
and any of their pledgees, donees, transferees, assignees and successors-in-interest may, from time to time, sell any or all of
their shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions
either at a fixed price of $1.00 per share or, once our common stock is listed for trading or quoted on the OTC Bulletin Board or
another public market, at prevailing market prices at the time of sale.&nbsp; This prospectus may also be used by transferees of
the selling stockholders, including broker-dealers or other transferees who borrow or purchase the shares to settle or close out
short sales of shares of common stock. Selling stockholders will act independently of us in making decisions with respect to the
timing, manner and size of each sale or other transfer. We will not receive any of the proceeds from sales or transfers by the
selling stockholders or any of their transferees.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">We expect that the
selling stockholders will sell their shares primarily through sales on the OTC QB market operated by OTC Markets Group, Inc. or
any other stock exchange, market or trading facility on which our shares are traded or in private transactions. Sales may be effected
by means of one or more of the following transactions, which may involve cross or block transactions:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 23.7pt"></TD><TD STYLE="width: 9.45pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>ordinary brokerage transactions and transactions in which the broker-dealer solicits investors;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 33.15pt; text-indent: -9.45pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 23.7pt"></TD><TD STYLE="width: 9.45pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 33.15pt; text-indent: -9.45pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 23.7pt"></TD><TD STYLE="width: 9.45pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>purchases by a broker-dealer as principal and resale by the broker-dealer for its account;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 33.15pt; text-indent: -9.45pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 23.7pt"></TD><TD STYLE="width: 9.45pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>an exchange distribution in accordance with the rules of the applicable exchange;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 33.15pt; text-indent: -9.45pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 23.7pt"></TD><TD STYLE="width: 9.45pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>privately negotiated transactions;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 33.15pt; text-indent: -9.45pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 23.7pt"></TD><TD STYLE="width: 9.45pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>settlement of short sales made after the date that this registration statement is declared effective by the SEC;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 33.15pt; text-indent: -9.45pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 23.7pt"></TD><TD STYLE="width: 9.45pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>transactions in which broker-dealers may agree with one or more of the selling stockholders to sell a specified number of such
shares at a stipulated price per share;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 33.15pt; text-indent: -9.45pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 23.7pt"></TD><TD STYLE="width: 9.45pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 33.15pt; text-indent: -9.45pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 23.7pt"></TD><TD STYLE="width: 9.45pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>through the distribution of common stock by any selling stockholder to its partners, members or stockholders;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 33.15pt; text-indent: -9.45pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 23.7pt"></TD><TD STYLE="width: 9.45pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>any other method permitted pursuant to applicable law; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 33.15pt; text-indent: -9.45pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 23.7pt"></TD><TD STYLE="width: 9.45pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>a combination of any such methods of sale.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">The selling stockholders
may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus. In addition, in
some states the securities may not be sold unless registered or qualified for sale or an exemption from registration or qualification
requirements is available and is complied with. The selling stockholders will have the sole discretion not to accept any purchase
offer or make any sale of their shares if they deem the purchase price to be unsatisfactory at a particular time. To the extent
required, we may amend or supplement this prospectus from time to time to describe a specific plan of distribution.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">Broker-dealers engaged
by the selling stockholders may arrange for other brokers-dealers to participate in sales.&nbsp;Broker-dealers may receive commissions
or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser)
in amounts to be negotiated.&nbsp;The selling stockholders do not expect these commissions and discounts to exceed what is customary
in the types of transactions involved.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">The selling stockholders
may from time to time pledge or grant a security interest in some or all of the shares of common stock owned by them and, if they
default in the performance of their secured obligations, the pledgees or secured parties may offer and sell shares of common stock
from time to time under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provision
of the Securities Act amending the list of selling stockholders to include the pledgee, transferee or other successors-in-interest
as selling stockholders under this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">In connection with
sales of common stock or interests therein, selling stockholders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of the common stock in the course of hedging the positions they
assume. Selling stockholders may also engage in short sales, puts and calls or other transactions in our securities or derivatives
of our securities and may sell and deliver shares in connection with these transactions.&nbsp;We have advised each selling stockholder
that it may not use shares registered on this registration statement to cover short sales of common stock made prior to the date
on which this registration statement is declared effective by the SEC.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">The selling stockholders
also may transfer the shares of common stock in other circumstances, in which case the donees, assignees, transferees, pledgees
or other successors-in-interest will be the selling beneficial owners for purposes of this prospectus and may sell the shares of
common stock from time to time under this prospectus after we have filed any necessary supplements to this prospectus under Rule
424(b), or other applicable provisions of the Securities Act, supplementing or amending the list of selling stockholders to include
such donee, assignee, transferee, pledgee, or other successor-in-interest as a selling stockholder under this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">Selling stockholders
and broker-dealers or agents involved in an arrangement to sell any of the offered shares may, under certain circumstances, be
deemed to be &ldquo;underwriters&rdquo; within the meaning of the Securities Act. Any profit on such sales and any discount, commission,
concession or other compensation received by any such underwriter, broker-dealer or agent may be deemed an underwriting discount
and commission under the Exchange Act. No selling stockholder has informed us that they have an agreement or understanding, directly
or indirectly, with any person to distribute the common stock. If a selling stockholder should notify us that they have a material
arrangement with a broker-dealer for the resale of their shares, we would be required to amend the registration statement of which
this prospectus is a part, and file a prospectus supplement to describe the agreement between the selling stockholder and broker-dealer
or agent, provide required information regarding the plan of distribution, and otherwise revise the disclosure in this prospectus
as needed. We would also file the agreement between the selling stockholder and the broker-dealer as an exhibit to the post-effective
amendment to the registration statement. The selling stockholder and/or purchasers will pay all discounts, concessions, commissions
and similar selling expenses, if any, that can be attributed to the sale of&nbsp;the shares of common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">If a selling stockholder
uses this prospectus for any sale of the common stock, it will be subject to the prospectus delivery requirements of the Securities
Act.&nbsp;The selling stockholders will be responsible for complying with the applicable provisions of the Securities Act, and
the rules and regulations thereunder promulgated, as applicable to such selling stockholders in connection with resales of their
respective shares under this registration statement. These provisions and regulations may limit the timing of purchases and sales
of common stock by them and the marketability of such securities. To comply with the securities laws of certain jurisdictions,
if applicable, the common stock will be offered or sold in such jurisdictions only through registered or licensed brokers or dealers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">The Exchange Act
and the rules and regulations thereunder, including without limitation Regulation M, will apply to selling stockholders and other
persons participating in the sale or distribution of the shares offered hereby. With certain exceptions, Regulation M restricts
certain activities of, and limits the timing of purchases and sales of any of the shares by, selling stockholders, affiliated
purchasers and any broker-dealer or other person who participates in the sale or distribution. Regulation M precludes these persons
from bidding for or purchasing, or attempting to induce any person to bid for or purchase, any security subject to the distribution
until the distribution is complete. Regulation M also prohibits any bids or purchases made in order to stabilize the price of
a security in connection with the distribution of that security. All of these limitations may affect the marketability of the
shares offered by this prospectus. To our knowledge, no selling stockholder is a broker-dealer or an affiliate of a broker-dealer
except to the extent listed in the footnotes to the table contained in the &ldquo;Selling Stockholders&rdquo; section beginning
on page  27 of this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">We have agreed to
pay all costs and expenses incident to the registration of the common stock. &nbsp;Each selling stockholder will be responsible
for all costs and expenses in connection with the sale of their shares, including brokerage commissions or dealer discounts. We
will not receive any proceeds from the sale of the common stock. However, we will receive proceeds from the selling stockholders
if they exercise their warrants on a cash basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">We have agreed to
indemnify the selling stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities
Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>USE OF PROCEEDS </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">We will not receive
any proceeds from the sale of common stock offered by the selling stockholders under this prospectus. However, with respect to
the 23,310,473 shares of common stock being offered by the selling stockholders under this prospectus, we will receive up to $3,049,998
in the aggregate from the selling stockholders if they exercise in full, on a cash basis, all of their unexercised warrants to
purchase 5,321,426 shares of common stock being offered under this prospectus. We will use any cash proceeds from the exercise
of the warrants for working capital and other corporate purposes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>MARKET PRICE OF AND DIVIDENDS ON COMMON
STOCK AND RELATED MATTERS </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Market Information</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; color: blue">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">Our common stock is
currently quoted under the symbol &ldquo;MNDL&rdquo; on the OTC QB market operated by OTC Markets Group, Inc.&nbsp;&nbsp;Prior
to May 16, 2012, our stock was quoted on the OTC Bulletin Board under the symbol &ldquo;MNDL.&rdquo;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">The following table
sets forth the high and low bid quotations for our common stock for the periods indicated below, as reported by the OTC QB market
or OTC Bulletin Board, as applicable.&nbsp;&nbsp;Such over-the-counter market quotations reflect inter-dealer prices, without retail
mark-up, mark-down, or commission and may not necessarily represent actual transactions in our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">High</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Low</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold">Year Ended March 31, 2013</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 70%">First Quarter (ended June 30, 2012)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">1.05</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">0.72</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold">Year Ended March 31, 2012</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Fourth Quarter (ended March 31, 2012)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.99</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.57</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Third Quarter (ended December 31, 2011)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.70</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.42</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Second Quarter (ended September 30, 2011)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.85</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.44</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>First Quarter (ended June 30, 2011)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.64</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.30</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold">Year Ended March 31, 2011</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Fourth Quarter (ended March 31, 2011)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.74</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.15</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Third Quarter (ended December 31, 2010)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.39</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.21</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Second Quarter (ended September 30, 20)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.64</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.20</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>First Quarter (ended June 30, 2010)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.40</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.15</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">Our common stock
is thinly traded and any reported sale prices may not be a true market-based valuation of our common stock.&nbsp;On July 5,
2012, the closing price of our common stock, as reported on the OTC QB market operated by OTC Markets Group, Inc.&nbsp;was
$0.79 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">As of June 29, 2012,
there were 503 holders of record of our common stock. Trades in our common stock may be subject to Rule 15g-9 under the Exchange
Act, which imposes requirements on broker-dealers who sell securities subject to the rule to persons other than established customers
and accredited investors.&nbsp;For transactions covered by the rule, broker-dealers must make a special suitability determination
for purchasers of the securities and receive the purchaser&rsquo;s written agreement to the transaction before the sale.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">The SEC also has rules
that regulate broker-dealer practices in connection with transactions in &ldquo;penny stocks.&rdquo; Penny stocks generally are
equity securities with a price of less than $5.00 (other than securities listed on some national exchanges, provided that the current
price and volume information with respect to transactions in that security is provided by the applicable exchange or system).&nbsp;The
penny stock rules require a broker-dealer, before effecting a transaction in a penny stock not otherwise exempt from the rules,
to deliver a standardized risk disclosure document prepared by the SEC that provides information about penny stocks and the nature
and level of risks in the penny stock market.&nbsp;The broker-dealers also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealers and its salesperson in the transaction, and monthly account
statements showing the market value of each penny stock held in the customer&rsquo;s account.&nbsp;The bid and offer quotations,
and the broker-dealers and salesperson compensation information, must be given to the customer orally or in writing before effecting
the transaction, and must be given to the customer in writing before or with the customer&rsquo;s confirmation.&nbsp;These disclosure
requirements may have the effect of reducing the level of trading activity in the secondary market for shares of common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Dividends</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">We have not paid any
dividends on our common stock in the last two fiscal years and currently have no intention of paying dividends on our common stock.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Recent Sales of Unregistered Securities</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.45pt">The following is
a summary of transactions by us during the twelve months ended March 31, 2012, involving sales of our securities that were not
registered under the Securities Act. Each sale was exempt from registration under either Section 4(2) of the Securities Act or
Section 3(a)(9) of the Securities Act because (i) the securities were offered and sold only to accredited investors; (ii) there
was no general solicitation or general advertising related to the offerings; (iii) each investor was given the opportunity to ask
questions and receive answers concerning the terms of and conditions of the offering and to obtain additional information; (iv)
the investors represented that they were acquiring the securities for their own account and for investment; and (v) the securities
were issued with restrictive legends where required.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: 27.35pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: 27.35pt"><FONT STYLE="color: black">In
March 2012, the Company sold an aggregate of </FONT>3,857,143<FONT STYLE="color: black"> </FONT>shares of its common stock and
warrants to purchase an aggregate of 964,284 shares of common stock to accredited investors for an aggregate purchase price of
$2.7 million. Each warrant has an exercise price of $0.70 per share (subject to adjustment) and a five year term from the date
of issuance. Each warrant may not be exercised prior to the first anniversary of the date of issuance. The Company agreed to register
the securities purchased in this offering. The securities were issued pursuant to the exemption provided by Section 4(2) of the
Securities Act of 1933, as amended, for transactions by an issuer not involving any public offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: 27.35pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: 27.35pt">In March 2012, the Company
entered into a Convertible Note Financing Binding Term Sheet (the &ldquo;Adage Term Sheet&rdquo;) with Adage Capital Partners,
L.P. (&ldquo;Adage&rdquo;), pursuant to which the parties agreed to restructure certain terms of the convertible note financing
consummated on December 29, 2011. In connection with the restructuring, $7,037,333, representing the entire outstanding principal
amount and all accrued and unpaid interest thereon under the Subordinated Convertible Promissory Note in the original principal
amount of $7,000,000 issued by the Company to Adage (the &ldquo;Adage Note&rdquo;), was converted into 10,053,333<B> </B>shares
of common stock of the Company effective as of March 1, 2012, and the exercise price of the warrant to purchase common stock of
the Company issued to Adage in connection with the purchase and sale of the Adage Note was changed to $0.70 per share, subject
to adjustment. As a result of the change to the exercise price, the warrant gives Adage the right to purchase up to 2,500,000 shares
of common stock of the Company, subject to adjustment. We relied on Section 3(a)(9) of the Securities Act of 1933, as amended,
as providing an exemption from registration for this transaction and relied on Section 4(2) of the Securities Act of 1933, as amended,
as providing for an exemption for the original issuance of the Adage Note and warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
March 2012, the Company issued to </FONT>TAJA, LLC <FONT STYLE="color: black">warrants to purchase  2,000,000 shares of
common stock of the Company at an exercise price of $0.70 cents per share with a term of 5 years. The warrants were issued as
consideration related to the modification of an existing note to convertible debt. In connection with the same
transaction, the Company issued 1,071,429 warrants to purchase shares of common stock of the Company at an exercise price of
$0.70 cents per share. Also in connection with the same transaction, the Company issued 2,600,000 shares of common stock of
the Company as payment of $1,820,000 of principle of a convertible note. </FONT>We relied on Section 3(a)(9) of the
Securities Act as providing an exemption from registering the issuance of these shares of common stock under the Securities
Act inasmuch as the conversion was made with our existing security holders exclusively and no commission or other
remuneration was paid or given directly or indirectly for soliciting the exchange.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
March 2012, the Company issued 50,000 shares of common stock of the Company to Hyaden IR in consideration of investor relations
services. The shares are vested, but restricted for a one year period. The shares were valued at the closing market price on that
date of $0.85 cents per share. </FONT>We relied on Section 4(2) of the Securities Act as providing an exemption from registering
the issuance of these shares of common stock under the Securities Act inasmuch as the conversion was made with our existing security
holders exclusively and no commission or other remuneration was paid or given directly or indirectly for soliciting the exchange.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
January 2012, the Company issued 1,375,000 shares of common stock of the Company to three employees </FONT>Lisa Higgins-Lucero,
David Mandell and David Waldman<FONT STYLE="color: black">. The shares are vested, but are restricted for a two year period. The
shares were valued at the closing market price on that date of $0.65 cents per share. </FONT>We relied on Section 4(2) of the
Securities Act, as providing an exemption from registering the sale of these shares of common stock under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt">In January
2012, the Company entered into a consulting agreemen with Andrew Schleimer for advisory board services, pursuant to which, the
Company issued 150,000 shares of common stock of the Company under a two-year lock-up and an additional 850,000 shares of common
stock of the Company that vests upon the achievement of certain company milestons. We relied on Section 4(2) of the Securities
Act, as providing an exemption from registering the sale of these shares of common stock under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt">In January
2012, the Company entered into a consulting agreement with Michael Lambert for advisory
board services, pursuant to which, the Company issued 150,000 shares of common stock of the Company. The shares vest over one year
and were valued at the closing market price on that date of $0.65 cents per share. We relied on Section 4(2) of the Securities
Act, as providing an exemption from registering the sale of these shares of common stock under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
December 2011, the Company issued 3,600,000 shares of common stock of the Company to a director. The shares are vested, but are
restricted for a one year period. The shares were valued at the closing market price on that date of $0.61 cents per share. </FONT>We
relied on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock
under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
December 2011, the Company issued 3,400,000 shares of common stock of the Company to a director. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.&nbsp;</FONT>We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
December 2011, the Company issued 1,000,000 shares of common stock of the Company to a director. The shares vest over a period
of one year. The shares were valued at the closing market price on that date of $0.61 cents per share. </FONT>We relied on Section
4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under the Securities
Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
December 2011, the Company issued 1,000,000 shares of common stock of the Company to a director. The shares vest over a period
of one year. The shares were valued at the closing market price on that date of $0.62 cents per share. </FONT>We relied on Section
4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under the Securities
Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
December 2011, the Company issued 1,000,000 shares of common stock of the Company to a director. The shares vest over a period
of one year. The shares were valued at the closing market price on that date of $0.62 cents per share. </FONT>We relied on Section
4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under the Securities
Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
December 2011, the Company issued 500,000 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.&nbsp;</FONT>We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
December 2011, the Company issued 25,000 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.&nbsp;</FONT>We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
December 2011, the Company issued 500,000 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.&nbsp;</FONT>We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
December 2011, the Company issued 200,000 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.&nbsp;</FONT>We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
December 2011, the Company issued 9,037,500 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.&nbsp;</FONT>We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
December 2011, the Company issued 100,000 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.&nbsp;</FONT>We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
December 2011, the Company issued 50,000 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.&nbsp;</FONT>We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
December 2011, the Company issued 1,787,500 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.&nbsp;</FONT>We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
December 2011, the Company issued 100,000 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.&nbsp;</FONT>We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 27pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
December 2011, the Company issued 100,000 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.&nbsp;</FONT>We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
December 2011, the Company issued 50,000 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.&nbsp;</FONT>We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
December 2011, the Company issued 50,000 of common stock of the Company to Digital Turbine Group LLC for the purchase of its assets.
The shares were valued at the closing market price on that date of $0.65 cents per share. </FONT>We relied on Section 4(2) of the
Securities Act, as providing an exemption from registering the sale of these shares of common stock under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">On
December 29, 2011, the Company issued a convertible promissory note for $7,000,000 pursuant to which the Company issued warrants
to purchase 3,500,000 shares based on 25% coverage and a conversion rate of $0.50. The exercise price was $0.50 at the date of
issuance with a five year life. On March 1, 2012 the note was amended, changing the conversion price to $0.70 cents per share,
and the Company issued 10,053,333 shares of common stock of the Company in full payment of principle and interest of the New Convertible
Note at the new conversion price.</FONT> We relied on Section 4(2) of the Securities Act, as providing an exemption from registering
the sale of these shares of common stock under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">On
December 29, 2011, the Company </FONT>completed a convertible note financing with TAJA, LLC by exchanging $3,000,000 of principal
amount of an existing senior subordinated secured note with an unsecured subordinated convertible note in the same principal amount
due June 21, 2013 and extending the term of the existing senior subordinated secured note to June 21, 2015. The new subordinated
secured note was issued with 25% warrant coverage with the warrant exericsable for five years at an exercise price based on the
conversion price of the note. In addition, in connection with the exchange, TAJA, LLC was issued a warrant exercisable for 2,000,000
shares of Common Stock exericisable for a five-year term at an exercise price equal to $0.25, but is not exercisable for one year
following its issuance. We relied on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of
these shares of common stock under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
June 2011, the Company entered into a consulting agreement, pursuant to which, the Company issued warrants to purchase 150,000
shares of the Company&rsquo;s common stock at an exercise price of $0.47 cents per share. The warrants vest over a one year period.</FONT>
We relied on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common
stock under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
June 2011, the Company entered into a consulting agreement, pursuant to which, the Company issued warrants to purchase 150,000
shares of the Company&rsquo;s common stock at an exercise price of $0.47 cents per share. The warrants vest over a one year period.&nbsp;</FONT>We
relied on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock
under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
May 2011, 150,000 shares of common stock of the Company were issued to a vendor as a settlement, at the closing market price on
that date of $0.40 cents per share.&nbsp;</FONT>We relied on Section 4(2) of the Securities Act, as providing an exemption from
registering the sale of these shares of common stock under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">On
April 6, 2011, the Company issued warrants to purchase 75,000 shares of the Company&rsquo;s common stock to a vendor, as compensation
for services rendered, at $0.25 cents per share. The warrants vest over a six month period.&nbsp;</FONT>We relied on Section 4(2)
of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under the Securities
Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt">On April
6, 2011, the Company entered into a consulting agreement. On January 3, 2012 the Company issued 150,000 shares of common stock
of the Company to the consultant. The shares vest over a one year period. The shares were valued at the closing market price on
that date of $0.58 cents per share. We relied on Section 4(2) of the Securities Act, as providing an exemption from registering
the sale of these shares of common stock under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt">On April
1, 2011, 347,244 shares of common stock of the Company were issued to two former employees of the Company, as compensation, at
the closing market price on that date of $0.58 cents per share. In addition, the employees each agreed to cancel options to purchase
173,622 shares of common stock in connection with their respective termination agreements. &nbsp;We relied on Section 4(2) of the
Securities Act, as providing an exemption from registering the sale of these shares of common stock under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Issuer Repurchases of Equity Securities</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: center">For the year ending</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">(a)<BR> Total&nbsp;Number&nbsp;of<BR> Shares&nbsp;(or&nbsp;Units)<BR> Purchased</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">(b)<BR> Average&nbsp;Price&nbsp;Paid<BR> per&nbsp;Share&nbsp;(or&nbsp;Unit)<BR>
($)</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">(c)<BR> Total&nbsp;Number&nbsp;of<BR> Shares&nbsp;(or&nbsp;Units)<BR> Purchased&nbsp;as&nbsp;Part&nbsp;of<BR> Publicly&nbsp;Announced<BR> Plans&nbsp;or&nbsp;Programs</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">(d)<BR> Maximum&nbsp;Number<BR> (or&nbsp;Approximate<BR> Dollar&nbsp;Value)&nbsp;of<BR> Shares&nbsp;(or&nbsp;Units)<BR> that&nbsp;May&nbsp;Yet&nbsp;Be<BR> Purchased&nbsp;Under<BR> the&nbsp;Plans&nbsp;or<BR> Programs</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 40%; font-weight: bold; text-align: center">March 31, 2012</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">0.00</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>BUSINESS </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Overview</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt"><FONT STYLE="font-size: 10pt">Mandalay
Digital Group, Inc. (&quot;Mandalay&quot; or the &quot;Company&quot;</FONT> <FONT STYLE="font-size: 10pt">or, in the first person
as &ldquo;we&rdquo; &ldquo;us&rdquo; and &ldquo;our&rdquo;), 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,&nbsp;the Company&nbsp;reincorporated in the State of Delaware under the name Mandalay Media, Inc.&nbsp;&nbsp;
</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">On May 11, 2010, Mandalay
Media, Inc. merged into its wholly-owned, newly formed subsidiary, NeuMedia Inc., with NeuMedia as the surviving corporation. NeuMedia
issued: (1) one new share of common stock in exchange for each share of outstanding common stock of Mandalay Media, Inc. and (2)
one new share of preferred stock in exchange for each share outstanding preferred stock of Mandalay Media, Inc. as of May 11, 2010.
The preferred and common stock of NeuMedia had the same status and par value as the respective stock of Mandalay Media, Inc. and
NeuMedia acceded to all the rights, acquired all the assets and assumed all of the liabilities of Mandalay Media, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">On October 27, 2004,
and as amended on December 17, 2004, NeuMedia 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 &ldquo;Plan of Reorganization&rdquo;). Under
the Plan of Reorganization, as completed on January 26, 2005: (1) NeuMedia&rsquo;s net operating assets and liabilities were transferred
to the holders of its secured notes in satisfaction of the principal and accrued interest thereon; (2) $400,000 was transferred
to a liquidation trust and used to pay administrative costs and certain preferred creditors; (3) $100,000 was retained by NeuMedia
to fund the expenses of remaining public; (4) 3.5% of the new common stock of NeuMedia (140,000 shares) was issued to the holders
of record of NeuMedia&rsquo;s preferred stock in settlement of their liquidation preferences; (5) 3.5% of the new common stock
of NeuMedia (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 NeuMedia (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, NeuMedia and its subsidiaries
were engaged in providing business-to-business transaction management services designed to simplify trading between buyers and
suppliers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Prior to February 12,
2008, NeuMedia was a public shell company with no operations, and controlled by its significant stockholder, Trinad Capital Master
Fund, L.P.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">From February 12, 2008
to October 23, 2008, our sole operations were those of our wholly-owned subsidiary, Twistbox. In October 2008, we acquired AMV
Holding Limited and its subsidiaries, a mobile media and marketing company. On June 21, 2010, we sold AMV Holding Limited and its
subsidiaries.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Current Operations</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Mandalay is at the convergence
of Internet media content and mobile communications. We are an established provider of mobile services enabling mobile content
distribution and transactions serving Mobile Operators, End Consumers, and Original Equipment Manufactures (OEM&rsquo;s) of mobile
devices and tablets. Our software as a service (&quot;SaaS&quot;) based platform delivers a mobile services platform that works
with mobile operators and third-party publishers to provide portal management, user interface, content development and billing
technology that enables the ecosystem required for the global distribution of mobile content. Our platforms enable our customers
to implement an intuitive user experience and storefront, enabling the discovery, purchase and download of mobile content. Our
integrated solutions address the mobile ecosystem spanning mobile optimized websites, mobile applications, mobile merchandising
and content management, mobile messaging, mobile advertising, mobile billing and predictive analytics. Our solutions allow our
customers to drive loyalty, generate revenue and reengineer business processes to capture the advantages of their mobile-enabled
customer base. Our predictive analytics capabilities allow our customers to recommend the right solution to their end-customer
based upon the consumers&rsquo; tastes and preferences. We are headquartered in Los Angeles and have offices in Europe to support
global sales and marketing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Key Operating Divisions</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt"><B><U>Digital Turbine</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">On December 28, 2011,
the Company acquired the assets of Digital Turbine Group, LLC, the developer of Digital Turbine (&ldquo;DT&rdquo;), a technology
platform that allows media companies, mobile carriers, and their OEM handset partners to take advantage of multiple mobile operating
systems across multiple networks, and offers solutions that allow them to maintain their own branding and personalized, one-to-one
relationships with each end-user. DT&rsquo;s cross-platform user interface and multimedia management system for carriers and OEMs
can be integrated with different operating systems to provide a more organized and unified experience for end-users of mobile content
across search, discovery, billing, and delivery. Other aspects of the platform, such as a smart content discovery toolbar, allows
carriers and OEMs to control the data presented to their users while giving the end-user a more efficient way of finding and purchasing
the desired content.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">With the acquisition
and integration of the assets of Digital Turbine, the Company will be able to provide an end-to-end, modular platform to the Company&rsquo;s
existing carrier customers. The combined Digital Turbine offering allows new and existing customers to choose from a fully outsourced,
smart mobile ecosystem to more efficient, modular components that can be integrated with different operating systems to provide
a more unified experience for end-users of mobile content across search, discovery, billing, and delivery.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Based upon the initial
launch data, the Company believes there is an opportunity to integrate its DT platform with new and existing mobile carriers. Mobile
carriers are facing increased competition from competing mobile application storefronts and improved user experiences from other
retailing, social networking, and operating system providers including Apple, Google, Amazon, and Facebook. As a result, operators
are looking for new, innovative solutions for how they better manage their existing user experience. The DT platform can be &ldquo;white-labeled&rdquo;
to allow operators to custom tailor their own unique branding experience to the customer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">In addition to improved
user experiences, many operators are looking for end-to-end solutions for their mobile storefronts that include procuring and programming
the content, managing the content experience, ingesting content into the content management system (CMS), securely installing and
de-installing applications from the device, and integrating with the back-end elements such as billing interfaces, analytics, settlement,
and reporting.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt"><B><U>Twistbox Entertainment, Inc.</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 22.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Twistbox Entertainment,
Inc. (&ldquo;Twistbox&rdquo;) is a global publisher, developer and enabler of mobile content and data services across mobile networks.
Twistbox provides its services in over 14 countries supporting over 50 carriers. Since operations began in 2003, Twistbox has developed
an intellectual property portfolio that includes a proprietary mobile publishing platform covering: tools that automate device
management; distribution and billing technology; a mobile games development, distribution and retail platform; and a content ratings
system adopted by wireless carriers globally to assist with the deployment of age-verified content. Twistbox has leveraged its
intellectual property and carrier-class platforms to secure agreements with leading mobile operators throughout the world including,
among others, Vodafone, Telefonica, Orange, and Hutchison&rsquo;s 3.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are considering
the future status and role of Twistbox in relation to our focus on the DT platform. Although it is our only active business, Twistbox
revenues have been declining, which we expect to continue for the foreseeable future. At the same time, we intend to seek to leverage
its existing customer base for offerings by DT. While we believe the offering of DT&rsquo;s platform to Twistbox customers is an
attractive strategy, it entails significant risks, some of which are described in &ldquo;Risk Factors&rdquo;, and include the possibility
that Twistbox may operate at a deficit while we need to make investments to effectively launch DT, which, in turn, entails business
and financial risks and the possibility of needing additional capital and the associate dilution.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Twistbox&rsquo;s target
customers are the highly-mobile, digitally-aware 18 to 40 year old demographic. This group is a leading consumer of new mobile
handsets and represents more than 50% of mobile content consumption revenue globally. In addition, this group is very focused on
consumer lifestyle brands and is much sought after by advertisers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">On February 12, 2008,
the Company completed its acquisition of Twistbox Entertainment, Inc. pursuant to an Agreement and Plan of Merger entered into
on December 31, 2007, as subsequently amended by the Amendment to Agreement and Plan of Merger dated February 12, 2008, with Twistbox
Acquisition, Inc., a Delaware corporation and a wholly-owned subsidiary of NeuMedia (&ldquo;Merger Sub&rdquo;), Twistbox Entertainment,
Inc. (&ldquo;Twistbox&rdquo;), and Adi McAbian and Spark Capital, L.P., as representatives of the stockholders of Twistbox, as
part of which Merger Sub merged with and into Twistbox, with Twistbox as the surviving corporation (the &ldquo;Merger&rdquo;).
Following the Merger, Twistbox became the sole operating subsidiary of NeuMedia until the acquisition of AMV Holding Limited, a
United Kingdom private limited company (&ldquo;AMV&rdquo;) on October 23, 2008 as described below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt"><U>Revenue </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Twistbox&rsquo;s revenue
model includes pay-per-download and a growing base of recurring subscription services. Video services include daily, weekly and
monthly subscriptions to access a specific mobile site or suite of mobile TV channels. Twistbox also earns revenue for platform
and portal management, carrier development projects, and by licensing its platform to mobile operators and other 3rd party vendors.
Since the year ended March 31, 2010 the total revenue earned by Twistbox has declined due in part to overall market conditions
and the general shift in end-user discovery of content services. These trends are likely to continue as more and more users begin
to use their mobile devices to search for content. The Company&rsquo;s strategy is to work with mobile carriers to try to recapture
and grow market share by offering its DT platform to new and existing customers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Twistbox leverages its
distribution channels within carrier portals to generate revenue from subscriptions on mobile sites that Twistbox manages on an
exclusive and non-exclusive basis. Twistbox bills and receives payment directly through mobile carriers and billing aggregators
which form the majority of its revenue. Billings from mobile operators or billing aggregators comprise more than 50% of its collections.
Twistbox&rsquo;s cost of revenues represents license fees paid to content providers, which currently averages approximately 12%
of revenues. Other costs of revenues include customer service fees, and traffic and streaming fees.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt"><U>Value Added Services
for Mobile Content and Game Development</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Twistbox is focusing
its development activities on value-added services such as in-application billing technology that enables carriers and billing
aggregators to offer solutions such as try-before-you-buy, rentals, and virtual goods. Twistbox has agreements in place with some
of the world&rsquo;s largest mobile network operators and billing aggregators to offer its In-Application Billing solution.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Twistbox also develops
games and applications that work with a number of languages, platforms, and formats. It has been 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. Twistbox continues to develop new applications to assure that it has a steady supply of new content
and services to offer its customers. Twistbox believes it is an industry trend that the overall market for mobile entertainment
should continue to increase as new storefronts proliferate and mobile operators continue to roll out their next-generation service
offerings and advanced handsets offering improvements in billing, data handling capability, graphics resolution and other features.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt"><U>Carrier-Class Publishing
Platform</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Renux&trade; is Twistbox&rsquo;s
carrier-class content management and publishing platform developed for the deployment, billing and marketing of mobile content
and applications. The system has been in operation for over five years and today supports over 350 mobile sites, and more than
66 mobile TV channels. The Renux&trade; content management system stores image and video content formatted for a wide range of
mobile 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 across mobile operator networks globally.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt"><U>RapidPort</U>&trade;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">RapidPort&trade; is
Twistbox&rsquo;s software suite that enables the development and porting of mobile games and applications to over 1,500 different
handsets from leading manufacturers including Apple, Nokia, Motorola, Samsung and Sony Ericsson. Twistbox has created an automated
handset abstraction tool that significantly reduces the time required to &ldquo;port&rdquo; a game across a significant number
of these handsets. The RapidPort&trade; development platform supports a broad number of wireless device formats including iOS,
Android, J2ME, BREW, DoJa and Symbian, and provides localization in over 18 languages. Twistbox has enhanced RapidPort&trade; to
include new technology designed to enhance titles with value-added features, such as in-application billing, multi-player and play-for-prizes
functionality, 3D graphics and location-based services (LBS).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;<U>Nitro-CDP</U>&trade;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Nitro-CDP&trade; is
a content download and delivery platform for mobile network operators, portals and content publishers. The Nitro-CDP&trade; 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-CDP&trade; also provides innovative cross-promotional tools, including purchase
history-based up-sales and advertising, an individual &ldquo;My Downloads&rdquo; area for each consumer and peer-to-peer recommendations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><U>CMX Wrapper</U>&trade;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">The CMX Wrapper&trade;
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 &ldquo;try before you buy&rdquo; and &ldquo;refer a friend&rdquo; functionality.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt"><U>Play-for-Prizes -
Competition Goes Mobile</U> &reg;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">The Twistbox Games for-prizes
network 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 Play-for-Prizes
platform enables unique in-game promotions through carrier-specific campaigns in cooperation with sponsors and advertisers.&nbsp;&nbsp;On
July 25, 2008, Twistbox filed with the United States Patent and Trademark Office a patent application for the Improvements In Skill-Based
Electronic Gaming Tournament Play having Serial Number 12/180,405.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt"><U>Distribution</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Twistbox distributes
its programming and services through on-deck relationships with mobile carriers, off-deck relationships with third-party aggregators,
and through affiliates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Twistbox&rsquo;s on-deck
services include the programming and provisioning of games and games aggregation, images, videos and mobile TV content and portal
management. Twistbox currently has on-deck agreements with more than 50 mobile operators including Vodafone, SFR, T-Mobile, Orange,
and Telefonica in over 14 countries. Through these on-deck agreements, Twistbox relies on the carriers for both marketing and billing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Twistbox off-deck services
include the programming and distribution of 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 maintains an affiliate program that allows for the sales and tracking of Twistbox mobile content by 3rd party publishers,
partners and their affiliates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Twistbox has established
an affiliate program to market and sell its content off-deck. We believe that this channel offers an attractive secondary channel
for consumers wishing to peruse and purchase content in an environment that is more niche focused than some operators&rsquo; &ldquo;walled
gardens.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt"><U>Mobile Operators
(Carriers)</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Twistbox currently has
a large number of distribution agreements with mobile operators and portals in Europe, North America, and Latin America. Twistbox
currently has distribution agreements with more than 50 single territory operators in 14 countries. The strength and coverage of
these relationships is of paramount importance and the ability to support and service them is a vital channel for Twistbox&rsquo;s
new product offerings and services.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt"><U>Trademarks, Trade
names, Patent and Copyrights</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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&nbsp;States and in foreign countries. Twistbox also has a copyright known as the &ldquo;WAAT Media
Wireless Content Standards Ratings Matrix&copy;&rdquo;, which has been filed with the Library of Congress&rsquo;s Copyright Office.
On July 25, 2008, Twistbox filed with the United States Patent and Trademark Office a patent application for the Improvements In
Skill-Based Electronic Gaming Tournament Play having Serial Number 12/180,405. We believe that these trademarks, trade names, patent
and copyrights are important to its business. The loss of some of Twistbox&rsquo;s intellectual property might have a negative
impact on its financial results and operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt"><U>AMV Holding Limited</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">On October 23, 2008,
the Company consummated the acquisition of 100% of the issued and outstanding share capital of AMV Holding Limited, a United Kingdom
private limited company (&ldquo;AMV&rdquo;) and 80% of the issued and outstanding share capital of Fierce Media Limited, United
Kingdom private limited company (collectively the &ldquo;Shares&rdquo;).&nbsp;&nbsp;The acquisition of AMV is referred to herein
as the &ldquo;AMV Acquisition&rdquo;. The aggregate purchase price (subject to adjustments as provided in the stock purchase agreement)
for the Shares consisted of (i) $5,375,000 in cash; (ii) 4,500,000 shares of common stock, par value $0.0001 per share; (iii) a
secured promissory note in the aggregate principal amount of $5,375,000 (the &ldquo;AMV Note&rdquo;); and (iv) additional earn-out
amounts, if any, based on certain targeted earnings as set forth in the stock purchase agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">On June 21, 2010, the
Company signed and closed an agreement whereby ValueAct and the AMV founders, acting through a newly formed company, acquired all
of the AMV operating subsidiaries (the &ldquo;Assets&rdquo;) in exchange for the release of $23.2 million of secured indebtedness,
comprising of a release of all amounts due and payable under the AMV Note and all of the amounts due and payable under the ValueAct
Note (as defined below) except for $3.5 million in principal. The Company retained all assets and liabilities of Twistbox and the
Company other than the AMV operating subsidiaries</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Future Plans</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">As a result of both
the needs of the operator and the need for the Company to scale its distribution, the Company is pursuing targeted acquisitions
that will accelerate growth. On May 1, 2012, the Company announced a letter of intent to acquire Logia Mobile (&ldquo;Logia&rdquo;).
Logia Mobile is an Israel-based developer of applications and provider of content. It has relationships with over 500 applications
developers and content vendors, and currently operates in more than 20 countries providing services including in-app billing to
more than 50 leading mobile carriers including: Cellcom, Vodafone, Verizon, Telefonica, Turkcell, Deutsche Telekom among others
reaching over 1.5 billion mobile subscribers. In addition, Logia has existing partnerships with industry suppliers including Amdocs,
Ericsson, and Alcatel-Lucent.&nbsp; Mandalay plans on leveraging Logia&rsquo;s distribution channels and complimentary technology
to add to the Digital Turbine user experience by leveraging devices that are powered by Logia&rsquo;s platform and CMS. The Company
believes that certain of the assets of Twistbox could be utilized in assets potentially acquired from the transaction. Logia has
no legal obligation to enter or consummate any transaction with us.  Our letter of intent is non-binding and each side has the
right to terminate discussions at any time. There is no assurance we will consummate any transaction with Logia. The Logia transaction
would, if consummated, also present certain risks, as described below in &ldquo;Risk Factors&rdquo;.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Competition</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Twistbox is an established
enabler of content management services designed for the complex needs and requirements of mobile carriers. The industry trend has
been for carriers to focus on fewer partners and outsource their content retailing and infrastructure requirements. We believe
that Twistbox&rsquo;s reputation and existing integration with carriers globally enhances the Company&rsquo;s overall position
allowing it to continue to manage, evolve and offer new services for operators globally, principally the offering of the DT platform
to Twistbox customers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Twistbox competes with
a number of other companies in the mobile content services industry, including Mondia Media, Net-M, Jesta, Buongiorno (recently
acquired by NTT DoCoMo), Mobile Streams, and ZED Group. To the extent that such firms continue to focus on enabling services, they
will compete directly with Twistbox. While Twistbox competes with many of the leading publishers, its core business is enabling
services and platforms for operators and publishers to enhance revenues. In turn, through the management of an operator&rsquo;s
download platform, providing a cross carrier Play4Prizes infrastructure or facilitating in-application billing, Twistbox has become
a strategic value added partner to both the mobile operator and publishing communities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Our direct-to-consumer
(D2C) products may have an adverse impact on Twistbox&rsquo;s business, as these are products that require the acquisition of mobile
traffic from 3rd party publishers that may not price their traffic at rates favorable to scale the business in certain countries.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">We believe that the
principal competitive factors in the market for mobile content and services 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Employees</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">As of March 31, 2012,
the Company, including its subsidiaries, had 33 employees, 30 of whom were full-time and 3 of whom were part-time. We consider
our relationships with our employees to be satisfactory. None of our employees is covered by a collective bargaining agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>MANAGEMENT&rsquo;S DISCUSSION AND ANALYSIS
OF</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>FINANCIAL CONDITION AND RESULTS OF OPERATIONS
</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt"><I>You should read
the following discussion and analysis of financial condition and results of operation together with the financial statements and
the related notes appearing in pages F-1 through F-38 of this prospectus. The various sections of this discussion contain a number
of forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and
risk factors described throughout this prospectus. See &ldquo;Risk Factors&rdquo; at page 7 of this prospectus. Any of these
risks may have a material adverse effect on our business, financial condition, results of operations and cash flows and our prospects
could be harmed. In that event, the price of our common stock could decline and you could lose part or all of your investment.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Overview</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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 prospectus, the words &ldquo;anticipate,&rdquo; &ldquo;believe,&rdquo; &ldquo;estimate,&rdquo; &ldquo;expect&rdquo;
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 &ldquo;Risk Factors&rdquo; beginning on page 7 and
elsewhere in this filing. Historical operating results are not necessarily indicative of the trends in operating results for any
future period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Unless the context otherwise
indicates, the use of the terms &ldquo;we,&rdquo; &ldquo;our&rdquo; &ldquo;us&rdquo; or the &ldquo;Company&rdquo; refer to the
business and operations of Mandalay Digital Group, Inc. (&ldquo;Mandalay Digital&rdquo;) and its operating and wholly-owned subsidiary,
Twistbox Entertainment, Inc. (&ldquo;Twistbox&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Historical Operations of Mandalay Digital Group, Inc.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Mandalay Digital 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. DynamicWeb Enterprises, Inc was the resulting entity,
but it 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,&nbsp;the&nbsp;Company&nbsp;reincorporated in the State of Delaware under the name Mandalay Media, Inc.&nbsp;&nbsp;On
May 12, 2010, the Company changed its name to NeuMedia, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">On February 6, 2012,
the Company merged with a wholly-owned, newly-formed subsidiary, changing its name to Mandalay Digital Group, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">On October 27, 2004,
and as amended on December 17, 2004, the Company 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 &ldquo;Plan of Reorganization&rdquo;). Under
the Plan of Reorganization, as completed on January 26, 2005: (1) the Company&rsquo;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 was
transferred to a liquidation trust and used to pay administrative costs and certain preferred creditors; (3) $100,000 was retained
by the Company to fund the expenses of remaining public; (4) 3.5% of the new common stock of the Company (140,000 shares) was issued
to the holders of record of Mandalay Digital&rsquo;s preferred stock in settlement of their liquidation preferences; (5) 3.5% of
the new common stock of the Company (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 the Company (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, the
Company and its subsidiaries were engaged in providing business-to-business transaction management services designed to simplify
trading between buyers and suppliers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Prior to February 12,
2008, the Company was a public shell company with no operations, and controlled by its significant stockholder, Trinad Capital
Master Fund, L.P.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">From February 12, 2008
to October 23, 2008, our sole operations were those of our wholly-owned subsidiary, Twistbox. In October 2008, we acquired AMV
Holding Limited and its subsidiaries, a mobile media and marketing company. On June 21, 2010, we sold AMV Holding Limited and its
subsidiaries.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>SUMMARY OF THE TWISTBOX MERGER</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">The Company 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 &ldquo;Merger Agreement&rdquo;), with Twistbox Acquisition, Inc., a Delaware corporation and a wholly-owned
subsidiary of the Company (&ldquo;Merger Sub&rdquo;), Twistbox Entertainment, Inc. (&ldquo;Twistbox&rdquo;), and Adi McAbian and
Spark Capital, 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 &ldquo;Merger&rdquo;). The Merger was completed on February 12, 2008.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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, $0.01 par value per share (the &ldquo;Twistbox
Preferred Stock&rdquo;), converted automatically into and became exchangeable for Company 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 (the &ldquo;Plan&rdquo;) was assumed by the Company,
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 Company 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 &ldquo;Option
Conversion Ratio&rdquo;), rounded down to the nearest whole number; and (b) the per share exercise price for the shares of Mandalay
Digital 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, the Company also assumed all unvested Twistbox
options. The Merger consideration consisted of an aggregate of up to 12,325,000 shares of Company common stock, which included
the conversion of all shares of Twistbox capital stock and the reservation of 2,144,700 shares of Company common stock required
for assumption of the vested Twistbox options. The Company reserved an additional 318,772 shares of Company 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">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, the Company or any subsidiary of Twistbox or the Company 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">As part of the Merger,
the Company agreed to guarantee up to $8,250,000 of Twistbox&rsquo;s outstanding debt to ValueAct SmallCap Master Fund L.P. (&ldquo;ValueAct&rdquo;
or &ldquo;VAC&rdquo;), 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 &ldquo;ValueAct Note&rdquo; or the &ldquo;VAC Note&rdquo;) and a warrant which entitled ValueAct
to purchase from Twistbox up to a total of 2,401,747 shares of Twistbox&rsquo;s common stock (the &ldquo;Warrant&rdquo;). Twistbox
and ValueAct 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 ValueAct Note
would be secured by substantially all of the assets of Twistbox and its subsidiaries (the &ldquo;VAC Note Security Agreement&rdquo;).
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 entitled 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 entitled 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, would have
been permanently increased to an exercise price of $7.55 per share. Both warrants were scheduled to expire on July 30, 2011. The
warrants were subsequently modified on October 23, 2008 and cancelled on June 21, 2010, as set forth below. We also entered into
a Guaranty (the &ldquo;ValueAct Note Guaranty&rdquo;) with ValueAct whereby the Company agreed to guarantee Twistbox&rsquo;s payment
to ValueAct of up to $8,250,000 of principal under the ValueAct Note in accordance with the terms, conditions and limitations contained
in the ValueAct Note, which was subsequently amended as set forth below. The financial covenants of the ValueAct Note were also
amended, pursuant to which Twistbox was required to maintain a cash balance of not less than $2,500,000 at all times and the Company
is required to maintain a cash balance of not less than $4,000,000 at all times. The ValueAct Note was subsequently amended and
restated as set forth below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>SUMMARY OF THE AMV ACQUISITION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">On October 23, 2008,
the Company consummated the acquisition of 100% of the issued and outstanding share capital of AMV Holding Limited, a United Kingdom
private limited company (&ldquo;AMV&rdquo;) and 80% of the issued and outstanding share capital of Fierce Media Limited, United
Kingdom private limited company (collectively the &ldquo;Shares&rdquo;). The acquisition of AMV is referred to herein as the &ldquo;AMV
Acquisition&rdquo;. The aggregate purchase price (subject to adjustments as provided in the stock purchase agreement) for the Shares
consisted of (i) $5,375,000 in cash; (ii) 4,500,000 shares of Company common stock, par value $0.0001 per share; (iii) a secured
promissory note in the aggregate principal amount of $5,375,000 (the &ldquo;AMV Note&rdquo;); and (iv) additional earn-out amounts,
if any, based on certain targeted earnings as set forth in the stock purchase agreement. The AMV Note was scheduled to mature on
July 31, 2010, and bore interest at an initial rate of 5% per annum, subject to adjustment as provided therein.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">In addition, also on
October 23, 2008, in connection with the AMV Acquisition, the Company, Twistbox and ValueAct entered into a Second Amendment to
the ValueAct Note, which among other things, provided for a payment-in-kind election at the option of Twistbox, modified the financial
covenants set forth in the ValueAct Note to require that the Company and Twistbox maintain certain minimum combined cash balances
and provided for certain covenants with respect to the indebtedness of the Company and its subsidiaries. Also on October 23, 2008,
AMV granted to ValueAct a security interest in its assets to secure the obligations under the ValueAct Note. In addition, the Company
and ValueAct entered into an allonge to each of those certain warrants issued to ValueAct in connection with the Merger, which,
among other things, amended the exercise price of each of the warrants to $4.00 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">In addition, also on
October 23, 2008, the Company entered into a Securities Purchase Agreement with certain investors identified therein (the &ldquo;Investors&rdquo;),
pursuant to which the Company agreed to sell to the Investors in a private offering an aggregate of 1,685,394 shares of common
stock and warrants to purchase 842,697 shares of common stock for gross proceeds to the Company of $4,500,000. The warrants have
a five year term and an exercise price of $2.67 per share. The funds were held in an escrow account pursuant to an Escrow Agreement,
dated October 23, 2008 and were released to the Company on or about November 8, 2008.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">On August 14, 2009,
the Company and ValueAct entered into a Second Allonge to Warrant to Purchase 1,092,621 shares of the Company&rsquo;s common stock
(the &ldquo;Second Allonge&rdquo;), which amended that certain warrant to purchase 1,092,621 shares of the Company&rsquo;s common
stock, issued to ValueAct on February 12, 2008, as amended (the &ldquo;ValueAct Warrant&rdquo;). Pursuant to the Second Allonge,
the exercise price of the ValueAct Warrant decreased from $4.00 per share to the lesser of $1.25 per share, or the exercise price
per share for any warrant to purchase shares of the Company&rsquo;s common stock issued by the Company to certain other parties.
In addition, also on August 14, 2009, the Company, Twistbox and ValueAct entered into a Third Amendment to the ValueAct Note. Pursuant
to the Third Amendment, the maturity date was changed to July 31, 2010 and the interest rate of the ValueAct Note increased from
10% to 12.5%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">On January 25, 2010,
Mandalay Digital, Twistbox and ValueAct entered into a Waiver to Senior Secured Note (the &ldquo;Waiver&rdquo;), pursuant to which
ValueAct agreed to waive certain provisions of the ValueAct Note. Pursuant to the Waiver, subject to Twistbox&rsquo;s compliance
with certain conditions set forth in the Waiver, certain rights to prepay the ValueAct Note were extended from January 31, 2010
to March 1, 2010. In addition, subject to Twistbox&rsquo;s compliance with certain conditions set forth in the Waiver, the timing
obligation of the Company and Twistbox to comply with the cash covenant set forth in the ValueAct Note was extended to March 1,
2010 and the minimum cash balance by which Twistbox and Mandalay Digital must maintain was increased to $1,600,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">On February 25, 2010,
Twistbox received a letter (the &ldquo;Letter&rdquo;) from ValueAct alleging certain events of default with respect to the ValueAct
Note. The Letter claimed that an event of default had occurred and was continuing under the ValueAct Note as result of certain
alleged defaults, including the failure to provide weekly evidence of compliance with certain of Twistbox&rsquo;s and the Company&rsquo;s
covenants under the ValueAct Note, the failure to comply with limitations on certain payments by the Company and each of its subsidiaries,
and the failure of Twistbox and the Company to maintain minimum cash balances in deposit accounts of each of Twistbox and the Company.
The Letter also claimed that the Waiver had ceased to be effective as a result of the alleged failure of Mandalay Digital to comply
with the conditions set forth in the Waiver. On May 10, 2010, Twistbox received from ValueAct a Notice of Event of Default and
Acceleration (&ldquo;Notice&rdquo;) in which ValueAct stated that an event of default had occurred under the ValueAct Note as a
result of Twistbox&rsquo;s and Mandalay Digital&rsquo;s failure to comply with the cash balance covenant under the ValueAct Note
and, therefore, ValueAct accelerated all outstanding amounts payable by Twistbox under the ValueAct Note. In connection with the
Notice, ValueAct instituted an administration proceeding in the United Kingdom against AMV.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">On June 21, 2010, the
Company sold all of the operating subsidiaries of AMV to an entity controlled by ValueAct and certain of AMV&rsquo;s founders in
exchange for the release of $23,231,000 of secured indebtedness, comprising of a release of all amounts due and payable under the
AMV Note and all amounts due and payable under the VAC Note except for $3,500,000 in principal (the &ldquo;Restructure&rdquo;).
In connection with the Restructure, the ValueAct Note (as amended and restated, the &ldquo;Amended ValueAct Note&rdquo;), the Value
Act Security Agreement and the Value Act Guaranty were amended and restated in their entirety. In addition, all warrants and common
stock of the Company held by ValueAct were cancelled and all warrants and common stock of the Company held by AMV founders Nate
MacLeitch and Jonathan Cresswell were repurchased by the Company for a price of $0.02 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">The Amended ValueAct
Note matures on June 21, 2013 and bears interest at 10% payable in cash semi-annually in arrears on each January 1 and July 1 that
the Amended ValueAct Note is outstanding. Twistbox may prepay the Amended ValueAct Note in whole or in part at any time without
penalty. Notwithstanding the foregoing, at any time on or prior to January 1, 2012, Twistbox may, at its option, in lieu of making
any cash payment of interest, elect that the amount of any interest due and payable on any interest payment date on or prior to
January 1, 2012 be added to the principal due under the Amended ValueAct Note. In the event of a Fundamental Change (as defined
therein) of Twistbox, the holder of the Amended ValueAct Note will have the right for a period of thirty days to require Twistbox
to repurchase the Amended ValueAct Note at a price equal to 100% of the outstanding principal and all accrued and unpaid interest.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Also on June 21, 2010,
for purposes of capitalizing the Company, the Company sold and issued $2,500,000 of Senior Secured Convertible Notes due June 21,
2013 (the &ldquo;New Senior Secured Notes&rdquo; or the &ldquo;Senior Debt&rdquo;) to certain significant stockholders. The New
Senior Secured Notes have a three year term and bear interest at a rate of 10% per annum payable in arrears semi-annually. Notwithstanding
the foregoing, at any time on or prior to the 18th month following the original issue date of the New Senior Secured Notes, the
Company may, at its option, in lieu of making any cash payment of interest, elect that the amount of any interest due and payable
on any interest payment date on or prior to the 18th month following the original issue date of the New Senior Secured Notes be
added to the principal due under the New Senior Secured Notes. The accrued and unpaid principal and interest due on the New Senior
Secured Notes are convertible at any time at the election of the holder into shares of Company common stock at a conversion price
of US $0.15 per share, subject to adjustment. The New Senior Secured Notes are secured by a first lien on substantially all of
the assets of the Company and its subsidiaries. The Amended ValueAct Note is subordinated to the New Senior Secured Notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Each purchaser of a
New Senior Secured Note also received a warrant (&ldquo;Warrant&rdquo;) to purchase shares of common stock of the Company at an
exercise price of $0.25 per share, subject to adjustment. For each $1.00 of New Senior Secured Notes purchased, the purchaser received
a Warrant to purchase 3.33 shares of common stock of the Company. Each Warrant has a five year term.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">The Merger and the AMV
Acquisition both included the issuance of common stock as all or part of the consideration. Based on the trading price of the common
stock as of the acquisition dates, the total consideration was approximately $67.5 million for the Merger and approximately $22.2
million for the AMV Acquisition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">On December 16, 2011
the Amended ValueAct Note was purchased by Taja, LLC (&ldquo;Taja&rdquo;) and immediately amended to remove certain negative covenants
(as amended, the &ldquo;Taja Note&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Company Overview</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">From February 12, 2008
to October 23, 2008, our sole operations were those of our wholly-owned subsidiary, Twistbox. In October 2008, we acquired AMV
Holding Limited and its subsidiaries, a mobile media and marketing company. On June 21, 2010, we sold AMV Holding Limited and its
subsidiaries.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Twistbox is a global,
mobile data services company primarily focused on enabling and optimizing the development, distribution and billing of content
and applications across mobile networks. Operating since 2003, Twistbox publishes content in over 28 countries with distribution
representing more than five hundred million subscribers. Twistbox has developed an intellectual property portfolio that includes
worldwide or territory exclusive mobile rights to content, a proprietary publishing platform that includes tools to automate device
management and billing of content and applications; a mobile games development and distribution platform that automates the porting
of mobile games and applications to over 1,500 handset models; a content ratings system adopted by certain major wireless carriers
to assist with the responsible deployment of age-verified programming and services; a suite of value added billing technologies
that allow for in-application billing, and Digital Rights Management (DRM) solutions. Twistbox has leveraged its intellectual property
and carrier-class technology to secure direct distribution and/or enabling agreements with leading mobile operators throughout
Europe, North America and Latin America, including, among others, Vodafone, Telefonica, Orange, and SFR.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Twistbox maintains a
global distribution agreement with Vodafone. Through this relationship, in certain markets Twistbox serves as one of Vodafone&rsquo;s
exclusive category portal managers. Twistbox has similar exclusive agreements with other operators in selected territories.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">In addition to its carrier
publishing and enabling business, Twistbox operates a mobile ad network and suite of direct to consumer services that are promoted
through advertising, as well as from other mobile publishers. Payments for the Company&rsquo;s direct to consumer services are
processed through integration with the Company&rsquo;s own mobile billing solutions, third party mobile billing aggregators, and
credit card processing companies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">Twistbox&rsquo;s target
customers are the lucrative, tech-savvy 18 to 40 year old demographic. This group is a leading consumer group of new mobile handsets
and represents more than 50% of mobile content consumption revenue globally. In addition, this group is very focused on consumer
lifestyle brands and is much sought after by advertisers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">In December 2011, the
Company purchased the assets of Digital Turbine. With the acquisition and integration of the assets of Digital Turbine, the Company
will be able to provide an end-to-end, modular platform to the Company&rsquo;s existing carrier customers. The combined DT offering
allows new and existing customers to choose from a fully outsourced, smart mobile ecosystem to more efficient, modular components
that can be integrated with different operating systems to provide to the end user a more unified experience of mobile content
across search, discovery, billing, and delivery. Innovative aspects of the Digital Turbine platform include the ability for carriers
and OEMs to analyze and control the data presented to their end-users while giving them a more efficient way of finding and purchasing
content.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>RESULTS OF OPERATIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Twelve Months&nbsp;ended</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Twelve Months&nbsp;ended</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">March&nbsp;31,</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">March&nbsp;31,</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">%&nbsp;of</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt">Change</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center">(in thousands)</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 55%">Revenues</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">7,230</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">9,186</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">-21</TD><TD STYLE="width: 1%; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Cost of revenues</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,873</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,210</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">-10</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Gross profit</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,357</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,976</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-27</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>SG&amp;A</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">16,040</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,368</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">41</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Amortization of intangible assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">54</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-100</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Impairment of intangibles</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,319</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,482</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-48</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">Impairment of goodwill</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,969</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,546</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">92</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Operating loss</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(16,971</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(11,474</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">48</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Interest expense, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(12,497</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,761</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">610</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Foreign exchange transaction gain / (loss)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(94</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(83</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">13</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Change in fair value of accrued derivative liabilities gain / (loss)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(4,447</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Loss on extinguishment of debt</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,004</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Gain / (loss) on settlement of debt</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,393</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(864</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-261</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Other income / (expenses)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">15</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">-850</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Loss&nbsp;before income taxes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(30,597</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(14,184</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">116</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Income tax provision</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(110</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(224</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">-51</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Loss&nbsp;from continuing operations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(30,707</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(14,408</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">113</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Profit from discontinued operations, net of taxes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">809</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-100</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Gain on disposal of discontinued operations, net of taxes</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,215</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">-100</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Net (loss) income</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(30,707</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(9,384</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: right">-227</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Basic and Diluted net income / (loss) per common share:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 8.65pt">Continuing operations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(0.62</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(0.38</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">63</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 8.65pt">Discontinued operations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.13</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-100</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 8.65pt">Net loss</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(0.62</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(0.25</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">148</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Basic and Diluted weighted average shares outstanding</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">49,418</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">37,664</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">31</TD><TD STYLE="text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Comparison of the Year Ended March 31, 2012 and the Year
Ended March 31, 2011 &nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>Revenues</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Twelve Months Ended March 31,</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt">% of</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt">Change</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center">(In thousands)</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Revenues by type:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 55%; padding-left: 9pt">Services</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">1,214</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">1,270</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">-4</TD><TD STYLE="width: 1%; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Content - Games</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">434</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,107</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-61</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Content - Other</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,824</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,546</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-31</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; padding-left: 9pt">Advertising</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,758</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,263</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">39</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt; padding-left: 0.25in">Total</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">7,230</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">9,186</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: right">-21</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Games revenue &ndash;
the decline in revenue largely reflects a strategic decision to curtail investment in development of new games for carrier sales,
along with the loss of on-deck placement with US carriers. In addition, we have wound down our development work on behalf of third
parties. This was partly offset by higher platform and services fees, particularly in Germany.&nbsp;&nbsp;&nbsp;Games revenue includes
both licensed and internally developed games for use on mobile phones.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The revenue
decline for Content - Other is the result of multiple factors. Revenues were impacted by a very challenging European sales
environment for our carrier partners and consequently for us. This resulted in lower sales in major territories including the
UK, Germany and Spain. Revenues were also affected by the increase in the use of smart phones over feature phones, which
hinder the carriers&rsquo; ability to monetize content revenues effectively. Other content includes a broad range of licensed
and internally developed products delivered in the form of WAP, Video, Wallpaper and Mobile.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>Cost of Revenues</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Twelve&nbsp;Months&nbsp;Ended&nbsp;March&nbsp;31,</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt">%&nbsp;of</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt">Change</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="color: blue; font-weight: bold; font-style: italic">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center">(In thousands)</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Cost of revenues:</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 55%; text-align: left; padding-left: 9pt">License fees</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">2,643</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">2,915</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">-9</TD><TD STYLE="width: 1%; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Other direct cost of revenues</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">230</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">295</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">-22</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 0.25in">Total cost of revenues</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,873</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,210</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: right">-10</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.25in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt; padding-left: 0.25in">Revenues</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">7,230</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">9,186</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: right">-21</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.25in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 0.25in">Gross margin</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">60.3</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">%</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">65.1</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">%</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">License fees represent
costs payable to content providers for use of their intellectual property in products sold. Our licensing agreements are predominantly
on a revenue-share basis, and have therefore decreased relative to the decrease in revenue. We experienced slightly higher fees
in the area of traffic and advertising costs that affected our sales mix, as well as our gross margin.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>Operating Expenses</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Twelve&nbsp;Months&nbsp;Ended&nbsp;March&nbsp;31,</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt">%&nbsp;of</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt">Change</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center">(In thousands)</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 55%; text-align: left">Product development expenses</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">2,154</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">3,528</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">-39</TD><TD STYLE="width: 1%; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Sales and marketing expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">873</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,142</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-59</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">General and administrative expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">13,013</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,698</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">128</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Amortization of intangible assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">54</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-100</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Impairment of intangible assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,319</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,482</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-48</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Impairment of goodwill</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,969</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,546</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">75</TD><TD STYLE="text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Product development
expenses include the costs to build, edit and optimize content formats for consumption on a mobile phone. Expenses in this area
are primarily driven by personnel costs. Due to strategic changes in the focus of the development business as well as the consolidation
of the device operating systems within the marketplace, our headcount has been reduced from period to period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Sales and marketing
expenses represent the costs of sales and marketing personnel, and advertising and marketing campaigns. Selling costs, including
our headcount have been reduced from period to period in an effort to streamline the business. The decrease year-over-year is the
result of cost savings made by headcount reductions, as well as reduced travel and entertainment expenses, offset by relocation
costs relative to our UK operations from late fiscal year 2010 through most of fiscal year 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">General and administrative
expenses represent management and support personnel costs in each of the subsidiary companies and related expenses, as well as
professional and consulting costs, and other costs such as stock based compensation, rent, depreciation and bad debt expenses.
The increase during fiscal year 2012 is mostly due to an increase in stock compensation to management. Significant savings were
made during fiscal year 2011 mostly due to a decrease in stock compensation to management, but also through headcount reductions
and related overheads, as well as lower bad debt expense and legal fees.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Amortization of intangibles
represents amortization of the intangibles identified as part of the purchase price accounting related to both acquisitions and
attributed to operating expenses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Impairment of goodwill
and intangible assets represents the write down in value of goodwill and intangible assets associated with the acquisition of Twistbox.
The consideration in the Twistbox acquisition was entirely stock-based, and generated significant goodwill since Twistbox was not
a capital intensive company. Subsequent to the acquisition, the Company experienced a significant and continued decline in the
market value of its common stock, which resulted in the Company&rsquo;s market capitalization falling below its net book value.
The Company recorded an impairment charge in the value of goodwill and intangible assets in the third quarter of fiscal year 2011
and the last quarter of fiscal year 2012. At December 31, 2010 the Company recorded an impairment charge of $1,546,000 to write
down goodwill and $4,482,000 to write down intangible assets. At March 31, 2012, due to a decline in revenues, the Company performed
an impairment review for goodwill and intangible assets. As a result of the assessment, the Company determined that its net book
value exceeded the implied fair value; therefore, the Company recorded an additional impairment charge of $2,969,000 to write down
goodwill and $2,319,000 to write down intangibles assets. The intangible assets impaired were the valuation associated with the
Twistbox trademark/trade name.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;<B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>Other Income and&nbsp;Expenses</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Twelve Months Ended March 31,</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt">% of</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt">Change</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center">(In thousands)</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 55%; text-align: left">Interest and other (expense)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">(13,626</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">(2,710</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">403</TD><TD STYLE="width: 1%; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Profit from discontinued operations, net of taxes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">809</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-100</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Gain on disposal of discontinued operations, net of taxes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">4,215</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-100</TD><TD STYLE="text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Interest and other
income/(expense) includes interest income on invested funds, interest expense related to the Senior Secured Note, the ValueAct
Note, the Taja Note, the Adage Note, financing costs including loan modification costs, changes in the fair market value of derivatives,
foreign exchange transaction gains, and other income/expense. The increase in net expense compared to the prior period is comprised
mostly of financing costs, loss on extinguishment of debt, and change in fair value of derivative liabilities offset by settlement
of debt with a provider.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Financial Condition</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Assets</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our current assets
totaled $10.1 million and $3.8 million at March 31, 2012 and March 31, 2011, respectively. Total assets were $14.8 million and
$14.2 million at March 31, 2012 and March 31, 2011, respectively. The increase in current assets is primarily due to an increase
in cash due to the sale of shares of the Company&rsquo;s common stock, and the sale of convertible debt offset by lower accounts
receivable balances due to a decrease in revenues. The increase in total assets is primarily due to the increase in cash offset
by the impairment charge recorded against goodwill and intangibles assets, as well as the lower accounts receivable and depreciation
of fixed assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Liabilities and
Working Capital</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">At&nbsp;March 31, 2012,
our current and total liabilities were $9.1 million, compared to $11.6 million at March 31, 2011. The change in liabilities was
related to a significant reduction in accounts payable and accrued license fees due to settlements with certain suppliers, offset
by an increase in accrued compensation due to deferred payroll compensation and an increase in the fair market value of warrant
derivative liabilities. Additionally, debt was reduced due to the restructuring of the Value Act Note, and the equity conversion
of $1.8 million of that note. The Company had positive working capital of $4.1 million at March 31, 2012 as opposed to negative
working capital of $3.3 million at March 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>Liquidity and Capital Resources</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Twelve Months Ended March 31,</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center">(In thousands)</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left">Consolidated Statement of Cash Flows Data:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; text-align: left; padding-left: 9pt">Capital expenditures</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">(17</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">(88</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Cash flows used in operating activities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,829</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,909</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Cash flows used in investing activities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,547</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Proceeds from new convertible debt</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,500</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 9pt">Issuance of shares for cash</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,700</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Effect of exchange rate changes on cash and cash equivalents</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">100</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2</TD><TD STYLE="text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company has incurred
losses and negative annual cash flows since inception, although the operating loss increased from $11.5 million in fiscal year
2011 to $16.9 million as of March 31, 2012. A significant portion of the loss is represented by one-time non-cash charges to stock
compensation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The consolidated financial
statements included in this prospectus include the accounts of the Company. The primary sources of liquidity have historically
been issuance of common and preferred stock and borrowings under credit facilities. In fiscal year 2012, the Company raised $9.7
million through issuance of convertible debt and equity financings and through restructuring existing debt to convertible debt.
Until we become cash flow positive, we anticipate that our primary sources of liquidity will be our existing cash balances together
with cash generated by our operating activities, cash on hand, as well as further borrowings or further capital raises. Assuming
there are no further changes in expected sales and expense trends subsequent to March 31, 2012, the Company believes that its cash
position will be sufficient to continue operations for the next twelve months.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>Operating Activities</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the year ended
March 31, 2012, we used $1.8 million of net cash in operating activities. Net cash used represents an increase in
accounts payable and accrued compensation of $0.8 million, decreases in accounts receivable and prepaid expense of $1.7
million, offset by decreases in accrued license fees and other liabilities of $0.6 million. These changes flow from the loss
for the period, but exclude impairment charge of $5.2 million, depreciation and amortization of $0.4 million, as well as
interest, finance charges, debt extinguishment and debt discount costs of $10.7 million incurred to restructure liabilities,
derivative liability costs of $4.4 million, and $7.5 million for stock and warrants issued for services, offset by supplier
settlements of $1.4 million. In the year ended March 31, 2011, we used $1.9 million of net cash in operating activities, including an
increase in accounts payable and other liabilities of $1.3 million , flowing from the loss excluding impairment charge of
$6.0 million , offset by non-cash stock based compensation and depreciation and amortization.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of March 31, 2012,
the Company had approximately $8.8 million of cash for use in continuing operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company&rsquo;s
cash requirements in the future will be dependent on actions taken to improve cash flow, including operational restructuring. We
may require additional cash resources due to changed business conditions or other future developments, including any investments
or acquisitions we may decide to pursue. If cash resources 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 debt or equity financing will be available
on acceptable terms, if at all.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;Debt obligations
include interest payments under the Senior Debt facility, and also under the Amended Taja Note. Under the Senior Debt facility
the Company may elect to add interest to the principal, until 18 months following June 21, 2010, with the full amount of the principle
and interest payable at the end of the term. Under the Amended Taja Note the Company may elect to add interest to the principal.
The full amount is payable two years from March 1, 2012, if it has not already been converted into shares of common stock of the
Company. The Company&rsquo;s operating lease obligations include non-cancelable operating leases for the Company&rsquo;s office
facilities in several locations, expiring at various dates through 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Off-Balance Sheet
Arrangements</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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 believe, therefore, that we are not materially exposed to any financing, liquidity, market or credit risk that could
arise if we had engaged in such relationships.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Stock Sales and
Liquidity</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In April 2011, the
Company issued an aggregate of 497,244 shares of the Company&rsquo;s common stock in private placements (1) to two former employees
of a subsidiary of the Company as a severance payment, and (2) to a consultant for services.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In April 2011, the
Company issued warrants to purchase 75,000 shares of the Company&rsquo;s common stock at an exercise price of $0.25 per share to
a service provider of the Company as payment for past services to the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In May 2011, the Company
issued 150,000 shares of the Company&rsquo;s common stock to a service provider to the Company as payment for past services to
the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In June 2011, the Company
issued warrants to purchase an aggregate of 300,000 shares of the Company&rsquo;s common stock at an exercise price of $0.47 per
share to two advisory board members for consulting services.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>



<P STYLE="margin: 0"></P>

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<P STYLE="margin: 0"></P>
<P STYLE="margin: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In December 2011, the
Company issued 50,000 shares of the Company&rsquo;s common stock as part of the consideration for the assets of Digital Turbine
Group, LLC.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In December 2011, in
connection with the acquisition of assets from Digital Turbine Group, LLC, the Company issued 12,450,000 shares of the Company&rsquo;s
common stock to consultants as payment for services. The shares vest based on certain conditions. As of March 2012, 9,037,500 of
such shares have vested and 3,412,500 of such shares were unvested.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In December 2011, the
Company issued an aggregate of 10,000,000 shares of the Company&rsquo;s common stock with vesting conditions to directors of the
Company. As of March 2012, 3,000,000 of such shares have vested.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In January 2012, the
Company issued 300,000 shares of common stock of the Company to two advisory board members for consulting services. As of March
2012, 150,000 shares have vested.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In January 2012, the
Company issued 1,375,000 shares of common stock of the Company with vesting provisions to three employees. As of March 2012, 875,000
of such shares have vested.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In March 2012, the
Company issued warrants to purchase 500,000 shares of the Company&rsquo;s common stock at an exercise price of &nbsp;$0.70 per
share to a service provider of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In March 2012, the
Company issued 10,053,333 shares of common stock of the Company in full payment of principle and interest of the New Convertible
Note.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In March 2012, the
Company issued 200,000 shares of common stock of the Company to two vendors for services. As of March 2012, 50,000 of such shares
have vested.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In March 2012, the
Company sold 3,857,143 shares of common stock of the Company to certain investors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In March 2012, the
Company issued to certain investors warrants to purchase 964,286 shares of common stock of the Company at an exercise price of
$0.70 cents per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In March 2012, the
Company issued warrants to purchase 3,071,429 shares of common stock of the Company at an exercise price of $0.70 cents per share
related to modification of an existing note to convertible debt.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In March 2012, the
Company issued 2,600,000 shares of common stock of the Company as payment of $1,820,000 of principle of a convertible note.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In May 2012, the Company
issued 150,000 shares of common stock of the Company to an advisory board member for consulting services.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In May&nbsp;2012, the
Company issued 433,333 shares of common stock of the Company to a director of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In June 2012, the Company
issued 1,428,571 shares of common stock of the Company to certain investors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In June 2012, the Company
issued warrants to purchase 357,143 shares of common stock of the Company at an exercise price of $0.70 cents per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Revenues</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The discussion herein
regarding our future operations pertain to the results and operations of Twistbox. Assets from the Digital Turbine acquisition
have yet to generate revenues due to the development cycle of the Digital Turbine products. The Company expects to begin earning
revenue from the Digital Turbine assets by the end of fiscal year ending March 31, 2013. Twistbox has historically generated and
expects to continue to generate the vast majority of its revenues from mobile phone carriers that market, distribute and/or bill
for its content. These carriers generally charge a one-time purchase fee or a monthly subscription fee on their subscribers&rsquo;
phone bills when the subscribers download Twistbox&rsquo;s content 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 transaction. Twistbox
recognizes as revenues the percentage of the fees due to it from the carrier. End users may also initiate the purchase of Twistbox&rsquo;s
content 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&rsquo;s international revenues have been much more significant than its
domestic revenues.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We believe that the
improving quality and greater availability of smartphones 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 enablers
that have the ability to provide high-quality mobile content services consistently and cost-effectively with the ability to enable
mobile billing across a wide variety of handsets and countries. Additionally, publishers and content owners are seeking enablers
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, distribution and billing technology and has achieved the scale to operate at a level that
provides it with competitive advantages. We also believe that leveraging existing carrier and publisher 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, our ability to leverage our distribution and content
relationships, as well as our ability to continue to expand billing for content in new regional markets. 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 should continue to grow in absolute dollars, assuming our revenues continue to grow. As a percentage of
revenues, we expect these expenses to decrease.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Because many new mobile
handset models are released in the fourth calendar quarter to coincide with the holiday shopping season, and 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 the March quarter end. For a variety of reasons, we may experience seasonal sales decreases during the summer, particularly
in Europe, which is predominantly reflected in our second fiscal quarter. In addition to these possible seasonal patterns, our
revenues may be impacted by declines in users visiting carrier portals, 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Cost of Revenues</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Twistbox&rsquo;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 platform and third
party delivery charges are included in cost of revenues. Our cost of revenues also includes noncash expenses&mdash;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 product sold 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;<B><I>Gross Margin</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our gross margin going
forward will be determined principally by the mix of content that we deliver, and the costs of distribution. Our games based on
licensed intellectual property require us to pay royalties to the licensor and the royalty rates in our licenses vary significantly.
Our own in-house developed games, which are based on our own intellectual property, require no royalty payments to licensors. For
late night business, branded content requires royalty payment to the licensors, generally on a revenue share basis, while for acquired
content we amortize the cost against revenues, and this will generally result in a lower cost associated with it. There are multiple
internal and external factors that affect the mix of revenues between games and late night content, and among licensed, developed
and acquired content within those categories, including the overall number of licensed games and developed games available for
sale during a particular period, the extent of our and our carriers&rsquo; marketing efforts for each type of content, and the
deck placement of content on our carriers&rsquo; mobile handsets. We believe the success of any individual game during a particular
period is affected by the recognizability of the title, its quality, its marketing and media exposure, its overall acceptance by
end users and the availability of competitive games. For other content, we believe that success is driven by the carrier&rsquo;s
deck placement, the rating of the content, by quality and by brand recognition. If our product mix shifts more to licensed games
or content 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 platform and 3<SUP>rd</SUP> party delivery charges, 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Operating Expenses</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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. For acquired content, typically we will receive content from our licensors which must be
edited for use on mobile phones, combined with other appropriate content, and packaged for end-users. The process is made more
complex by the need to deliver content on multiple carriers&rsquo; platforms and across a large number of different handsets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Sales and Marketing</I></B>.&nbsp;&nbsp;&nbsp;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 business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>General and Administrative</I>.</B>&nbsp;&nbsp;Our
general and administrative expenses, historically, and 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, capital raises 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 operations and, in the near term, additional accounting costs related to our operation as
a public company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Amortization
of Intangible Assets</I>. </B>We will record amortization of acquired intangible assets that are directly related to revenue-generating
activities as part of our cost of revenues and amortization of the remaining acquired intangible assets, such as customer lists
and platform, as part of our operating expenses. We will record intangible assets on our balance sheet based upon their fair value
at the time they are acquired. We will determine the fair value of the intangible assets using a contribution approach. We will
amortize the amortizable intangible assets using the straight-line method over their estimated useful lives of three to five years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Estimates and Assumptions</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Income Taxes</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We provide for deferred
income taxes using the liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable
to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases
and the tax effect of net operating loss carry-forwards. A valuation allowance has been provided as it is more likely than not
that the deferred assets will not be realized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Recent Accounting Pronouncements</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Adopted Accounting Pronouncements</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">In December 2010,
the FASB issued updated guidance on when and how to perform certain steps of the periodic goodwill impairment test for public entities
that may have reporting units with zero or negative carrying amounts. This guidance is effective for fiscal years, and interim
periods within those years, beginning after December 15, 2010, with early adoption prohibited. It is applicable to the Company&rsquo;s
fiscal year beginning April 1, 2011. The Company evaluated this guidance, and determined it doesn&rsquo;t have a material effect
on its consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">In December 2010,
the FASB also issued guidance to clarify the reporting of pro forma financial information related to business combinations of public
entities and to expand certain supplemental pro forma disclosures. This guidance is effective prospectively for business combinations
that occur on or after the beginning of the fiscal year beginning on or after December 15, 2010, with early adoption permitted.
It is applicable to the Company&rsquo;s fiscal year beginning April 1, 2011. The Company evaluated this guidance, and determined
it doesn&rsquo;t have a material effect on its consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">In May 2011, the FASB
issued guidance to amend certain measurement and disclosure requirements related to fair value measurements to improve consistency
with international reporting standards. This guidance is effective prospectively for public entities for interim and annual reporting
periods beginning after December 15, 2011, with early adoption by public entities prohibited, and is applicable to the Company&rsquo;s
fiscal quarter beginning January 1, 2012. The Company evaluated this guidance, and determined it doesn&rsquo;t have a material
effect on its consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">In September 2011,
the Financial Accounting Standards Board (FASB) issued amended accounting guidance related to goodwill impairment testing. The
new guidance provides the option to perform a qualitative assessment by applying a more likely than not scenario to determine whether
the fair value of a reporting unit is less than its carrying amount, which may then allow a company to skip the annual two-step
quantitative goodwill impairment test depending on the determination. The amended guidance is effective for annual and interim
goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Earlier adoption is permitted. Management
does not expect the adoption of the amended guidance to have a material impact on the Company&rsquo;s consolidated financial statements.
The Company evaluated this guidance, and determined it doesn&rsquo;t have a material effect on its consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Recently Issued Accounting Pronouncements</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">In June 2011, the
FASB issued new guidance on the presentation of comprehensive income that will require a company to present components of net income
and other comprehensive income in one continuous statement or in two separate, but consecutive statements. There are no changes
to the components that are recognized in net income or other comprehensive income under current GAAP. This guidance is effective
for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011, with early adoption permitted.
It is applicable to the Company&rsquo;s fiscal year beginning April 1, 2012. The Company is currently evaluating this guidance,
but does not expect its adoption will have a material effect on its consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">Other recent authoritative
guidance issued by the FASB (including technical corrections to the FASB Accounting Standards Codification), the American Institute
of Certified Public Accountants, and the Securities and Exchange Commission (&ldquo;SEC&rdquo;) did not, or are not expected to
have a material effect on the Company&rsquo;s consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Critical Accounting Policies</I></B><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Basis of Presentation</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The financial statements
have been prepared in accordance with accounting principles generally accepted in the United States of America (&ldquo;GAAP&rdquo;)
and pursuant to the rules and regulations of the Securities and Exchange Commission (&ldquo;SEC&rdquo;) for annual financial statements.&nbsp;&nbsp;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Principles of Consolidation</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The consolidated financial
statements include the accounts of the Company and our wholly-owned subsidiaries. All material intercompany balances and transactions
have been eliminated in consolidation. Discontinued operations have been treated in accordance with Financial Accounting Standards
Board (&ldquo;FASB&rdquo;) Accounting Standards Codification (&ldquo;ASC&rdquo;)&nbsp;&nbsp;205-20, <I>Discontinued Operations.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Revenue Recognition</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company&rsquo;s
revenues are derived primarily by licensing material and software in the form of products (Image Galleries, Wallpapers, video,
WAP Site access, Mobile TV), developing and maintaining carrier platforms, mobile advertising, mobile billing and mobile games.
License arrangements with the end user can be on a perpetual or subscription basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company either
markets and distributes its products directly to consumers, or distributes products through mobile telecommunications service providers
(&ldquo;carriers&rdquo;), in which case the carrier markets the product, images or games to end users. License fees for perpetual
and subscription licenses are usually billed upon download of the product, image or game by the end user. In the case of subscription
licenses, many subscriber agreements provide for automatic renewal until the subscriber opts-out, while others provide opt-in renewal.
In either case, subsequent billings for subscription licenses are generally billed monthly. The Company applies the provisions
of FASB ASC 985-605, <I>Software Revenue Recognition</I>, to all transactions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Revenues are recognized
from the Company&rsquo;s 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 license agreement to be evidence of an arrangement with a carrier or aggregator
and a &ldquo;clickwrap&rdquo; agreement to be evidence of an arrangement with an end user. For these licenses, the Company defines
delivery as the download of the product, image or game by the end user.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company 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 the Company 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 the Company believes are reasonable,
but it is possible that actual results may differ from the Company&rsquo;s estimates. The Company&rsquo;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 newer and more advanced handsets, promotions during the period and economic
trends. When the Company receives the final carrier reports, to the extent not received within a reasonable time frame following
the end of each month, the Company records any differences between estimated revenues and actual revenues in the reporting period
when the Company determines the actual amounts. Revenues earned from certain carriers may not be reasonably estimated. If the Company
is unable to reasonably estimate the amount of revenues to be recognized in the current period, the Company recognizes revenues
upon the receipt of a carrier revenue report and when the Company&rsquo;s portion of licensed revenues are fixed or determinable
and collection is probable. To monitor the reliability of the Company&rsquo;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 the Company deems a carrier not to be creditworthy, the Company defers
all revenues from the arrangement until the Company receives payment and all other revenue recognition criteria have been met.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In accordance with
FASB ASC 605-45, <I>Reporting Revenue Gross as a Principal Versus Net as an Agent</I>, the Company recognizes as revenues the amount
the carrier reports as payable upon the sale of the Company&rsquo;s products, images or games. The Company 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:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 3%; font-family: Wingdings 2; text-align: justify">&mdash;</TD>
    <TD STYLE="width: 87%; text-align: justify">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;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Wingdings 2; text-align: justify">&mdash;</TD>
    <TD STYLE="text-align: justify">carriers generally have significant control over the types of content that they offer to their subscribers;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Wingdings 2; text-align: justify">&mdash;</TD>
    <TD STYLE="text-align: justify">carriers are directly responsible for billing and collecting fees from their subscribers, including the resolution of billing disputes;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Wingdings 2; text-align: justify">&mdash;</TD>
    <TD STYLE="text-align: justify">carriers generally pay the Company a fixed percentage of their revenues or a fixed fee for each game;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Wingdings 2; text-align: justify">&mdash;</TD>
    <TD STYLE="text-align: justify">carriers generally must approve the price of the Company&rsquo;s content in advance of their sale to subscribers, and the Company&rsquo;s more significant carriers generally have the ability to set the ultimate price charged to their subscribers; and</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Wingdings 2; text-align: justify">&mdash;</TD>
    <TD STYLE="text-align: justify">the Company has limited risks, including no inventory risk and limited credit risk.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For direct to consumer
business, revenue is earned by delivering a product or service directly to the end user of that product or service. In those cases,
the Company 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. Substantially all of our discontinued operations represents direct to consumer business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Net (Loss) per Common Share</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Basic loss per common
share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding
for the period. Diluted net loss per share is computed by dividing net 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<B> </B>from stock options and warrants and the conversion of the Series A preferred stock were as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 70%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Year&nbsp;Ended</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Year&nbsp;Ended</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">March&nbsp;31,</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">March&nbsp;31,</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 74%; text-align: justify">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify">Potentially dilutive shares</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">21,943</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,992</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Comprehensive Loss</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Comprehensive loss
consists of two components, net loss and other comprehensive income. Other comprehensive income refers to gains and losses that
under generally accepted accounting principles are recorded as an element of stockholders&rsquo; equity, but are excluded from
net income. The Company&rsquo;s other comprehensive income currently includes only foreign currency translation adjustments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Cash and Cash Equivalents</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company considers
all highly liquid short-term investments purchased with a maturity of three months or less to be cash equivalents.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Accounts Receivable</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company maintains
reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes
historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment
patterns to evaluate the adequacy of these reserves.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Content Provider Licenses</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Content Provider License Fees</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company&rsquo;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&rsquo;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 content acquisitions, paid in advance and capitalized
on our balance sheet as prepaid license fees. 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 content acquired. Minimum guarantee 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Content Acquired</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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 content acquired.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Software Development Costs</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company applies
the principles of FASB ASC 985-20, <I>Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed </I>(&ldquo;ASC
985-20&rdquo;). ASC 985-20 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company has adopted
the &ldquo;tested working model&rdquo; 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&rsquo;s or game&rsquo;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Product Development Costs</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Advertising Expenses</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company expenses
the costs of advertising, including direct response advertising, the first time the advertising takes place. Advertising expense
for continuing operations was $7 and $116 in the years ended March 31, 2012 and 2011, respectively. Advertising expense for discontinued
operations was $0 and $956 in the years ended March 31, 2012 and 2011, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Restructuring</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company accounts
for costs associated with employee terminations and other exit activities in accordance with FASB ASC 420-10<I>, Accounting for
Costs Associated with Exit or Disposal Activities</I>. 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Presentation</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In order to facilitate
the comparison of financial information, certain amounts reported in the prior year have been reclassified to conform to the current
year presentation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Fair Value of Financial Instruments</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of March 31, 2012
and 2011, the carrying value of cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts
payable, accrued license fees, accrued compensation, derivative liabilities and other current liabilities approximates fair value
due to the short-term nature of such instruments. The carrying value of long-term debt approximates fair value as the related interest
rates approximate rates currently available to the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Derivative Liabilities</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company applies
ASC Topic 815, &ldquo;Derivatives and Hedging,&rdquo; which provides a two-step model to determine whether a financial instrument
or an embedded feature is indexed to an issuer&rsquo;s own stock and thus able to qualify for the scope exception in ASC 815-10-15-74.
Using the criteria in ASC 815, the Company determines which instruments or embedded features that require liability accounting
and records the fair values as a derivative liability. The changes in the values of the derivative liabilities are shown in the
accompanying consolidated statements of operations as &ldquo;change in fair value of accrued derivative liabilities gain / (loss).&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Foreign Currency Translation</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company uses the
United States dollar for financial reporting purposes.&nbsp;&nbsp;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.&nbsp;&nbsp;Statement of Operations amounts are translated at average rates in effect
for the reporting period. The foreign currency translation adjustment gains of $97 in the year ended March 31, 2012 and $128 in
the year ended March 31, 2011 has been reported as a component of comprehensive loss in the consolidated statements of stockholders&rsquo;
equity and comprehensive income.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Concentrations of Credit Risk</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Financial instruments
which potentially subject us to concentration of credit risk consist principally of cash and cash equivalents, and accounts receivable.
We have placed cash and cash equivalents with a single high credit-quality institution. 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, 2012, one major
customer represented approximately 43% of our gross accounts receivable outstanding, and 39% of gross accounts receivable outstanding
as of March 31, 2011. This customer accounted for 41% of our gross revenues in the year ended March 31, 2012; and 49% in the year
ended March 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Property and Equipment</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Property and equipment
is stated at cost.&nbsp;&nbsp;Depreciation and amortization is calculated using the straight-line method over the estimated useful
lives of the related assets. Estimated useful lives are the lesser of 8 to 10 years or the term of the lease for leasehold improvements
and 5 years for other assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Goodwill and Indefinite Life Intangible
Assets</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Goodwill represents
the excess of cost over fair value of net assets of businesses acquired. In accordance with FASB ASC 350-20 <I>Goodwill and Other
Intangible Assets</I>, the value assigned to goodwill and indefinite lived intangible assets, including trademarks and tradenames,
is not amortized to expense, but rather they are evaluated at least on an annual basis to determine if there are potential impairments.
If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded to the extent that the
implied fair value of the reporting unit goodwill is less than the carrying value. If the fair value of an indefinite lived intangible
(such as trademarks and trade names) is less than its carrying amount, an impairment loss is recorded. Fair value is determined
based on discounted cash flows, market multiples or appraised values, as appropriate. Discounted cash flow analysis requires assumptions
about the timing and amount of future cash inflows and outflows, risk, the cost of capital, and terminal values. Each of these
factors can significantly affect the value of the intangible asset. The estimates of future cash flows, based on reasonable and
supportable assumptions and projections, require management&rsquo;s judgment. Any changes in key assumptions about the Company&rsquo;s
businesses and their prospects, or changes in market conditions, could result in an impairment charge. Some of the more significant
estimates and assumptions inherent in the intangible asset valuation process include: the timing and amount of projected future
cash flows; the discount rate selected to measure the risks inherent in the future cash flows; and the assessment of the asset&rsquo;s
life cycle and the competitive trends impacting the asset, including consideration of any technical, legal or regulatory trends.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the year ended March
31, 2012, the Company determined that there was an impairment of goodwill, amounting to $2,969.&nbsp;&nbsp;In the year ended March
31, 2011, the Company determined that there was an impairment of goodwill, amounting to $1,546. In performing the related valuation
analysis, the Company used various valuation methodologies including probability weighted discounted cash flows, comparable transaction
analysis, and market capitalization and comparable company multiple comparison. The impairment is detailed in Note 9 below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Impairment of Long-Lived Assets and
Finite Life Intangibles</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Long-lived assets,
including, intangible assets subject to amortization primarily consist of customer lists, license agreements and software that
have been acquired are amortized using the straight-line method over their useful&nbsp;life ranging from five to eight years and
are reviewed for impairment in accordance with FASB ASC 360-10, <I>Accounting for the Impairment or Disposal of Long-Lived Assets</I>,
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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the year ended March
31, 2012, the Company determined that there was an impairment of intangible assets amounting to $2,319. In the year ended March
31, 2011, the Company determined that there was an impairment of intangible assets, amounting to $4,482. In performing the related
valuation analysis the Company used various valuation methodologies including probability weighted discounted cash flows, comparable
transaction analysis, and market capitalization and comparable company multiple comparison. The impairment is detailed in Note
9 below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Income Taxes</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company accounts
for income taxes in accordance with FASB ASC 740-10, <I>Accounting for Income Taxes </I>(&ldquo;ASC 740-10&rdquo;), 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 ASC 740-10, 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.&nbsp;&nbsp;To the extent a deferred tax asset cannot be recognized, a valuation allowance is
established if necessary.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">ASC 740-10 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 &ldquo;more-likely-than-not&rdquo; 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&nbsp;months.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Stock-based compensation.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have applied FASB
ASC 718 <I>Share-Based Payment</I> (&ldquo;ASC 718&rdquo;) and accordingly, we record stock-based compensation expense for all
of our stock-based awards.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under ASC 718, 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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, interest rates, dividend rates and an option&rsquo;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company grants
restricted stock subject to market or performance conditions that vest based on the satisfaction of the conditions of the award.
Unvested restricted stock entitles the grantees to dividends, if any, with voting rights determined in each agreement. The fair
market values of market condition-based awards are determined using the Monte Carlo simulation method. The Monte Carlo simulation
method is subject to variability as several factors utilized must be estimated, including the derived service period, which is
estimated based on the Company&rsquo;s judgment of likely future performance and the Company&rsquo;s stock price volatility. The
fair value of performance-based awards is determined using the market closing price on the grant date. Derived service periods
and the periods charged with compensation expense for performance-based awards are estimated based on the Company&rsquo;s judgment
of likely future performance and may be adjusted in future periods depending on actual performance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Preferred Stock</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company applies
the guidance enumerated in FASB ASC&nbsp;480-10, <I>Accounting for Certain Financial Instruments with Characteristics of both Liabilities
and Equity </I>(&ldquo;ASC 480-10&rdquo;) 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
ASC 480-10. All other issuances of preferred stock are subject to the classification and measurement principles of ASC 480-10.
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&rsquo;s control, as temporary equity. At all other times, the Company classifies its preferred shares
in stockholders&rsquo; equity.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Use of Estimates</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Board of Directors</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table sets forth the names,
ages and positions of our directors and executive officers as of&nbsp;June 15, 2012. Each director serves until removed or resigns,
or a successor is elected. Officers serve at the discretion of the Board and subject to any employment agreements as set forth
below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 20%; font-weight: bold">Name</TD>
    <TD STYLE="width: 6%; font-weight: bold; text-align: center">Age</TD>
    <TD STYLE="width: 74%; font-weight: bold">Position(s)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Peter Adderton</TD>
    <TD STYLE="text-align: center">45</TD>
    <TD>Chief Executive Officer and Director</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Lisa Higgins-Lucero</TD>
    <TD STYLE="text-align: center">46</TD>
    <TD>Principal Financial Officer and CFO of Twistbox Entertainment Inc.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Peter Guber</TD>
    <TD STYLE="text-align: center">70</TD>
    <TD>Chairman</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Robert S. Ellin</TD>
    <TD STYLE="text-align: center">47</TD>
    <TD>Executive Chairman</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Paul Schaeffer</TD>
    <TD STYLE="text-align: center">65</TD>
    <TD>Vice-Chairman</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Chris Rogers</TD>
    <TD STYLE="text-align: center">54</TD>
    <TD>Director</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Biographical information for our directors
and executive officers are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>Peter Adderton. &nbsp;</B> Peter Adderton
has served as our Chief Executive Officer and as a Director on the Board since December 2011. Mr. Adderton founded Boost Mobile
in 2000 and remains a Director and the largest shareholder of Boost Mobile Australia. Boost Mobile USA is one of the fastest growing
mobile brands in its category with annual revenues over $1 billion and over five million subscribers. Boost Mobile USA was purchased
by Nextel in 2004, and remains a wholly-owned subsidiary of Sprint Nextel. In 2005 Mr. Adderton also founded Amp'd Mobile, creating
the first integrated mobile entertainment company targeted for youth, young professionals and early adopters. Amp'd Mobile filed
for Chapter 11 bankruptcy in 2007.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Lisa Higgins-Lucero.<FONT STYLE="font-weight: normal">
Lisa Higgins-Lucero is the Chief Financial Officer of Twistbox Entertainment, Inc. Mrs. Higgins-Lucero joined Twistbox Entertainment
Inc. in August 2007. She is responsible for all financial reporting and for the strategic planning and reporting of the Company's
operations. She works closely with all areas of the business to insure profitability and success for each of the Company's vertical
revenue strategies. Her prior experience is with publicly traded manufacturing and engineering companies, including 12 years with
Odetics, Inc., (now Iteris, Inc. NYSE Amex: ITI). </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>Peter Guber</B>.&nbsp;&nbsp;Mr.
Guber has served as Co-Chairman of our Board of Directors from August 2007 and currently serves as a Chairman of the Board.&nbsp;
Mr. Guber is Chairman and CEO of the multimedia Mandalay Entertainment Group. Prior to Mandalay, Mr. Guber was Chairman and CEO
of Sony Pictures Entertainment, Chairman and CEO of Polygram Entertainment, Co-Founder of Casablanca Record &amp; Filmworks and
President of Columbia Pictures. Mr. Guber produced or executive produced (personally or through his companies) films that garnered
five Best Picture Academy Award nominations (winning for Rain Man) and box office hits that include The Color Purple, Midnight
Express, Batman, Flashdance and The Kids Are All Right. Mr.Guber is the Owner and Co-executive Chairman of the NBA franchise, the
Golden State Warriors. He is as a weekly entertainment and media analyst for Fox Business News and a full professor at UCLA. Mr.
Guber serves on the board of directors of Demand Media, an online media publishing company (NYSE: DMD), and is Co-Founder of Geek
Chic Daily, a daily email newsletter with inside information on technology &amp; apps, video games, comics, TV &amp; film. Mr.
Guber is a noted author with works including &ldquo;Inside The Deep&rdquo; and &ldquo;Shootout: Surviving Fame and (Mis)Fortune
in Hollywood.&rdquo; Mr. Guber wrote the cover article for the Harvard Business Review titled, &ldquo;The Four Truths of the Storyteller&rdquo;
and has also authored op-ed pieces for the New York Times and the San Francisco Chronicle. Mr. Guber recently released his third
book, &ldquo;Tell To Win - Connect, Persuade, and Triumph with the Hidden Power of Story&rdquo;, which became a #1 New York Times
bestseller.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>Robert S. Ellin.</B>
&nbsp;&nbsp;&nbsp;In December 2011, Mr. Ellin was appointed Executive Chairman of the Board of Directors. Prior to that, Mr. Ellin
served as Co-Chairman of our Board of Directors since 2005. Mr. Ellin has more than twenty years of investment and turnaround experience.
Since 2004, he has served as Managing Director and Portfolio Manager of Trinad Capital, an activist hedge fund investing primarily
in micro-cap and small-cap publicly traded companies. Prior to founding Trinad, Mr. Ellin was Founder and President of Atlantis
Equities Inc., a private 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 played an active role in its investee companies including
board representation, management selection, corporate finance and other advisory services. He spearheaded world-class investments
in ThQ, Inc. (THQI), Grand Toys (GRIN), Forward Industries, Inc. (FORD), Majesco Entertainment (COOL), and iWon.com. Mr. Ellin
also acquired S&amp;S Industries, Inc. the largest manufacturer in the world of underwires which had strong partnerships with leading
companies including Bally&rsquo;s, Maidenform, and Sara Lee. Prior to Atlantis, he worked in Institutional Sales at LF Rothschild
and was Manager of Retail Operations at Lombard Securities. Mr. Ellin is the Chief Executive Officer, Chief Financial Officer,
Chairman of the Board of Directors and holds certain other positions of Loton Corporation (LTNR.QB), a company specializing in
3D rendering, animation and architectural visualization services. Mr. Ellin is also a director of Infosearch Media, Inc. (ISHM.PK),
a provider of search-targeted text and video content for the Internet. Mr. Ellin<FONT STYLE="font-family: Times New Roman, Times, Serif; color: blue">
</FONT>currently also sits on the Board of Directors of Atrinsic, Inc. (ATRN), as well as the Board of Governors at Cedars-Sinai
Hospital in Los Angeles, California. Mr. Ellin holds a Bachelor of Arts degree from Pace University.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>Paul Schaeffer.&nbsp;&nbsp;</B>
Mr.&nbsp;Schaeffer is a member of our Board of Directors and served as Vice-Chairman or Co-Chairman on our Board of Directors since
August 2007 and is currently Vice-Chairman.&nbsp; He&nbsp;is the Vice Chairman, Chief Operating Officer and Co-Founder of Mandalay
Entertainment Group. 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 (&ldquo;SPE&rdquo;), overseeing the worldwide corporate
operations for SPE including Worldwide Administration, Financial Affairs, Human Resources, Corporate Affairs, Legal Affairs and
Corporate Communications. Mr. Schaeffer is a member of the Academy of Motion Pictures, Arts, &amp; 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 time as an accountant with Arthur Young &amp; Company in Philadelphia. He graduated from
the University of Pennsylvania Law School and received his accounting degree from Pennsylvania State University. The Company considered
Mr. Schaeffer to be a valuable resource when it selected him as a director based on having served for more than 5 years as the
Chairman of the Finance Committee, and a member of the Board of Trustees of Children&rsquo;s Hospital Los Angeles, where he also
served as a chairman of its Audit Committee, and member of its Compensation Committee and Executive Committee for more than five
years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>Chris Rogers. </B>Mr.
Rogers has been a member of our Board of Directors since May 2012. Mr. Rogers served as a Senior Vice President, Corporate Development
and Spectrum, of Sprint Nextel Corporation, where he evaluated and executed strategic initiatives, including mergers, acquisitions,
divestitures, equity investments and joint ventures within the mobile communication and e-commerce sectors. He also was responsible
for management and oversight of wireless spectrum licenses and Sprint Nextel&rsquo;s investment portfolio of emerging technology
start-ups. Prior to its merger with Sprint in 2005, Mr. Rogers was Co-Founder and Senior Vice President of Nextel Communications,
Inc. as well as Co-Founder of FleetCall Communications, the predecessor to Nextel Communications, and Founder and Chairman of Dispatch
Communications, Inc., which was sold to Fleet Call/Nextel in 1993. Rogers holds a JD in Communications Law and has served as a
Director on multiple public and private company Boards and as a Director for several Washington, DC-based philanthropic organizations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Except as noted below,
none of our directors has, during the past ten years, been involved in any legal proceedings described in subparagraph (f) of Item
401 of Regulation S-K.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Audit Committee</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our audit committee
was established during the fiscal year ended March 31, 2010 and consists of Paul Schaeffer and Robert Ellin. Mr. Schaeffer has
been designated as the Chairman of the committee and the financial expert within the rules and regulations of the SEC. The committee
met regularly during the course of the year, including regular meetings with our auditors, and monitors our compliance with our
obligations under the assessment of internal control over financial reporting.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Nominating Committee</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The entire Board of
Directors currently operates as our Nominating Committee.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Code of Ethics</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We intend to establish a code of ethics
during the fiscal year ended March 31, 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Section 16 Beneficial Ownership Reporting Compliance</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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
(&ldquo;ten percent stockholders&rdquo;) to file reports of ownership and changes of ownership 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
the fiscal year ended March 31, 2012, all Section 16(a) filing requirements applicable to our officers, directors, and ten percent
stockholders were met except for the following: (i) one Form 4 report was not timely filed by Peter Adderton with respect to two
transactions; (ii) one Form 3 report was not timely filed by Peter Adderton with respect to one transaction; (iii) one Form 4 report
was not timely filed by Lisa Higgins-Lucero with respect to one transaction; (iv) one Form 3 report was not timely filed by Lisa
Higgins-Lucero with respect to two transactions, (v) one Form 3 report and one Form 4 report was not timely filed by Chris Rogers
with respect to one transaction, and (v) one Form 4 report was not filed by Robert Ellin with respect to three transactions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>EXECUTIVE COMPENSATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SUMMARY COMPENSATION TABLE</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table
sets forth information concerning the total compensation paid during our fiscal year ended March 31, 2011, and our fiscal year
ended March 31, 2012, for (i) our Chief Executive Officer, (ii) our other three most highly compensated executive officers who
were serving as executive officers as of March 31, 2012, and (iii) two additional individuals who are former executive officers
but were not serving as an executive officer at the end of the fiscal year ended March 31, 2012 (collectively, our &ldquo;named
executive officers&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Position</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Fiscal&nbsp;<BR>
    Year&nbsp;<BR> Ended</FONT></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Salary&nbsp;<BR>
    ($)</FONT></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Bonus&nbsp;<BR>
    ($)</FONT></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Stock&nbsp;(1)&nbsp;<BR>
    ($)</FONT></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Option&nbsp;(1)<BR>
    ($)</FONT></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">All&nbsp;Other<BR>
    ($)</FONT></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Total&nbsp;<BR>
    ($)</FONT></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 35%; text-align: left"><FONT STYLE="font-size: 8pt">Peter Adderton (2)</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 8%; text-align: center"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><FONT STYLE="font-size: 8pt">March
                                                                                                                                       31, 201<FONT STYLE="color: black">2</FONT></FONT></P></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">112,500</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">125,000</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">2,025,504</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">26,741</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">2,289,745</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-style: italic; text-align: left"><FONT STYLE="font-size: 8pt">Chief Executive Officer</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: center"><FONT STYLE="font-size: 8pt">March
                                                                                  31, <FONT STYLE="color: black">2011</FONT></FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">25,751</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">25,751</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Robert Ellin (3)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: center"><FONT STYLE="font-size: 8pt">March
                                                                                  31, 201<FONT STYLE="color: black">2</FONT></FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">112,500</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">3,110,515</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">20,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">3,243,015</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-style: italic; text-align: left"><FONT STYLE="font-size: 8pt">Executive Chairman</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: center"><FONT STYLE="font-size: 8pt">March
                                                                                  31, <FONT STYLE="color: black">2011</FONT></FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">360,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">360,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font-size: 8pt">Lisa Higgins-Lucero (4)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: center"><FONT STYLE="font-size: 8pt">March
                                                                                  31, 201<FONT STYLE="color: black">2</FONT></FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">120,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">34,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">162,475</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">10,999</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">327,474</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-style: italic; text-align: left"><FONT STYLE="font-size: 8pt">Principal Financial Officer and CFO of Twistbox
    Entertainment Inc.</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: center"><FONT STYLE="font-size: 8pt">March
                                                                                  31, <FONT STYLE="color: black">2011</FONT></FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">120,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">120,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">David Mandell (5)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: center"><FONT STYLE="font-size: 8pt">March
                                                                                  31, 201<FONT STYLE="color: black">2</FONT></FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">253,828</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">24,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">243,713</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">19,991</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">541,532</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-style: italic; text-align: left"><FONT STYLE="font-size: 8pt">Former Executive Vice President and General
    Counsel</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: center"><FONT STYLE="font-size: 8pt">March
                                                                                  31, <FONT STYLE="color: black">2011</FONT></FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">332,600</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">49,916</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">16,251</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">398,767</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">James Lefkowitz (6)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: center"><FONT STYLE="font-size: 8pt">March
                                                                                  31, 201<FONT STYLE="color: black">2</FONT></FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">50,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">17,773</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">67,773</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-style: italic; text-align: left"><FONT STYLE="font-size: 8pt">Former Chief Operating Officer</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: center"><FONT STYLE="font-size: 8pt">March
                                                                                  31, <FONT STYLE="color: black">2011</FONT></FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">226,403</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">26,137</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">28,856</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">281,396</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Ray Schaaf (7)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: center"><FONT STYLE="font-size: 8pt">March
                                                                                  31, 201<FONT STYLE="color: black">2</FONT></FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">19,950</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">19,950</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-style: italic; text-align: left"><FONT STYLE="font-size: 8pt">Former President and Chief Executive Officer</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: center"><FONT STYLE="font-size: 8pt">March
                                                                                  31, <FONT STYLE="color: black">2011</FONT></FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">285,960</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">125,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">75,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">30,268</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">516,228</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px">(1)</TD>
    <TD STYLE="text-align: justify">The amounts in the &ldquo;Stock&rdquo; column reflect the aggregate grant date fair value of each restricted stock award computed in accordance with FASB ASC Topic 718. Under ASC 718, for Messer&rsquo;s. Adderton and Ellin we estimated the fair value of the restricted stock granted using the Monte Carlo pricing method model that values the restricted stock awards using various random hypothecations of stock price; securities issuances for services; securities issuances for capital raises and acquisitions. The primary assumptions used in this analysis are: Stock price ($0.61 as of December 28, 2011) is projected to fluctuate based on a future annual volatility of 100%; Average monthly stock issuances for services is projected at 100,000 shares with a standard deviation of 50,000 shares; Average monthly stock issuances for capital is projected at 200,000 shares with a standard deviation of 100,000 shares; Average monthly stock issuances for acquisitions is projected at 200,000 with a standard deviation of 100,000 shares; Acquisition share issuances were not assumed for the first 3 months; Market cap hurdles of $100 million and $200 million are based on maintaining those levels for 30 trading days; Dilutive share analysis included warrants, options, restricted stock grants and convertible debt with only fixed price conversion and exercise prices; and restricted stock discount of 36.1%, risk-free rate of 0.1% and dividend yield of 0%. Forfeiture rate was assumed to be 0% due to the lack of any service requirement related to these awards.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3pt; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">For the amounts for other recipients
in the &ldquo;Stock&rdquo; and &ldquo;Options&rdquo; columns were also computed under ASC 718. We estimated the fair value of restricted
stock and stock options granted using the Black-Scholes 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 vesting term. The amount
of expense recognized represents the expense associated with the restricted stock or 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 restricted stock or options that actually vest or are forfeited are recorded. Vesting schedules for unvested
stock grants or option grants for each officer are described below under &ldquo;Narrative Disclosure to Summary Compensation Table&rdquo;.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 21pt; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px">(2)</TD>
    <TD STYLE="text-align: justify">Mr. Adderton was appointed as our Chief Executive Officer on December 28, 2011 following a period of service as our interim Chief Executive Officer that began on July 15, 2011. Mr. Adderton was previously serving as an advisor to us and received a warrant to purchase 150,000 shares of our common stock at a per share price of $0.39 on September 27, 2010. In the fiscal year ended March 31, 2012, Mr. Adderton was reimbursed $20,000 for his personal assistant, through payment to Skycrest Ventures, LLC, and such amounts are disclosed under &ldquo;All Other&rdquo;.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3pt; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px">(3)</TD>
    <TD STYLE="text-align: justify">Mr. Ellin was appointed Executive Chairman of the Board of Directors on December 28, 2011. Mr. Ellin also received $20,000 in &lsquo;Other Compensation&rsquo; that consists of salary for a personal assistant that is reimbursed to Trinad Management, LLC. Prior to his appointment as Executive Chairman, we were a party to a Management Agreement, dated September 14, 2006 with Trinad Management, LLC, the manager of Trinad Capital Master Fund, which is one of our principal stockholders. Mr. Ellin is the managing director of and portfolio manager for Trinad Management, LLC. Pursuant to the terms of the Management Agreement, Trinad Management, LLC provides certain management services, including, without limitation, relating to the sourcing, structuring and negotiation of a potential business combination involving the Company, for a fee of $90,000 per quarter.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 21pt; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px">(4)</TD>
    <TD STYLE="text-align: justify">Ms. Higgins-Lucero was appointed as our Principal Financial Officer on July 26, 2011.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 21pt; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px">(5)</TD>
    <TD STYLE="text-align: justify">On April 12, 2012, Mr. Mandell resigned from his positions with us. <FONT STYLE="color: black">In February 2011, while an officer of the Company, Mr. Mandell agreed to cancel 400,000 shares underlying an option to purchase 450,000 shares of common stock of the Company, and the Company granted an option to purchase 400,000 shares of the Company&rsquo;s common stock at an exercise price of $0.25 per share. The Company determined the incremental fair value of the options issued to be $49,916, using the Black-Scholes option pricing model and the following assumptions: expected life of 6.98 years, a risk free interest rate of 2.99%, a dividend yield of 0% and volatility of 75%.&nbsp;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 21pt; text-align: justify">&nbsp;&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px">(6)</TD>
    <TD STYLE="text-align: justify">On January 31, 2012, James Lefkowitz resigned as our Chief Operating Officer. <FONT STYLE="color: black">In February 2011, while an officer of the Company, Lefkowitz agreed to cancel an option to purchase 500,000 shares of common stock of the Company, and the Company granted Lefkowitz an option to purchase 500,000 shares of the Company&rsquo;s common stock at an exercise price of $0.25 per share. The Company determined the incremental fair value of the options issued to be $26,137, using the Black-Scholes option pricing model and the following assumptions: expected life of 3.00 years, a risk free interest rate of 1.02%, a dividend yield of 0% and volatility of 75%.&nbsp;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 21pt; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px">(7)</TD>
    <TD STYLE="text-align: justify">On May 9, 2011, Ray Schaaf resigned as our President and Chief Executive Officer. Amounts disclosed as salary represent salary paid to Mr. Schaaf in his capacity as President and CEO, while amounts disclosed as &ldquo;All Other&rdquo; include fees prior to his appointment as President and other benefits paid.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NARRATIVE DISCLOSURE TO SUMMARY COMPENSATION
TABLE</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>Employment Agreement
with Peter Adderton. </I>On December 28, 2011, we entered into an employment agreement with Mr. Adderton as the Company&rsquo;s
Chief Executive Officer. Mr. Adderton&rsquo;s employment agreement provides for a one-year term and an annual salary of $450,000,
half of which was deferred until certain debt and/or equity financings were consummated. Such financings were consummated and Mr.
Adderton has received his full salary since April 1, 2012 and received a lump sum payment for the portion of his salary that was
deferred from December 28, 2011 to March 31, 2012 on April 9, 2012. Mr. Adderton is eligible to receive a special incentive bonus
if certain debt and/or equity financings are consummated, and is also eligible to receive an annual cash bonus in the amount of
100% of his base salary, upon on the satisfaction of performance-related milestones to be agreed upon between Mr. Adderton and
our board of directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Mr. Adderton also received
a grant of 9,037,500 shares of our restricted common stock that vest in three equal tranches upon the occurrence of the following
events: (i) one or more debt or equity financings during the two years following the date of the agreement (the &ldquo;Measurement
Period&rdquo;) with gross proceeds of at least $5 million; (ii) our achievement on any date during the Measurement Period of a
total enterprise value (computed by multiplying the number of outstanding shares of common stock on a fully diluted (taking into
account only those stock options that are in-the-money on such date), as-converted basis by the average daily trading price for
common stock for the 30-trading day period immediately preceding the date of determination) of $100 million or more; and (iii)
our achievement on any date during the Measurement Period of a total enterprise value (calculated as set forth in clause (ii) above)
of $200 million or more; provided, however, that all unvested shares of restricted common stock will vest immediately upon the
sale of all or substantially all of our assets, upon the merger or reorganization of our Company following which the equity holders
immediately prior to the consummation of such merger or reorganization collectively own less than 50% of the voting power of the
resulting entity, or upon the sale of our equity securities representing 50% or more of our voting power or 50% or more of the
economic interest in us in a single transaction or in a series of related transactions. The first tranche of the grant of restricted
common stock described above vested as of December 29, 2011 upon the funding of the $7 million financing from Adage Capital Partners,
L.P. Mr. Adderton will also be reimbursed for the annual fee of a personal assistant of up to $80,000 during the term of his employment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Mr. Adderton is also
entitled to receive additional performance bonuses, in cash or shares of common stock at Mr. Adderton&rsquo;s election, upon our
achievement of certain higher total enterprise values. All of Mr. Adderton&rsquo;s shares of restricted common stock are subject
to a one-year prohibition on transfer from the applicable vesting date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">During the fiscal year
ended March 31, 2012, we did not grant Mr. Adderton any stock options. Mr. Adderton also received a warrant to purchase 150,000
shares of our common stock at a per share price of $0.39.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>Executive Chairman
Agreement with Robert Ellin</I> . On December 28, 2011, we entered into an executive chairman agreement with Mr. Ellin. Mr. Ellin&rsquo;s
executive chairman agreement provides for a one-year term and an annual fee of $450,000, half of which was deferred until certain
debt and/or equity financings were consummated. Such financings were consummated, and Mr. Ellin has received his full fee since
April 1, 2012 and received a lump sum payment for the portion of his fee that was deferred from December 28, 2011 to March 31,
2012 on April 6, 2012. Mr. Ellin shall be entitled to be paid an annual incentive bonus in cash in an amount of up to one hundred
percent (100%) of the annual fee based upon satisfaction of performance-related milestones to be agreed upon between Mr. Ellin
and the other members of our board of directors. Mr. Ellin shall also be reimbursed for the annual fee of a personal assistant
of up to $80,000 during the term of this executive chairman agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Mr. Ellin also received
three grants totaling 8,000,000 shares of our restricted common stock and vests as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">The first grant of 3,400,000 was granted under the executive
chairman agreement and vests as follows: (i) one third vested upon the completion our most recent equity financing; (ii) one third
shall vest if on any date during the term or within 12 months following the term, our total enterprise value equals or exceeds
$100,000,000; and (iii) one third shall vest immediately if on any date during the term or within 12 months following the term
our total enterprise value equals or exceeds $200,000,000; provided, however, that all unvested shares of restricted common stock
shall vest immediately change of control. These shares may not be transferred for a period of one year from the vesting date.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">The second grant of 3,600,000 shares was granted on December
28, 2011 and vested fully on the date of the grant. These shares may not be transferred for a period of two years from the date
of grant.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">The third grant of 1,000,000 shares was granted on December
28, 2011 and vest one year from the date of grant. These shares may not be transferred for a period of one year from the vesting
date.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Mr. Ellin is also entitled
to receive additional performance bonuses, in cash or shares of common stock at Mr. Ellin&rsquo;s election, upon our achievement
of certain higher total enterprise values.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">During the fiscal year
ended March 31, 2012, we did not grant Mr. Ellin any additional stock options or warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>Employment Agreement
with Lisa Higgins-Lucero.</I> Ms. Higgins-Lucero joined us on August 27, 2007. Ms. Higgins-Lucero has a written employment contract
with our wholly owned subsidiary Twistbox which provides for a bonus of up to 10% of her then base salary, at the discretion of
management. She receives a base salary of $120,000 per year, payable in accordance with our payroll guidelines. She is eligible
for a bonus at the discretion of our board of directors. During the fiscal year ended March 31, 2012, we did not grant Ms. Higgins-Lucero
any stock options. Effective January 3, 2012, we granted Ms. Higgins-Lucero 500,000 shares of restricted common stock, of which
250,000 vested immediately and 250,000 will vest upon the achievement of performance criteria at the Chief Executive Officer&rsquo;s
discretion and with the approval of the board of directors, however, all unvested shares will vest immediately upon the sale of
all or substantially all of our assets, upon the merger or reorganization of our Company following which the equity holders immediately
prior to the consummation of such merger or reorganization collectively own less than 50% of the voting power of the resulting
entity, or upon the sale of our equity securities representing 50% or more of our voting power or 50% or more of the economic interest
in us in a single transaction or in a series of related transactions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>Employment Agreement
with David Mandell.&nbsp;</I> On February 1, 2012, we entered into an employment agreement with Mr. Mandell, our former Executive
Vice President and General Counsel.&nbsp; The agreement provides Mr. Mandell a base salary of $250,000 per year. Mr. Mandell was
entitled to be paid an annual discretionary incentive bonus in an amount not to exceed 50% of his salary, based upon satisfaction
of performance-related milestones. On January 3, 2012 we granted Mr. Mandell 750,000 shares of restricted common stock, which vested
as follows: 375,000 shares vested immediately, and 375,000 shares are scheduled to vest upon the completion of an acquisition by
us of all or substantially all of the assets of or equity interests in another entity or similar transaction which is approved
by our board of directors. During the fiscal year ended March 31, 2012, we did not grant Mr. Mandell any stock options.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On April 12, 2012,
we entered into a Separation and General Release Agreement with Mr. Mandell, under which Mr. Mandell retains ownership of the 375,000
shares of vested common stock awarded under his employment agreement and waives all rights to the non-vested common stock awards
and any other shares awarded under such agreement. We will pay Mr. Mandell a total of $125,000 over a nine-month period beginning
March 9, 2012 as compensation for performing certain transition consulting services for us. Mr. Mandell&rsquo;s first payment was
made on April 20, 2012 for the period March 9, 2012 to April 14, 2012. We will also pay Mr. Mandell&rsquo;s monthly COBRA premiums
for a nine-month period or provide certain reimbursement payments in the event Mr. Mandell&rsquo;s current health plan ceases to
be available before the end of such nine-month period. The agreement provides mutual releases from claims, reasonable cooperation
covenants (and reimbursements obligations for extended consultation), and continuation of non-disclosure obligations and various
attorney-client privilege, confidentiality, cooperation and non-solicitation clause of Mr. Mandell&rsquo;s employment agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>Employment Agreement
with James Lefkowitz.&nbsp;</I> On February 21, 2011, we entered into an employment agreement with Mr. Lefkowitz.&nbsp; The agreement
provided Mr. Lefkowitz a base salary of $5,000 per month. We also granted Mr. Lefkowitz options to purchase 500,000 shares of common
stock at an exercise price of $0.25 per share upon the cancellation of options to purchase 500,000 shares of common stock previously
granted to him.&nbsp;During the fiscal year ended March 31, 2012, we did not grant Mr. Lefkowitz any stock options. On January
31, 2012, James Lefkowitz resigned as our Chief Operating Officer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>Employment Agreement
with Ray Schaaf</I>. Mr. Schaaf was appointed as President of the Company on October 27, 2009 following a period of acting as a
consultant to us. On February 22, 2011 Mandalay entered into a Confidential Separation, Transition and Release Agreement and a
Restricted Stock Agreement with Mr. Schaaf (together, the &ldquo;Schaaf Agreements&rdquo;). Pursuant to the Schaaf Agreements,
Mr. Schaaf entered into a transition period in his role with the Company that ended on May 9, 2011.&nbsp;&nbsp;At the end of the
transition period, Mr. Schaaf ceased to be our President and resigned as a member of its Board of Directors.&nbsp;&nbsp;We paid
Mr. Schaaf $45,000 in 3 installments, and we issued 300,000 shares of the Company&rsquo;s common stock to Mr. Schaaf as compensation
for his services during the transition period.&nbsp; The Schaaf Agreements included a mutual, general release, and if Mr. Schaaf
had not reaffirmed the general release within 21 days of the transition period, then we would have had the right to repurchase
the 300,000 shares of the Company&rsquo;s common stock issued to him.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Outstanding Equity Awards at the Period Ended March 31, 2012</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table presents information
regarding outstanding options and unvested stock awards held by our named executive officers as of March 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="18" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Option&nbsp;Awards</FONT></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="14" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Stock&nbsp;Awards</FONT></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Name</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Number&nbsp;<BR>
    of&nbsp;<BR> Securities&nbsp;<BR> Underlying&nbsp;<BR> Unexercised<BR> Options&nbsp;<BR> (#)&nbsp;<BR> Exercisable</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Number&nbsp;<BR>
    of&nbsp;<BR> Securities&nbsp;<BR> Underlying&nbsp;<BR> Unexercised&nbsp;<BR> Options&nbsp;<BR> (#)&nbsp;<BR> Unexercisable</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Number&nbsp;<BR>
    of&nbsp;<BR> Securities&nbsp;<BR> Underlying&nbsp;<BR> Unexercised<BR> Unearned&nbsp;<BR> Options&nbsp;<BR> (#)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Option&nbsp;<BR>
    Exercise<BR> Price&nbsp;$</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Option&nbsp;<BR>
    expiration<BR> date</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Number&nbsp;<BR>
    of&nbsp;shares&nbsp;<BR> or&nbsp;units&nbsp;<BR> of&nbsp;stock&nbsp;<BR> that&nbsp;have&nbsp;<BR> not&nbsp;<BR> vested&nbsp;(#)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Market&nbsp;<BR>
    value&nbsp;of&nbsp;<BR> shares&nbsp;or&nbsp;<BR> units&nbsp;of&nbsp;<BR> stock&nbsp;<BR> that&nbsp;&nbsp;have<BR> &nbsp;not&nbsp;<BR>
    vested&nbsp;($)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Equity&nbsp;<BR>
    incentive&nbsp;<BR> plan&nbsp;<BR> awards:&nbsp;<BR> Number&nbsp;<BR> of&nbsp;<BR> unearned<BR> shares,&nbsp;<BR> units&nbsp;or&nbsp;<BR>
    other&nbsp;<BR> rights&nbsp;<BR> that&nbsp;have<BR> not&nbsp;<BR> vested&nbsp;(#)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Equity&nbsp;<BR>
    incentive&nbsp;<BR> plan&nbsp;awards:<BR> Market&nbsp;or&nbsp;<BR> payout&nbsp;value<BR> of&nbsp;unearned&nbsp;<BR> shares,&nbsp;units&nbsp;<BR>
    or&nbsp;other&nbsp;<BR> rights&nbsp;that&nbsp;<BR> have&nbsp;not&nbsp;<BR> vested&nbsp;($)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 10%; text-align: left"><FONT STYLE="font-size: 8pt">Peter Adderton <I>Chief</I> <I>Executive</I> <I>Officer</I>(1)</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 8pt">6,175,000</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 8pt">1,519,563</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Robert Ellin Executive Chairman (2)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">500,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2.75</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">6/18/18</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,000,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">155,880</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2,266,667</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">555,333</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Lisa Higgins- Lucero <I>Principal Financial Officer and CFO of Twistbox
    <FONT STYLE="color: black">Entertainment Inc.</FONT></I><FONT STYLE="color: black">(3)</FONT></FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">9,759</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">0.81</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">10/9/17</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">250,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">232,500</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">David Mandell <I>Former Executive Vice President and General Counsel
    </I>(4)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">400,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">0.25</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2/12/2018</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">375,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">348,750</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">50,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">4.75</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2/12/2018</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">James Lefkowitz Former Chief Operating Officer (5)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">500,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">0.25</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2/21/2014</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Ray Schaaf Former President and Chief Executive Officer</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">(1) Effective December
28, 2011, we granted Mr. Adderton 9,037,500 shares of restricted common stock, one third of which vested as of December 29, 2011.
The remaining 6,025,000 shares vest as described above under &ndash;&ldquo;Narrative Disclosure to Summary Compensation Table&mdash;Employment
Agreement with Peter Adderton.&rdquo; Mr. Adderton also received a warrant to purchase 150,000 shares of our common stock at a
per share price of $0.39 on September 27, 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">(2) Effective June 18, 2008, we granted
Mr. Ellin 500,000 stock options. The stock options are exercisable at the exercise price of $2.75 per share until June 18, 2018.
Effective December 28, 2011, we granted Mr. Ellin 8,000,000 shares of restricted stock, of which 4,733,333 shares have vested.
The remaining 3,266,667 shares vest as described above under &ndash;&ldquo;Narrative Disclosure to Summary Compensation Table&mdash;Executive
Chairman Agreement with Robert Ellin.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">(3) Effective January
31, 2008, we granted Ms. Higgins-Lucero 9,759 stock options. The stock options are exercisable at the exercise price of $0.81 per
share until October 9, 2017. Effective January 3, 2012, we also granted Ms. Higgins-Lucero 500,000 shares of restricted common
stock, half of which were vested as of January 3, 2012. The remaining 250,000 shares vest as described above under &ndash;&ldquo;Narrative
Disclosure to Summary Compensation Table&mdash;Employment Agreement with Lisa Higgins-Lucero.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">(4) Mr. Mandell resigned
from his positions with us on April 12, 2012. Effective February 12, 2008, we granted Mr. Mandell 400,000 stock options. These
stock options are exercisable at the exercise price of $0.25 per share until February 12, 2018. Effective February 12, 2008, we
also granted Mr. Mandell 50,000 stock options, which are exercisable at the exercise price of $4.75 per share until February 12,
2018. Effective January 3, 2012, we granted Mr. Mandell 750,000 shares of restricted common stock, half of which shares vested
immediately. The remaining 375,000 shares vest as described above under &ndash;&ldquo;Narrative Disclosure to Summary Compensation
Table&mdash;Employment Agreement with David Mandell.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">(5) Effective February 21, 2011, we granted
Ms. Lefkowitz 500,000 stock options. The stock options are exercisable at the exercise price of $0.25 per share until February
21, 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DIRECTOR COMPENSATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table presents information
regarding compensation paid to our directors during the fiscal year ended March 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Name</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Fees&nbsp;Earned&nbsp;or&nbsp;<BR> Paid&nbsp;in&nbsp;Cash&nbsp;<BR> ($)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Stock&nbsp;Awards&nbsp;<BR> ($)(1)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Option&nbsp;Awards&nbsp;<BR> ($)(1)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">All&nbsp;Other&nbsp;<BR> Compensation <BR>($)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Total&nbsp;<BR> ($)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 35%; text-align: left">Peter Guber (2)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">620,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">620,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Robert S. Ellin (3)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Paul Schaeffer (4)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">19,950</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">620,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">639,950</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Peter Adderton (5)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Ray Schaaf (6)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Adi McAbian (7)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">(1) The amounts in
this column reflect the aggregate grant date fair value of each restricted stock award computed in accordance with FASB ASC Topic
718. 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 stock vesting term. The amount of expense recognized represents the expense associated
with the stock 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 stock that actually vest or are forfeited are recorded.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">(2) As of March 31,
2012, Mr. Guber held 500,000 options with an exercise price of $ 2.75 per share, and 1,000,000 shares of unvested restricted common
stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">(3) Mr. Ellin was appointed
Executive Chairman of the Board of Directors on December 28, 2011. His compensation for fiscal year 2011 is fully reflected in
the &ldquo;Summary Compensation Table&rdquo; above. Mr. Ellin received no additional compensation for his service as a director.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">(4) As of March 31,
2012, Mr. Schaeffer held 300,000 options with an exercise price of $2.75 per share, and 1,000,000 shares of unvested restricted
common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">(5)<B> </B>Mr. Adderton
was appointed as our interim Chief Executive Officer on July 15, 2011 and was appointed as our Chief Executive Officer on December
28, 2011. His compensation for fiscal year 2011 is fully reflected in the &ldquo;Summary Compensation Table&rdquo; above. Mr. Adderton
received no additional compensation for his service as a director.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">(6) Mr. Schaaf resigned
as a member of our board of directors on May 9, 2011. As of March 31, 2012, Mr. Schaaf held no options and no shares of unvested
restricted common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">(7) Mr. McAbian resigned
as a member of our board of directors on April 27, 2011. As of March 31, 2012, Mr. McAbian held 54,725 options and no shares of
unvested restricted common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NARRATIVE TO DIRECTOR COMPENSATION TABLE</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Non-employee director
compensation for a new director is determined on an ad hoc basis by the existing members of the board of directors at the time
a director is elected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NARRATIVE DISCLOSURE OF COMPENSATION
POLICIES AND PRACTICES AS THEY RELATE TO THE COMPANY&rsquo;S RISK MANAGEMENT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We believe that our
compensation policies and practices for all employees, including executive officers, do not create risks that are reasonably likely
to have a material adverse effect on us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 24.5pt; color: blue"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 24.5pt"><B>SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Reference is made to
the information contained in the equity compensation plan tables contained in this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 37.45pt">The following table
presents information regarding the beneficial ownership of all shares of our common stock and preferred stock as of June 23, 2012
by:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">Each person who beneficially owns more
than five percent of the outstanding shares of our common stock;</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">Each person who beneficially owns outstanding
shares of our preferred stock;</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">Each director;</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">Each named executive officer; and</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">All directors and officers as a group.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center"><B>Name&nbsp;of<BR> Beneficial&nbsp;Owner&nbsp;<SUP>(1)</SUP></B></TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Number&nbsp;of&nbsp;Shares</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Beneficially&nbsp;Owned&nbsp;<SUP>(2)</SUP></B></P></TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Percentage<BR> Owned&nbsp;(%)</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 74%; text-align: left">Robert S. Ellin (3)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">30,201,385</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">25.9</TD><TD STYLE="width: 1%; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Peter Guber (4)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">18,786,293</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">16.1</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Adage Capital Partners LP (5)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,553,333</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10.8</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Peter Adderton (6)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,187,500</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7.9</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Paul Schaeffer (7)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,300,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.0</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Lisa Higgins-Lucero (8)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">509,759</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.4</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left">All directors and named executive officers as a group (5 individuals)</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">60,984,937</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">52.3</TD><TD STYLE="font-weight: bold; text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">(1) Except as otherwise
indicated, the address of each of the following persons is c/o Mandalay Digital Group, Inc., 4751 Wilshire Boulevard, Third Floor,
Los Angeles, CA 90010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">(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 Securities and Exchange 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 convertible or exercisable, convertible or issuable within 60 days
of May 20, 2012, are deemed outstanding. Such shares, however, are not deemed outstanding for the purpose of computing the percentage
ownership of any other person.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">(3)
Trinad Capital Master Fund, Ltd. is the beneficial owner of 21,701,385 shares of common stock, which includes (a) 4,262,233
issued and outstanding shares of common stock, (b) 280,899 shares of common stock issuable upon exercise of warrants held by
Trinad Capital Master Fund, Ltd., at an exercise price of $2.67 per share, (c) 12,058,253 (10,000,000 principal, 2,058,253
accrued interest) shares of common stock issuable upon conversion of a convertible note issued by us with an aggregate
principal amount of $1,500,000 held by Trinad Capital Master Fund, Ltd. (at the time of conversion accrued interest will also
be converted and increase total number of shares issued) and which is convertible at a price per share of $0.15, and
(d) 5,000,000 shares of common stock issuable upon exercise of warrants held by Trinad Capital Master Fund, Ltd. at an
exercise price of $0.25 per share. Trinad Management, LLC (as the manager of the Trinad Capital Master Fund, Ltd. and Trinad
Capital LP) is deemed the beneficial owner of 21,701,385 shares of common stock which includes 21,601,385 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 LLC, assuming conversion price $1.00 per
share.&nbsp;&nbsp;Trinad Management, LLC disclaims beneficial ownership of the shares of common stock directly and
beneficially owned by Trinad Capital Master Fund, Ltd. Robert S. Ellin, the managing director of and portfolio manager for
Trinad Management, LLC and the managing director of Trinad Advisors II LLC is deemed the beneficial owner of 30,201,385
shares of common stock, which includes (i) 21,701,385 shares of common stock held by Trinad Capital Master Fund, Ltd., (ii)
100,000 shares of common stock issuable upon conversion of 100,000 shares of series A convertible preferred stock held by
Trinad Management LLC, (iii) 8,000,000 issued and outstanding shares of common stock owned by Mr. Ellin, and (iv) options to
purchase 500,000 shares of common stock owned by Mr. Ellin. Mr. Ellin disclaims beneficial ownership of the shares of common
stock directly and beneficially owned by Trinad Capital Master Fund, Ltd. except to the extent of his pecuniary interests
therein. Trinad Capital LP (as the owner of 70.20% of the shares of Trinad Capital Master Fund, Ltd. as of March 31, 2012)
and Trinad Advisors II, LLC (as the general partner of Trinad Capital LP), are each deemed the beneficial owner of (a)
3,866,452 shares of common stock (representing 84.53% of the shares of the 4,293,160 shares of common stock held directly,
and not through a derivative security, by Trinad Capital Master Fund, Ltd.), (b) 280,899 shares of common stock issuable upon
exercise of warrants held by Trinad Capital Master Fund, Ltd., at an exercise price of $2.67 per share, (c) 10,000,000 shares
of common stock issuable upon conversion of a convertible note issued by us with an aggregate principal amount of $1,500,000
held by Trinad Capital Master Fund, Ltd., and (d) 5,000,000 shares of common stock issuable upon exercise of warrants held by
Trinad Capital Master Fund, Ltd. at an exercise price of $0.25 per share. Trinad Advisors II, LLC disclaims beneficial
ownership of the shares of common stock beneficially owned by Trinad Capital LP, except to the extent of its pecuniary
interest therein.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Each of the beneficial
owners share the power to vote or to direct the vote and to dispose or to direct the disposition of common stock it or he may be
deemed to beneficially own, except that Mr. Ellin has the sole power to vote or to direct the vote of 8,000,000 shares of vested
and unvested stock owned by him and to dispose or to direct the disposition of 4,733,333 shares of fully vested common stock owned
by him, and will have the power to vote or to direct the vote and to dispose or to direct the disposition of 500,000 shares of
common stock underlying the options granted to Mr. Ellin on June 18, 2008 at an exercise price of $2.75 per share, upon their exercise.
The address of each of the beneficial owners is 4751 Wilshire Boulevard, Third Floor, Los Angeles, CA 90010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">(4) The Guber Family
Trust (the &ldquo;Trust&rdquo;), of which Peter Guber serves as a trustee, is the beneficial owner of 17,286,293 shares of common
stock, which consists of: (a) 5,633,225 issued and outstanding shares of common stock, (b) 280,899 shares of common stock issuable
upon exercise of warrants at an exercise price of $2.67 per share, (c) 8,038,836 (6,666,667 principal, 1,372,169 accrued interest)
shares of common stock issuable upon conversion of a convertible note issued by us with an aggregate principal amount of $1,000,000
(at the time of conversion accrued interest will also be converted and increase total number of shares issued) and which is convertible
at a price per share of $0.15, and (d) 3,333,333 shares of common stock issuable upon exercise of warrants at an exercise price
of $0.25 per share. Peter Guber disclaims beneficial ownership of the shares of common stock directly and beneficially owned by
the Trust, except to the extent of his pecuniary interest therein. Mr. Guber directly owns 1,500,000 shares of common stock, which
consists of 1,000,000 unvested shares of common stock, and options to purchase 500,000 shares of our common stock, which options
are fully vested. Mr. Guber, as trustee of the Trust, has the sole power to vote or to direct the vote and dispose or to direct
the disposition of 16,991,822 shares of common stock. Mr. Guber shall have the sole power to vote or to direct the vote and to
dispose or to direct the disposition of 500,000 shares of common stock underlying the options granted to Mr. Guber on June 18,
2008 at an exercise price of $2.75 per share, upon their exercise. The information set forth herein is based solely on a Schedule
13D filed by the beneficial owners with the Securities and Exchange Commission on January 9, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">(5) Adage Capital Partners
LP is the beneficial owner of 12,553,333 shares of common stock, which consists of 10,053,333 issued and outstanding shares of
common stock, and 2,500,000 shares of common stock issuable upon exercise of warrants at an exercise price of $0.70 per share.
Adage Capital Partners LP has the sole power to vote or to direct the vote and dispose or to direct the disposition of 12,553,333
shares of common stock. The written consents to the Reverse Stock Split and the Authorized Stock Increase included consents with respect to 15,510,476 shares (representing 18.8% of our common stock as of May 23, 2012) held by stockholders who had previously agreed to vote in favor of such proposals in separate voting agreements they entered into in connection with their purchase from the Company of the stock being registered hereby.  The shares being registered hereby of selling stockholders Adage Capital Partners, L.P. and William C Powers Trust Dtd 12/19/09 were included in such shares subject to the voting agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">(6) Peter A. Adderton
is the beneficial owner of 9,187,500 shares of common stock, which consists of (a) 9,037,500 issued and outstanding shares of common
stock and (b) 150,000 shares of common stock issuable upon exercise of warrants at an exercise price of $0.39 per share. Mr. Adderton
has the sole power to vote or to direct the vote of 9,037,500 shares of common stock and to dispose or to direct the disposition
of 3,012,500 shares of common stock (subject to a one-year prohibition on transfer from the applicable vesting date).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">(7) Paul &amp; Judy
Schaeffer Living Trust is the beneficial owner of 1,000,000 shares of common stock. The securities indicated are held indirectly
by Mr.&nbsp;Schaeffer through the Paul and Judy Schaeffer Living Trust for which he serves as a trustee. Mr.&nbsp;Schaeffer disclaims
beneficial ownership of these securities except to the extent of his pecuniary interest. Mr. Schaeffer directly owns options to
purchase 300,000 shares of our common stock, which options are fully vested, and 1,000,000 unvested shares of common stock Mr.
Schaeffer will have the sole power to vote or to direct the vote and to dispose or to direct the disposition of 300,000 shares
of common stock underlying the options granted to Mr. Schaeffer on June 18, 2008 at an exercise price of $2.75 per share, upon
their exercise.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">(8) Lisa Higgins-Lucero
is the beneficial owner of 509,759 shares of common stock, which consists of 500,000 issued and outstanding shares, and options
to purchase 9,759 shares of common stock. Mrs. Higgins-Lucero has the sole power to vote or to direct the vote and dispose or to
direct the disposition of 250,000 shares of fully vested common stock, and will have the sole power to vote or to direct the vote
and to dispose or to direct the disposition of 9,759 shares of common stock underlying the options granted to Mrs. Higgins-Lucero
on January 31, 2008 at an exercise price of $0.81 per share, upon their exercise.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; color: red"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
AND DIRECTOR INDEPENDENCE</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Mandalay Digital Group, Inc. </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>Management Agreement</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On September 14, 2006,
the Company entered into a five year management agreement (&ldquo;Agreement&rdquo;) with Trinad Management, LLC the manager of
Trinad Capital Master Fund, which is one of our principal stockholders. In addition, Robert Ellin, our Executive Chairman, is the
managing director of and portfolio manager for Trinad Management. Pursuant to the terms of the Agreement, Trinad Management provided
certain management services, including, without limitation, relating to the sourcing, structuring and negotiation of a potential
business combination transaction involving the Company in exchange for a fee of $90,000 per quarter, plus reimbursements of all
related expenses reasonably incurred. The Agreement expired on September 14, 2011, but was extended to December 31, 2011. For the
years ended March 31, 2012 and 2011, the Company incurred management fees under the agreement of $270,000 and $360,000 respectively.
At March 31, 2012 and March 31, 2011, the accrued payable to Trinad Management was $135,000 and $180,000 respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In March 2008, we entered
into a month-to-month lease for office space with Trinad Management for rent of $9,000 per month, which was subsequently reduced
to $5,000 per month. Rent expense in connection with this lease was $0 and $40,000 respectively for the years ended March 31, 2012
and 2011. This lease was terminated in December 2010 when the Company moved to a new location.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>Senior Secured Convertible Notes</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 45pt">On June 21, 2010, we
sold and issued $2,500,000 of Senior Secured Convertible Notes due June 21, 2013 (the &ldquo;New Senior Secured Notes&rdquo;) to
certain significant stockholders, comprised of a $1,500,000 New Senior Secured Note sold and issued to Trinad Capital Master Fund
and a $1,000,000 New Senior Secured Note sold and issued to the Guber Family Trust (the &ldquo;Offering&rdquo;).&nbsp;Trinad Capital
Master Fund is one of our principal stockholders and an affiliate of our Executive Chairman, Robert Ellin. &nbsp;Peter Guber, our
Chairman, serves as trustee of the Guber Family Trust. The New Senior Secured Notes have a three-year term and bear interest at
a rate of 10% per annum payable in arrears semi-annually. Notwithstanding the foregoing, at any time on or prior to the 18th month
following the original issue date of the New Senior Secured Notes, we&nbsp;may, at our option, in lieu of making any cash payment
of interest, elect that the amount of any interest due and payable on any interest payment date on or prior to the 18th month following
the original issue date of the New Senior Secured Notes be added to the principal due under the New Senior Secured Notes. The accrued
and unpaid principal and interest due on the New Senior Secured Notes are convertible at any time at the election of the holder
into shares of our common stock at a conversion price of $0.15 per share, subject to adjustment. The New Senior Secured Notes are
secured by a first priority lien on substantially all of our and our subsidiaries&rsquo; assets. The Amended ValueAct Note (described
below) is subordinated to the New Senior Secured Notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Each purchaser of a
New Senior Secured Note also received a warrant (&ldquo;Warrant&rdquo;) to purchase shares of our common stock at an exercise price
of $0.25 per share, subject to adjustment.&nbsp;&nbsp;For each $50,000 of New Senior Secured Notes purchased, the purchaser received
a Warrant to purchase 166,667 shares of common stock.&nbsp;&nbsp;Each Warrant has a five-year term.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Twistbox</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Twistbox engages in
various business relationships with its stockholders and officers and their related entities. The significant relationships are
as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Loans</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As part of the Merger,
we agreed to guarantee up to $8,250,000 of Twistbox&rsquo;s&nbsp;outstanding&nbsp;debt&nbsp;to ValueAct, with certain amendments.
On July 30, 2007, Twistbox&nbsp;had&nbsp;entered into a Securities Purchase Agreement by and among Twistbox, the Subsidiary Guarantors,
as defined therein, and ValueAct,&nbsp;pursuant to which ValueAct purchased&nbsp;the ValueAct&nbsp;Note&nbsp;in the amount of $16,500,000
and a Warrant which entitled ValueAct to purchase from Twistbox up to a total of 2,401,747 shares of Twistbox&rsquo;s common stock.&nbsp;&nbsp;In
connection therewith,&nbsp;Twistbox and ValueAct&nbsp;had&nbsp;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 ValueAct Note would be secured by substantially all of the assets of Twistbox and its subsidiaries.
In connection with the Merger,&nbsp;the&nbsp;Warrant was terminated and we issued two warrants&nbsp;in place thereof&nbsp;to ValueAct
to purchase shares of our common stock. One of such warrants entitled ValueAct to purchase up to a total of 1,092,622 shares of&nbsp;our&nbsp;common
stock at an exercise price of $7.55 per share. The other warrant entitled ValueAct to purchase up to a total of 1,092,621 shares
of&nbsp;our&nbsp;common stock at an initial exercise price of $5.00 per share.&nbsp; We also entered into a Guaranty with ValueAct
whereby we agreed to guarantee Twistbox&rsquo;s payment to ValueAct of up to $8,250,000 of principal under the ValueAct Note in
accordance with the terms, conditions and limitations contained in the ValueAct Note. The financial covenants of the ValueAct Note
were also amended,&nbsp;to provide that Twistbox&nbsp;was required&nbsp;maintain a cash balance of not less than $2,500,000&nbsp;at
all times&nbsp;and we were required&nbsp;to maintain a cash balance of not less than $4,000,000 at all times.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On October 23, 2008,
in connection with the AMV Acquisition, the Company, Twistbox and ValueAct entered into a Second Amendment to the ValueAct Note
in the amount of $16,500,000, which among other things, provided for a payment in kind election at the option of Twistbox,&nbsp;modified
the financial covenants set forth in the ValueAct Note&nbsp;to require that the Company and Twistbox maintain certain minimum combined
cash balances and provided for certain covenants with respect to the indebtedness of the Company. and its subsidiaries.&nbsp; Also
on October 23, 2008, AMV granted to ValueAct a security interest in its assets&nbsp;to secure the obligations under the ValueAct
Note.&nbsp;In addition, Mandalay Digital Group, Inc. and ValueAct entered into an allonge to each of those certain warrants issued
to ValueAct in connection with the Merger, which, among other things, amended the exercise price of each of the warrants to $4.00
per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On August 14, 2009,
for $3,500,000 in principal (the &ldquo;Amended ValueAct Note&rdquo;). In connection with the Restructure, the ValueAct Note, the
Value Act Security Agreement and the Value Act Guaranty were amended and restated in their entirety. In addition, all warrants
and common stock of the Company held by ValueAct were cancelled and all warrants and common stock of the Company held by AMV founders
Nate MacLeitch and Jonathan Cresswell, former directors of the Company, were repurchased by the Company for a price of $0.02 per
share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On August 14, 2009,
the Company, Twistbox and ValueAct&nbsp;entered into a Third Amendment to&nbsp;the ValueAct Note. Pursuant to this Third Amendment,
the maturity date of the ValueAct Note was changed to July 31, 2010 and the interest rate of the ValueAct Note increased from 10%
to 12.5%.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On January 25, 2010,
the Company, Twistbox and ValueAct entered into a Waiver to Senior Secured Note (the &ldquo;Waiver&rdquo;), pursuant to which ValueAct
agreed to waive certain provisions of the ValueAct Note. Pursuant to the Waiver, subject to Twistbox&rsquo;s compliance with certain
conditions set forth in the Waiver, certain rights to prepay the ValueAct Note were extended from January 31, 2010 to March 1,
2010. In addition, subject to Twistbox&rsquo;s compliance with certain conditions set forth in the Waiver, the timing obligation
of the Company and Twistbox to comply with the cash covenant set forth in the ValueAct Note was extended to March 1, 2010 and the
minimum cash balance that Twistbox and the Company must maintain was increased to $1,600,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On February 25, 2010,
Twistbox received a letter (the &ldquo;Letter&rdquo;) from ValueAct alleging certain events of default with respect to the ValueAct
Note. The Letter claimed that an event of default had occurred and was continuing under the ValueAct Note as&nbsp;a&nbsp;result
of certain alleged defaults, including the failure to provide weekly evidence of compliance with certain of Twistbox&rsquo;s and
the Company covenants under the ValueAct Note, the failure to comply with limitations on certain payments by the Company and each
of its subsidiaries, and the failure of Twistbox and the Company to maintain minimum cash balances in deposit accounts of each
of Twistbox and the Company. The Letter also claimed that the Waiver had ceased to be effective as a result of the alleged failure
of Mandalay Digital Group, Inc. to comply with the conditions set forth in the Waiver.&nbsp;&nbsp;On May 10, 2010, Twistbox received
from ValueAct a Notice of Event of Default and Acceleration (&ldquo;Notice&rdquo;) in which ValueAct stated that an event of default
had occurred under the ValueAct Note as a result of Twistbox&rsquo;s and the Company&rsquo;s failure to comply with the cash balance
covenant under the ValueAct Note and, therefore, ValueAct accelerated all outstanding amounts payable by Twistbox under the ValueAct
Note.&nbsp;In connection with the Notice, ValueAct instituted an administration proceeding in the United Kingdom against AMV.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;On June 21, 2010,
we sold all of the operating subsidiaries of AMV to an entity controlled by ValueAct and certain of AMV&rsquo;s founders in exchange
for the release of $23,000,000 of secured indebtedness, comprising of a release of all amounts due and payable under the AMV Note
and all amounts due and payable under the VAC Note except&rdquo;) election to the note through the revised term, and (3) stripped
out $3,000,000 of principal to create the Taja Convertible Note, leaving a principal balance of $500,000 plus accrued interest
of $562,000 for a total of $1,062,000. As consideration for amending the note, Taja also received a warrant (&ldquo;Incentive Warrant&rdquo;)
to purchase 2,000,000 shares of common stock of the Company at an exercise price of $0.25 per share, subject to adjustment. Taja
also received 25% warrant coverage (&ldquo;Coverage Warrant&rdquo;) determined by dividing the principal amount of the Taja Convertible
Note by the conversion price multiplied by 25%. The Incentive Warrant and the Coverage Warrant have a five year term and vest one
year from issue date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On December 16, 2011,
the Amended ValueAct Note was purchased in its entirety by Taja LLC (&ldquo;Taja) and was amended to remove certain negative covenants
from the Note (the &ldquo;Amended Taja Note&rdquo;). On December 29, 2011, the Company and Taja entered into a binding term sheet
for convertible note financing (&ldquo;Taja Convertible Note&rdquo;) and, effectively, a third amendment to the Second Amended
Note (&ldquo;Third Amended Note&rdquo;). The Third Amended Note (1) changed the maturity date of the Note from June 21, 2013 to
June 21, 2015, (2) extended the payment in kind (&ldquo;PIK&rdquo;) and the Company and ValueAct entered into a Second Allonge
to Warrant to Purchase 1,092,621 shares of common stock (the &ldquo;Second Allonge&rdquo;), which amended that certain warrant
to purchase 1,092,621 shares of the Company&rsquo;s common stock, issued to ValueAct on February 12, 2008, as amended (the &ldquo;ValueAct
Warrant&rdquo;).&nbsp; Pursuant to the Second Allonge, the exercise price of the ValueAct Warrant decreased from $4.00 per share
to the lesser of $1.25 per share, or the exercise price per share for any warrant to purchase shares of the Company&rsquo;s common
stock issued by the Company to certain other parties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On March 1, 2012, the
Company and Taja entered into a second binding term sheet (&ldquo;Amended Taja Convertible Note&rdquo;) to amend certain provisions
of the December 29, 2011 binding term sheet. Pursuant to the Amended Taja Convertible Note, (1) the maturity date was revised to
March 1, 2014, (2) the conversion price was amended to $0.70 share, (3) conversion of the note must not cause the holder to exceed
4.9% ownership, except that on the maturity date the entire remaining amount of principle and interest shall automatically convert
into shares of common stock of the Company, (4) the Amended Taja Convertible Note becomes accelerated and immediately due and payable
upon the consummation by the Company of one or more equity sales from and after March 1, 2012 resulting in aggregate net proceeds
of at least $10,000,000, (5) the conversion date is to occur the earlier of (x) the date that the long-form documents are executed
and delivered to all parties, and (y) March 19, 2012, (6) the 2,000,000 Incentive Warrants issued as consideration for the Third
Amended Note were amended to vest and be exercisable one year from March 1, 2012, and (7) the exercise date of the Coverage Warrants
was amended to one year following the conversion date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On March 19, 2012,
the Company issued 2,600,000 shares of its common stock to Taja for the conversion of $1,820,000 of the Amended Taja Convertible
Note.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The above description
of the Restructure does not purport to be complete and is qualified in its entirety by reference to the Current Reports on Form
8-K filed by us on June 23, 2010, January 4, 2012, and March 7, 2012, and relevant exhibits thereo, which are incorporated by reference
herein.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Director Independence</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of June 15, 2012,
the independent directors of the Board were Paul Schaeffer and Chris Rogers, based on the standards of NASDAQ.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; color: red"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; color: blue"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DESCRIPTION OF CAPITAL STOCK </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">The following is a
brief description of our capital stock. This summary does not purport to be complete in all respects. This description is subject
to and qualified entirely by the terms of our certificate of incorporation and bylaws, each as amended, copies of which have been
filed with the SEC and are also available upon request from us, and by the General Corporation Law of the State of Delaware.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Authorized Capitalization</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">We have authorized
100,000,000 shares of common stock, par value $0.0001 per share, and 1,000,000 shares of preferred stock, par value $0.0001 per
share, of which 100,000 shares have been designated as Series A Convertible Preferred Stock, or Series A Preferred Stock. Our authorized
shares of common stock and preferred stock are available for issuance without further action by our stockholders, unless such action
is required by applicable law or the rules of any stock exchange or automated quotation system on which our securities may be listed
or traded. If the approval of our stockholders is not so required, our board of directors may determine not to seek stockholder
approval.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">Our stockholders have
approved by written consent a proposal that would allow our Board of Directors, each at its option, to (i) effect a reverse stock
split of our common stock and (ii) increase the number of authorized shares of the Company&rsquo;s capital stock to 202,000,000
shares of stock, of which 200,000,000 shares would be common stock and 2,000,000 shares would be preferred stock.&nbsp;&nbsp;As
proposed, our Board of Directors would have the authority, until April 26, 2013, to effect a reverse stock split ranging from one-for-two
to one-for-ten, with the exact ratio with such range and the timing of the reverse split at the sole discretion of our board of
directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">As of June 23, 2012, there were issued
and outstanding:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="width: 2%; vertical-align: top; font-family: Symbol">&middot;</TD>
    <TD STYLE="width: 1%; vertical-align: top">&nbsp;</TD>
    <TD STYLE="width: 92%; vertical-align: top">85,953,136 shares of common stock, including 17,989,047 shares of issued and outstanding common stock being offered under this prospectus by the selling stockholders;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="width: 2%; vertical-align: top; font-family: Symbol">&middot;</TD>
    <TD STYLE="width: 1%; vertical-align: top">&nbsp;</TD>
    <TD STYLE="width: 92%; vertical-align: top">100,000 shares of Series A Preferred Stock, convertible into 100,000 shares of our common stock (based on a conversion price of $1.00 per share);</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="width: 2%; vertical-align: top; font-family: Symbol">&middot;</TD>
    <TD STYLE="width: 1%; vertical-align: top">&nbsp;</TD>
    <TD STYLE="width: 92%; vertical-align: top">Warrants to purchase 18,812,987 shares of common stock with a weighted average exercise price of $0.42 per share, including warrants to purchase 5,321,426 shares of our common stock being offered under this prospectus by the selling stockholders at a weighted average exercise price of $0.57 per share; and</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="width: 2%; vertical-align: top; font-family: Symbol">&middot;</TD>
    <TD STYLE="width: 1%; vertical-align: top">&nbsp;</TD>
    <TD STYLE="width: 92%; vertical-align: top">Options to purchase an aggregate of 4,798,352 shares of common stock with a
    weighted average exercise price of $1.80 per share.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Description of Common Stock </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">Holders of our common
stock are entitled to such dividends as may be declared by our board of directors out of funds legally available for such purpose,
subject to any preferential dividend rights of any then outstanding preferred stock. The shares of common stock are neither redeemable
or convertible. Holders of common stock have no preemptive or subscription rights to purchase any of our securities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">Each holder of our
common stock is entitled to one vote for each such share outstanding in the holder&rsquo;s name. No holder of common stock is entitled
to cumulate votes in voting for directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">In the event of our
liquidation, dissolution or winding up, the holders of our common stock are entitled to receive pro rata our assets which are legally
available for distribution, after payments of all debts and other liabilities and subject to the prior rights of any holders of
preferred stock then outstanding. All of the outstanding shares of our common stock are fully paid and non-assessable. The shares
of common stock offered by this prospectus will also be fully paid and non-assessable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">Our common stock is
traded on the OTC QB market under the symbol &ldquo;MNDL.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Description of Preferred Stock </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt"><FONT STYLE="font-weight: normal"><I>&nbsp;</I></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt"><FONT STYLE="font-weight: normal"><I>Series
A Convertible Preferred Stock </I></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">While the Series A
Preferred Stock is outstanding, holders of the Series A Preferred Stock are entitled to receive any dividends if and when declared
by the Company&rsquo;s board of directors on the Company&rsquo;s common stock on an as converted basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">The Series A Preferred
Stock is convertible at any time at the option of the holder into shares of our common stock based on dividing the original purchase
price plus the amount of any accumulated but unpaid dividends, by the conversion price then in effect (as may be adjusted).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">The Series A Preferred
Stock is entitled to vote together with the common stock as a single class (on an as if converted basis) on any matters submitted
to the holders of the Company&rsquo;s common stock, together with any other voting rights provided to the Series A Preferred under
law or the General Corporation Law of the State of Delaware.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">The Series A Preferred
Stock are entitled to receive, prior and in preference to our common stock or any other class designated as junior to the Series
A Preferred Stock, upon liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, or in the event
of its insolvency, an amount per share equal to the greater of (i) $10.00 per share of Series A Preferred Stock (subject to certain
adjustments) or (ii) such amount per share as would have been payable had the Series A Preferred Stock been converted into our
common stock immediately prior to such liquidation, dissolution or winding up.&nbsp;Each holder of Series A Preferred Stock also
has the right to a cash-out election in the event of certain transactions, including a consolidation or merger of the Company (excluding
a transaction involving a reincorporation or a merger with a wholly-owned subsidiary), a sale of all or substantially all of the
assets of the Company, the issuance by the Company in a single or integrated transaction shares of common stock (or securities
convertible into common stock) representing a majority of the shares of common stock outstanding immediately following such issuance,
or any other form of acquisition where the Company is the target and a change of control occurs such that the acquirer has the
power to elect a majority of the Company&rsquo;s board of directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Anti-Takeover Effects of Certain Provisions
of Delaware Law</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">The following is a
summary of certain provisions of Delaware law. This summary does not purport to be complete and is qualified in its entirety by
reference to the corporate law of Delaware and our certificate of incorporation and bylaws.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt"><I>Effect of Delaware
Anti-Takeover Statute.</I>&nbsp;We may be subject to Section&nbsp;203 of the Delaware General Corporation Law, an anti-takeover
law. In general, Section&nbsp;203 prohibits a Delaware corporation from engaging in any business combination with any interested
stockholder for a period of three years following the date that the stockholder became an interested stockholder, unless:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.35in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">prior to that date, the board of directors of the corporation
approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;</TD>
</TR></TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.35in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">upon consummation of the transaction that resulted in
the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares of voting stock
outstanding (but not the voting stock owned by the interested stockholder) those shares owned by persons who are directors and
officers and by excluding employee stock plans in which employee participants do not have the right to determine whether shares
held subject to the plan will be tendered in a tender or exchange offer;&nbsp;or</TD>
</TR></TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.35in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">on or subsequent to that date, the business combination
is approved by the board of directors of the corporation and authorized at an annual or special meeting of stockholders, and not
by written consent, by the affirmative vote of at least 66-2/3% of the outstanding voting stock that is not owned by the interested
stockholder.</TD>
</TR></TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">Section&nbsp;203 defines
&ldquo;business combination&rdquo; to include the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.35in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">any merger or consolidation involving the corporation
and the interested stockholder;</TD>
</TR></TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.35in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">any sale, transfer, pledge or other disposition of 10%
or more of the assets of the corporation involving the interested stockholder;</TD>
</TR></TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.35in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">subject to certain exceptions, any transaction that results
in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder;</TD>
</TR></TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.35in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">any transaction involving the corporation that has the
effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the
interested stockholder;&nbsp;or</TD>
</TR></TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.35in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">the receipt by the interested stockholder of the benefit
of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation.</TD>
</TR></TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">In general, Section&nbsp;203
defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of the
corporation, or who beneficially owns 15% or more of the outstanding voting stock of the corporation at anytime within a three-year
period immediately prior to the date of determining whether such person is an interested stockholder, and any entity or person
affiliated with or controlling or controlled by any of these entities or persons.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Transfer Agent </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">Our transfer agent and registrar is American
Stock Transfer &amp; Trust, LLC, and its telephone number is (800) 937-5449.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>LEGAL MATTERS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">The validity of the
common stock being offered hereby has been passed upon by Manatt, Phelps&nbsp;&amp; Phillips, LLP, Los Angeles, California. Certain
partners of, investment entities comprised of partners, and persons associated with Manatt, Phelps&nbsp;&amp; Phillips, LLP
beneficially own 2,300,000 shares of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>EXPERTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">The consolidated financial
statements appearing in this prospectus and in the registration statement have been audited by SingerLewak LLP, an independent
registered public accounting firm, as stated in their report appearing elsewhere herein, and are included in reliance upon such
report and upon the authority of such firm as experts in accounting and auditing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="margin: 0"></P>
<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Mandalay Digital Group, Inc. and Subsidiaries</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(formerly known as NeuMedia, Inc.)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 24pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Mandalay Digital Group, Inc. and Subsidiaries</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 24pt Times New Roman, Times, Serif; margin: 0pt 0"><B>(formerly known as NeuMedia, Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Consolidated Financial Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>March 31, 2012</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 1pt solid; width: 100%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD STYLE="width: 90%; vertical-align: top; text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="width: 10%; vertical-align: bottom; text-autospace: ideograph-numeric ideograph-other; font-weight: bold; text-align: right"><B>Page(s)</B></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-autospace: ideograph-numeric ideograph-other; text-align: right">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top; text-autospace: ideograph-numeric ideograph-other">Consolidated Balance Sheets as of March 31, 2012&nbsp;&nbsp;and March 31, 2011</TD>
    <TD STYLE="vertical-align: bottom; text-autospace: ideograph-numeric ideograph-other; text-align: right">F-3</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top; text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-autospace: ideograph-numeric ideograph-other; text-align: right">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top; text-autospace: ideograph-numeric ideograph-other">Consolidated Statements of Operations for the years ended March 31, 2012 and March 31, 2011</TD>
    <TD STYLE="vertical-align: bottom; text-autospace: ideograph-numeric ideograph-other; text-align: right">F-4</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top; text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-autospace: ideograph-numeric ideograph-other; text-align: right">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top; text-autospace: ideograph-numeric ideograph-other">Consolidated Statements of Stockholders&rsquo; Equity and Comprehensive Loss for the years ended March 31, 2012 and March 31, 2011</TD>
    <TD STYLE="vertical-align: bottom; text-autospace: ideograph-numeric ideograph-other; text-align: right">F-5</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top; text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-autospace: ideograph-numeric ideograph-other; text-align: right">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top; text-autospace: ideograph-numeric ideograph-other">Consolidated Statements of Cash Flows for the years ended March 31, 2012 and March 31, 2011</TD>
    <TD STYLE="vertical-align: bottom; text-autospace: ideograph-numeric ideograph-other; text-align: right">F-6</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top; text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-autospace: ideograph-numeric ideograph-other; text-align: right">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top; text-autospace: ideograph-numeric ideograph-other">Notes to Consolidated Financial Statements</TD>
    <TD NOWRAP STYLE="vertical-align: bottom; text-autospace: ideograph-numeric ideograph-other; text-align: right">F-7 to
    F-38</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;<B>&nbsp;&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Report of Independent Registered Public
Accounting Firm</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">To the Board of Directors and Stockholders</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Mandalay Digital Group, Inc. and Subsidiaries</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have audited the accompanying consolidated balance sheets
of Mandalay Digital Group, Inc. and Subsidiaries (collectively, the &ldquo;Company&rdquo;) as of March 31, 2012 and 2011, and the
related consolidated statements of operation, stockholders&rsquo; equity and comprehensive loss, and cash flows for the years 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 audits.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We conducted our audits in accordance with the standards of
the Public 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 audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that are appropriate in the 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 financial statements, assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of the Company as of March 31, 2012 and 2011, and the
results of its operations and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">/s/ SingerLewak LLP</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Los Angeles, California</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">June 29, 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Mandalay Digital Group, Inc. and Subsidiaries</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(formerly known as NeuMedia, Inc.)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"><B>Consolidated Balance Sheets</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(In thousands, except per share amounts)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">March 31,</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">March 31,</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold">ASSETS</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Current assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 74%; text-align: left; padding-left: 9pt">Cash and cash equivalents</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">8,799</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">845</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Accounts receivable, net of allowances of $108 and $96, respectively</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,190</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,699</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Prepaid expenses and other current assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">120</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">296</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.25in">Total current assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,109</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,840</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Property and equipment, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">230</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">388</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Intangible assets, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">817</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,366</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Goodwill</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,640</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">6,609</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left; padding-left: 0.25in; padding-bottom: 2.5pt">TOTAL ASSETS</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 2.5pt double">14,796</TD><TD STYLE="font-weight: bold; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 2.5pt double">14,203</TD><TD STYLE="font-weight: bold; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left">LIABILITIES AND STOCKHOLDERS' EQUITY</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Current liabilities</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Accounts payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">3,051</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">3,807</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Accrued license fees</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,155</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,189</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Accrued compensation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">582</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">371</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Current portion of long term debt</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">75</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">273</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Warrant derivative liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">452</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">223</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Other current liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">705</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,261</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.25in">Total current liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,020</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,124</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Long term debt and convertible debt, net of discounts of $2,147 and $1,856, respectively</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">3,077</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">4,461</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.25in; padding-bottom: 1pt">Total liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">$</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">9,097</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">$</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">11,585</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Stockholders' equity</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.55pt">Preferred stock Series A convertible preferred stock at $0.0001 par value; 100,000 shares authorized, issued and outstanding (liquidation preference of $1,000,000)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">100</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">100</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.55pt">Common stock, $0.0001 par value: 100,000,000 shares authorized; 82,656,945 issued and 76,581,945 outstanding at March 31, 2012; 45,047,224 issued and 41,274,225 outstanding at March 31, 2011;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Additional paid-in capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">133,300</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">99,612</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Treasury Stock (3,772,999 shares at March 31, 2012 and 2011)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(71</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(71</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Accumulated other comprehensive loss</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(194</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(291</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Accumulated deficit</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(127,443</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(96,736</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.25in; padding-bottom: 1pt">Total stockholders' equity</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">5,699</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">2,618</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left; padding-left: 0.25in; padding-bottom: 2.5pt">TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 2.5pt double">14,796</TD><TD STYLE="font-weight: bold; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 2.5pt double">14,203</TD><TD STYLE="font-weight: bold; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"><B>Consolidated Statements of Operations</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(In thousands, except per share amounts)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">12 Months Ended</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">12 Months Ended</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">March 31,</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">March 31,</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 74%; text-align: left; padding-bottom: 1pt">Net revenues</TD><TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 1pt solid; text-align: right">7,230</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 1pt solid; text-align: right">9,186</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Cost of revenues</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">License fees</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,643</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,915</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Other direct cost of revenues</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">230</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">295</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.25in; padding-bottom: 1pt">Total cost of revenues</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">2,873</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">3,210</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Gross profit</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">4,357</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">5,976</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Operating expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Product development</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,154</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,528</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Sales and marketing</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">873</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,142</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">General and administrative</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">13,013</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,698</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Amortization of intangible assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">54</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Impairment of intangible assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,319</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,482</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 9pt; padding-bottom: 1pt">Impairment of goodwill</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">2,969</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">1,546</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.25in; padding-bottom: 1pt">Total operating expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">21,328</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">17,450</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Loss from operations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(16,971</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(11,474</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Interest and other income / (expense)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Interest income/ (expense)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(12,497</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,761</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Foreign exchange transaction gain / (loss)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(94</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(83</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Change in fair value of accrued derivative liabilities gain / (loss)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(4,447</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Loss on extinguishment of debt</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,004</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Gain / (loss) on settlement of debt</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,393</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(864</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt; padding-bottom: 1pt">Other income / (expense)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">15</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(2</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.25in; padding-bottom: 1pt">Interest and other expense</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(13,626</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(2,710</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Loss from operations before income taxes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(30,597</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(14,184</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Income tax provision</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(110</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(224</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Net loss from continuing operations, net of taxes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(30,707</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(14,408</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Discontinued operations, net of taxes:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Income from discontinued operations, net of taxes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">809</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt; padding-bottom: 1pt">Gain on disposal of discontinued operations, net of taxes</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">4,215</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt; padding-bottom: 1pt">Net income from discontinued operations, net of taxes</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">5,024</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt">Net (loss)/profit income</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(30,707</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(9,384</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Other comprehensive (loss) / income:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Foreign currency translation adjustment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">97</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">128</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Comprehensive (loss) / income</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(30,610</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(9,256</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Basic and diluted net income / (loss) per common share</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.62</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.25</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.25in">Continuing operations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(0.62</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(0.38</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.25in">Discontinued operations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.13</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Weighted average common shares outstanding, basic and diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">49,418</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">37,664</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt">Weighted average common shares outstanding, diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">49,418</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">37,664</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;<B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"><B>Consolidated Statements of Stockholders&rsquo; Equity and
Comprehensive Loss</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(In thousands, except share amounts)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center"><FONT STYLE="font-size: 8pt">Accumulated</FONT></TD><TD NOWRAP STYLE="font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center"><FONT STYLE="font-size: 8pt">Additional</FONT></TD><TD NOWRAP STYLE="font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center"><FONT STYLE="font-size: 8pt">Other</FONT></TD><TD NOWRAP STYLE="font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Common
    Stock</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Preferred
    Stock</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">Treasury</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">Paid-In</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">Comprehensive</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">Accumulated</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Shares</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Amount</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Shares</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Amount</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Stock</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Capital</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Income/(Loss)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Deficit</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Total</FONT></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 19%; text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">Balance at March 31,
    2010</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">39,776,597</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">4</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">100,000</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">100</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">95,741</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">(419</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">(87,352</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">8,074</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">Net loss</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(9,384</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(9,384</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">Foreign currency translation
    gain</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">128</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">128</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">Deferred stock-based
    compensation</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">251</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">251</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">Issuance of common stock
    as part of compensation</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">300,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">75</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">75</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">Stock voided as part
    of disposal of subsidiary</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(561,798</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(197</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(197</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">Stock acquired by company
    as part of disposal of subsidiary</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(3,540,574</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt"></FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(71</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(1,168</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(1,239</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">Issuance of convertible
    debt and associated warrants</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2,500</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2,500</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">Repricing of options</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">113</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">113</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">Issuance of warrants
    to vendor for services rendered</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">76</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">76</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">Repricing of warrants</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">172</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">172</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.55pt; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">Stock issued for services</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">5,300,000</FONT></TD><TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">2,049</FONT></TD><TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">2,049</FONT></TD><TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font-size: 8pt">Balance at March 31, 2011</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">41,274,225</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">4</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">100,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">100</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(71</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">99,612</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(291</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(96,736</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2,618</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: blue; font-weight: bold; font-style: italic"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: blue; font-weight: bold; font-style: italic; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: blue; font-weight: bold; font-style: italic; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: blue; font-weight: bold; font-style: italic; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: blue; font-weight: bold; font-style: italic"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: blue; font-weight: bold; font-style: italic; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: blue; font-weight: bold; font-style: italic; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: blue; font-weight: bold; font-style: italic; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: blue; font-weight: bold; font-style: italic"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: blue; font-weight: bold; font-style: italic; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: blue; font-weight: bold; font-style: italic; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: blue; font-weight: bold; font-style: italic; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: blue; font-weight: bold; font-style: italic"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: blue; font-weight: bold; font-style: italic; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: blue; font-weight: bold; font-style: italic; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: blue; font-weight: bold; font-style: italic; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: blue; font-weight: bold; font-style: italic"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: blue; font-weight: bold; font-style: italic; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: blue; font-weight: bold; font-style: italic; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: blue; font-weight: bold; font-style: italic; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: blue; font-weight: bold; font-style: italic"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: blue; font-weight: bold; font-style: italic; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: blue; font-weight: bold; font-style: italic; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: blue; font-weight: bold; font-style: italic; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: blue; font-weight: bold; font-style: italic"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: blue; font-weight: bold; font-style: italic; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: blue; font-weight: bold; font-style: italic; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: blue; font-weight: bold; font-style: italic; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: blue; font-weight: bold; font-style: italic"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: blue; font-weight: bold; font-style: italic; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: blue; font-weight: bold; font-style: italic; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: blue; font-weight: bold; font-style: italic; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: blue; font-weight: bold; font-style: italic"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: blue; font-weight: bold; font-style: italic; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: blue; font-weight: bold; font-style: italic; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: blue; font-weight: bold; font-style: italic; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">Net loss</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(30,707</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(30,707</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">Foreign currency translation</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">97</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">97</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">Issuance of common stock
    as part of compensation</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">347,244</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">69</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">69</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">Issuance of restricted
    stock for services</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">23,100,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt"></FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt"></FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">6,666</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">6,668</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">Issuance of warrants
    to vendor for services rendered</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">133</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">133</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">Issuance of warrants
    related to convertible debt</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">4,374</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">4,374</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">Issuance of restricted
    stock for acquisition of assets</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">50,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">31</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">31</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">Reclassification of derivative liabilities</font></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">9,034</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">9,034</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">Issuance of common stock for cash</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">3,857,143</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2,700</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2,700</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">Issuance of restricted
    stock as part of compensation</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,375,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">568</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">568</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 16.55pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.55pt; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">Convertible debt converted
    to stock</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">12,653,333</FONT></TD><TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid"></TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">1</FONT></TD><TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">10,113</FONT></TD><TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">10,114</FONT></TD><TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">Balance at March 31, 2012</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">82,656,945</FONT></TD><TD STYLE="text-align: left; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">7</FONT></TD><TD STYLE="text-align: left; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">100,000</FONT></TD><TD STYLE="text-align: left; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">100</FONT></TD><TD STYLE="text-align: left; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">(71</FONT></TD><TD STYLE="text-align: left; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">133,300</FONT></TD><TD STYLE="text-align: left; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">(194</FONT></TD><TD STYLE="text-align: left; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">(127,443</FONT></TD><TD STYLE="text-align: left; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">5,699</font></TD><TD STYLE="text-align: left; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;<B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 94; Value: 1 -->
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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"><B>Consolidated Statements of Cash Flows</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(In thousands)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Year Ended</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Year Ended</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">March 31,</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">March 31,</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left">Cash flows from operating activities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 74%; padding-left: 9pt">Net (loss)/income</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">(30,707</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">(9,384</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Adjustments to reconcile net income/(loss) to net cash used in operating activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.35in">Gain on disposal of discontinued operations, net of taxes, net of impact of foreign currency translation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(4,215</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Depreciation and amortization</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">429</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">638</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Amortization of debt discount</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,709</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">644</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Loss on extinguishment of debt</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,004</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Settled debt with supplier</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,393</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Finance costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,194</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">PIK interest expense</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">575</TD><TD STYLE="text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Allowance for doubtful accounts</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(12</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(307</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 9pt">Stock-based compensation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">326</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Impairment of goodwill and intangibles</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,288</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,028</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Fair Value of warrants and conversion options issued for financing costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,255</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Warrants issued for services</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">133</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">76</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Stock issued for services</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,302</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,049</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 9pt">Repricing of options and compensation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">113</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 9pt">Repricing of warrants</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">172</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Change in fair value of derivative liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,447</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">(Increase) / decrease in assets, net of effect of disposal of subsidiary:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 27pt">Accounts receivable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,521</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,303</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 27pt">Prepaid expenses and other current assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">176</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">160</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Increase / (decrease) in liabilities, net of effect of disposal of subsidiary:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 27pt">Accounts payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">637</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(497</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 27pt">Accrued license fees</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(34</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(625</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 27pt">Accrued compensation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">211</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(166</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 27pt; padding-bottom: 1pt">Other liabilities and other items</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(556</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(224</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Net cash used in operating activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,829</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,909</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left">Cash flows from investing activities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 27pt">Purchase of property and equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(17</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(88</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 27pt">Transaction costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(906</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 27pt; padding-bottom: 1pt">Cash remaining with disposed subsidiary</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(641</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Net cash used in investing activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(17</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,635</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">Cash flows from financing activities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 27pt">Proceeds from new convertible debt</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,500</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 27pt; padding-bottom: 1pt">Issuance of shares for cash</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">2,700</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Net cash provided by financing activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">9,700</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,500</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Effect of exchange rate changes on cash and cash equivalents</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">100</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left">Net change in cash and cash equivalents</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,954</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,046</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">Cash and cash equivalents, beginning of period</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">845</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,891</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 2.5pt">Cash and cash equivalents, end of period</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">8,799</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">845</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left">Supplemental disclosure of cash flow information:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 9pt">Taxes paid</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">119</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">226</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 9pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 9pt">Interest paid</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,763</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left">Supplemental disclosure of non-cash investing and financing activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 9pt">Conversion of convertible note and interest to shares of common stock</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">8,852</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 9pt">Issuance of warrants with convertible debenture</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,636</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 9pt">Beneficial conversion feature associated with convertible debenture</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">8,915</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,496</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 9pt">Reclassify derivative liability to additional paid in capital</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">13,786</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"><B>Notes to Audited
Consolidated Financial Statements&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"><B>(all numbers in thousands except per share amounts)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 1%; text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="width: 5%; text-autospace: ideograph-numeric ideograph-other; font-weight: bold"><B>1.</B></TD>
    <TD STYLE="width: 94%; text-autospace: ideograph-numeric ideograph-other; font-weight: bold"><B>Organization</B></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Mandalay Digital Group, Inc. (&ldquo;we&rdquo;, &ldquo;us&rdquo;,
&ldquo;our&rdquo;, the &ldquo;Company&rdquo; or &ldquo;Mandalay Digital&rdquo;), formerly NeuMedia, Inc. (&ldquo;NeuMedia&rdquo;),
formerly Mandalay Media, Inc. (&ldquo;Mandalay Media&rdquo;) and formerly Mediavest, Inc. (&ldquo;Mediavest&rdquo;), 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.&nbsp;&nbsp;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 until its merger with Twistbox Entertainment, Inc., February 12, 2008.&nbsp;&nbsp;On
September 14, 2007, Mediavest was re-incorporated in the state of Delaware as Mandalay Media, Inc. On May 11, 2010 the Company
merged with a wholly-owned, newly formed subsidiary, changing its name to NeuMedia, Inc. On February 6, 2012, the Company merged
with a wholly-owned, newly formed subsidiary, changing its name to Mandalay Digital Group, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Twistbox is a global publisher and distributor of branded entertainment
content and services primarily focused on enabling the development, distribution and billing of content across mobile networks.&nbsp;&nbsp;Twistbox
publishes and distributes its content in a number of countries.&nbsp;&nbsp;Since operations began in 2003, Twistbox has developed
an intellectual property portfolio that includes mobile rights to global brands and content from film, television and lifestyle
media companies. Twistbox has built a proprietary mobile publishing platform that includes: tools that automate device management
for the distribution and billing of images and video; a mobile games development and distribution platform 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.&nbsp;&nbsp;Twistbox has distribution and service agreements
with many of the largest mobile operators in the world.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Twistbox is headquartered in the Los Angeles area and has offices
in Europe that provide local sales and marketing support for both mobile operators and third party distribution in their respective
regions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On October 23, 2008 the Company completed an acquisition of
100% of the issued and outstanding share capital of AMV Holding Limited, a United Kingdom private limited company (&ldquo;AMV&rdquo;),
and 80% of the issued and outstanding share capital of Fierce Media Ltd (&ldquo;Fierce&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AMV is a leading mobile media and marketing company delivering
games and lifestyle content directly to consumers in the United Kingdom, Australia, South Africa and various other European countries.
AMV markets its well established branded services through a unique Customer Relationship Management platform that drives revenue
through mobile internet, print and TV advertising. AMV is headquartered in Marlow, outside of London in the United Kingdom.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On May 10, 2010, an administrator was appointed over AMV Holding
Limited in the UK, at the request of the Company&rsquo;s senior debt holder. As from that date, AMV and its subsidiaries&nbsp;are
considered to be a discontinued operation. AMV and its subsidiaries were subsequently disposed, as set out in Note 8 below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On May 11, 2010, Mandalay Media merged into its wholly-owned,
newly formed subsidiary, NeuMedia Inc. (&ldquo;NeuMedia&rdquo;), with NeuMedia as the surviving corporation. NeuMedia issued: (1)
one new share of common stock&nbsp;in exchange for each share of Mandalay Media&rsquo;s outstanding common stock and (2) one new
share of preferred stock&nbsp;in exchange for each share of Mandalay Media&rsquo;s outstanding preferred stock as of May 11, 2010.
NeuMedia&rsquo;s preferred and common stock&nbsp;had the same status and par value as the respective stock of Mandalay Media and
NeuMedia acceded to all the rights, acquired all the assets and assumed all of the liabilities of Mandalay Media.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On June 21, 2010, the Company signed and closed an agreement
whereby ValueAct and the AMV Founders, acting through a newly formed company, acquired the operating subsidiaries of AMV (the &ldquo;Assets&rdquo;)
in exchange for the release of $23,231 of secured indebtedness, comprising of a release of all amounts due and payable under the
AMV Note and all of the amounts due and payable under the ValueAct Note (as defined below) except for $3,500 in principal. The
Company retained all assets and liabilities of Twistbox and the Company other than the Assets. See Note 8 for further discussion
on the discontinued operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On December 28, 2011, the Company issued 50,000 shares of the
Company&rsquo;s common stock as part of the consideration for in exchange for the assets of Digital Turbine Group, LLC, the developer
of Digital Turbine (&ldquo;DT&rdquo;), a technology platform that allows media companies, mobile carriers, and their OEM handset
partners to take advantage of multiple mobile operating systems across multiple networks, and offers solutions that allow them
to maintain their own branding and personalized, one-to-one relationships with each end-user. DT&rsquo;s cross-platform user interface
and multimedia management system for carriers and OEMs can be integrated with different operating systems to provide a more organized
and unified experience for end-users of mobile content across search, discovery, billing, and delivery. Other aspects of the platform,
such as a smart content discovery toolbar, allows carriers and OEMs to control the data presented to their users while giving the end-user a more efficient way of finding and purchasing the desired content.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 1%"></TD><TD STYLE="width: 5%; text-align: left"><B>2.</B></TD><TD STYLE="text-align: justify; width: 94%"><B>Liquidity</B></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The accompanying consolidated financial statements have been
prepared in conformity with accounting principles generally accepted in the United States of America. As reflected in the accompanying
consolidated financial statements, the Company has losses from operations and negative cash flows from operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The primary
sources of liquidity have historically been issuance of common and preferred stock and borrowings under credit facilities. In
fiscal year 2012, the Company raised $9.7 million through issuance of convertible debt and equity financings and through restructuring
existing debt to convertible debt. Until we become cash flow positive, we anticipate that our primary sources of liquidity will
be cash generated by our operating activities, as well as further borrowings or further capital raises. Assuming there are no
further changes in expected sales and expense trends subsequent to March 31, 2012, the Company believes that its cash position
will be sufficient to continue operations for the foreseeable next twelve months.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 1%; text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="width: 5%; text-autospace: ideograph-numeric ideograph-other; font-weight: bold"><B>3.</B></TD>
    <TD STYLE="width: 94%; text-autospace: ideograph-numeric ideograph-other; font-weight: bold"><B>Summary of Significant Accounting Policies</B></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Basis of Presentation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America (&ldquo;GAAP&rdquo;) and pursuant to the rules and regulations
of the Securities and Exchange Commission (&ldquo;SEC&rdquo;) for annual financial statements.&nbsp;&nbsp;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Principles of Consolidation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The consolidated financial statements include the accounts of
the Company and our wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.
Discontinued operations have been treated in accordance with Financial Accounting Standards Board (&ldquo;FASB&rdquo;) Accounting
Standards Codification (&ldquo;ASC&rdquo;)&nbsp;&nbsp;205-20, <I>Discontinued Operations.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Revenue Recognition</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company&rsquo;s revenues are derived primarily by licensing
material and software in the form of products (Image Galleries, Wallpapers, video, WAP Site access, Mobile TV), developing and
maintaining carrier platforms, mobile advertising, mobile billing and mobile games. License arrangements with the end user can
be on a perpetual or subscription basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company either markets and distributes its products directly
to consumers, or distributes products through mobile telecommunications service providers (&ldquo;carriers&rdquo;), in which case
the carrier markets the product, images or games to end users. License fees for perpetual and subscription licenses are usually
billed upon download of the product, image or game by the end user. In the case of subscription licenses, many subscriber agreements
provide for automatic renewal until the subscriber opts-out, while others provide opt-in renewal. In either case, subsequent billings
for subscription licenses are generally billed monthly. The Company applies the provisions of FASB ASC 985-605, <I>Software Revenue
Recognition</I>, to all transactions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Revenues are recognized from the Company&rsquo;s 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 license agreement to be evidence of an arrangement with a carrier or aggregator and a &ldquo;clickwrap&rdquo; agreement
to be evidence of an arrangement with an end user. For these licenses, the Company defines delivery as the download of the product,
image or game by the end user.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company 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 the Company 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 the Company believes are reasonable, but it is possible that
actual results may differ from the Company&rsquo;s estimates. The Company&rsquo;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 newer and more advanced handsets, promotions during the period and economic trends. When the
Company receives the final carrier reports, to the extent not received within a reasonable time frame following the end of each
month, the Company records any differences between estimated revenues and actual revenues in the reporting period when the Company
determines the actual amounts. Revenues earned from certain carriers may not be reasonably estimated. If the Company is unable
to reasonably estimate the amount of revenues to be recognized in the current period, the Company recognizes revenues upon the
receipt of a carrier revenue report and when the Company&rsquo;s portion of licensed revenues are fixed or determinable and collection
is probable. To monitor the reliability of the Company&rsquo;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 the Company deems a carrier not to be creditworthy, the Company defers all revenues from the
arrangement until the Company receives payment and all other revenue recognition criteria have been met.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In accordance with FASB ASC 605-45, <I>Reporting Revenue Gross
as a Principal Versus Net as an Agent</I>, the Company recognizes as revenues the amount the carrier reports as payable upon the
sale of the Company&rsquo;s products, images or games. The Company 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:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10%; text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="width: 3%; text-autospace: ideograph-numeric ideograph-other"><FONT STYLE="font-family: Wingdings 2">&mdash;</FONT></TD>
    <TD STYLE="width: 87%; text-autospace: ideograph-numeric ideograph-other">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;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other"><FONT STYLE="font-family: Wingdings 2">&mdash;</FONT></TD>
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other">carriers generally have significant control over the types of content that they offer to their subscribers;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other"><FONT STYLE="font-family: Wingdings 2">&mdash;</FONT></TD>
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other">carriers are directly responsible for billing and collecting fees from their subscribers, including the resolution of billing disputes;</TD></TR>
</TABLE>

<P STYLE="margin: 0">&nbsp;&nbsp;</P>

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    <!-- Field: /Page -->
<P STYLE="margin: 0"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other; width: 10%">&nbsp;</TD>
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other; width: 3%">&nbsp;</TD>
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other; width: 87%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other"><FONT STYLE="font-family: Wingdings 2">&mdash;</FONT></TD>
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other">carriers generally pay the Company a fixed percentage of their revenues or a fixed fee for each game;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other"><FONT STYLE="font-family: Wingdings 2">&mdash;</FONT></TD>
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other">carriers generally must approve the price of the Company&rsquo;s content in advance of their sale to subscribers, and the Company&rsquo;s more significant carriers generally have the ability to set the ultimate price charged to their subscribers; and</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other"><FONT STYLE="font-family: Wingdings 2">&mdash;</FONT></TD>
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other">the Company has limited risks, including no inventory risk and limited credit risk.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For direct to consumer business, revenue is earned by delivering
a product or service directly to the end user of that product or service. In those cases, the Company 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. Substantially
all of our discontinued operations represents direct to consumer business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Net (Loss) per Common Share</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">Basic loss per common share is
computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding for
the period. Diluted net loss per share is computed by dividing net 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</FONT><B> </B><FONT STYLE="font-size: 10pt">from stock options and warrants and the conversion of the Series A
preferred stock were as follows:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 50%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Year Ended</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Year Ended</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">March 31,</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">March 31,</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 70%">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Potentially dilutive shares</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">21,943</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,992</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Comprehensive Loss</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Comprehensive loss consists of two components, net loss
and other comprehensive income. Other comprehensive income refers to gains and losses that under generally accepted accounting
principles are recorded as an element of stockholders&rsquo; equity, but are excluded from net income. The Company&rsquo;s other
comprehensive income currently includes only foreign currency translation adjustments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Cash and Cash Equivalents</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company considers all highly liquid short-term investments
purchased with a maturity of three months or less to be cash equivalents.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Accounts Receivable</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company maintains reserves for potential credit losses on
accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations,
customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these
reserves.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Content Provider Licenses</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Content Provider License Fees</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company&rsquo;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&rsquo;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 content acquisitions, paid in advance and capitalized on our balance sheet as prepaid license
fees. 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 content acquired. Minimum guarantee 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Content Acquired</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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 content
acquired.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Software Development Costs</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company applies the principles of FASB ASC 985-20, <I>Accounting
for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed </I>(&ldquo;ASC 985-20&rdquo;). ASC 985-20 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company has adopted the &ldquo;tested working model&rdquo;
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&rsquo;s or game&rsquo;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Product Development Costs</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Advertising Expenses</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company expenses the costs of advertising, including direct
response advertising, the first time the advertising takes place. Advertising expense for continuing operations was $7 and $116
in the years ended March 31, 2012 and 2011, respectively. Advertising expense for discontinued operations was $0 and $956 in the
years ended March 31, 2012 and 2011, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Restructuring</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company accounts for costs associated with employee terminations
and other exit activities in accordance with FASB ASC 420-10<I>, Accounting for Costs Associated with Exit or Disposal Activities</I>.
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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B></B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Presentation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In order to facilitate the comparison of financial information,
certain amounts reported in the prior year have been reclassified to conform to the current year presentation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Fair Value of Financial Instruments</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of March 31, 2012 and 2011, the carrying value of cash and
cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued license fees, accrued
compensation, derivative liabilities and other current liabilities approximates fair value due to the short-term nature of such
instruments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Derivative Liabilities</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company applies ASC Topic 815, &ldquo;Derivatives
and Hedging,&rdquo; which provides a two-step model to determine whether a financial instrument or an embedded feature is indexed
to an issuer&rsquo;s own stock and thus able to qualify for the scope exception in ASC 815-10-15-74. Using the criteria in ASC
815, the Company determines which instruments or embedded features that require liability accounting and records the fair values
as a derivative liability. The changes in the values of the derivative liabilities are shown in the accompanying consolidated statements
of operations as &ldquo;change in fair value of accrued derivative liabilities gain / (loss).&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Foreign Currency Translation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company uses the United States dollar for financial reporting
purposes.&nbsp;&nbsp;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.&nbsp;&nbsp;Statement
of Operations amounts are translated at average rates in effect for the reporting period. The foreign currency translation adjustment
gains of $97 in the year ended March 31, 2012 and $128 in the year ended March 31, 2011 has been reported as a component of comprehensive
loss in the consolidated statements of stockholders&rsquo; equity and comprehensive income. </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Concentrations of Credit Risk</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Financial instruments which potentially subject us
to concentration of credit risk consist principally of cash and cash equivalents, and accounts receivable. We have placed
cash and cash equivalents with a single high credit-quality institution. 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, 2012, one major customer represented approximately 39% of our gross accounts receivable outstanding, and 43% of
gross accounts receivable outstanding as of March 31, 2011. This customer accounted for 41% of our gross revenues in the year
ended March 31, 2012; and 49% in the year ended March 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Property and Equipment</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Property and equipment is stated at cost.&nbsp;&nbsp;Depreciation
and amortization is calculated using the straight-line method over the estimated useful lives of the related assets. Estimated
useful lives are the lesser of 8 to 10 years or the term of the lease for leasehold improvements and 5 years for other assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Goodwill and Indefinite Life Intangible Assets</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Goodwill represents the excess of cost over fair value of net
assets of businesses acquired. In accordance with FASB ASC 350-20 <I>Goodwill and Other Intangible Assets</I>, the value assigned
to goodwill and indefinite lived intangible assets, including trademarks and tradenames, is not amortized to expense, but rather
they are evaluated at least on an annual basis to determine if there are potential impairments. If the fair value of the reporting
unit is less than its carrying value, an impairment loss is recorded to the extent that the implied fair value of the reporting
unit goodwill is less than the carrying value. If the fair value of an indefinite lived intangible (such as trademarks and trade
names) is less than its carrying amount, an impairment loss is recorded. Fair value is determined based on discounted cash flows,
market multiples or appraised values, as appropriate. Discounted cash flow analysis requires assumptions about the timing and amount
of future cash inflows and outflows, risk, the cost of capital, and terminal values. Each of these factors can significantly affect
the value of the intangible asset. The estimates of future cash flows, based on reasonable and supportable assumptions and projections,
require management&rsquo;s judgment. Any changes in key assumptions about the Company&rsquo;s businesses and their prospects, or
changes in market conditions, could result in an impairment charge. Some of the more significant estimates and assumptions inherent
in the intangible asset valuation process include: the timing and amount of projected future cash flows; the discount rate selected
to measure the risks inherent in the future cash flows; and the assessment of the asset&rsquo;s life cycle and the competitive
trends impacting the asset, including consideration of any technical, legal or regulatory trends.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In the year ended March 31, 2012, the Company determined that
there was an impairment of goodwill, amounting to $2,969.&nbsp;&nbsp;In the year ended March 31, 2011, the Company determined that
there was an impairment of goodwill, amounting to $1,546. In performing the related valuation analysis, the Company used various
valuation methodologies including probability weighted discounted cash flows, comparable transaction analysis, and market capitalization
and comparable company multiple comparison. The impairment is detailed in Note 9 below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Impairment of Long-Lived Assets and Finite Life Intangibles</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Long-lived assets, including, intangible assets subject to amortization
primarily consist of customer lists, license agreements and software that have been acquired are amortized using the straight-line
method over their useful&nbsp;life ranging from five to eight years and are reviewed for impairment in accordance with FASB ASC
360-10, <I>Accounting for the Impairment or Disposal of Long-Lived Assets</I>, 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In the year ended March 31, 2012, the Company determined that
there was an impairment of intangible assets amounting to $2,319. In the year ended March 31, 2011, the Company determined that
there was an impairment of intangible assets, amounting to $4,482. In performing the related valuation analysis the Company used
various valuation methodologies including probability weighted discounted cash flows, comparable transaction analysis, and market
capitalization and comparable company multiple comparison. The impairment is detailed in Note 9 below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Income Taxes</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company accounts for income taxes in accordance with FASB
ASC 740-10, <I>Accounting for Income Taxes </I>(&ldquo;ASC 740-10&rdquo;), 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 ASC 740-10, 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.&nbsp;&nbsp;To
the extent a deferred tax asset cannot be recognized, a valuation allowance is established if necessary.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">ASC 740-10 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 &ldquo;more-likely-than-not&rdquo;
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&nbsp;months.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Stock-based compensation</B><I>.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have applied FASB ASC 718 <I>Share-Based Payment</I> (&ldquo;ASC
718&rdquo;) and accordingly, we record stock-based compensation expense for all of our stock-based awards.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Under ASC 718, 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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, interest
rates, dividend rates and an option&rsquo;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company grants restricted stock subject to market or performance
conditions that vest based on the satisfaction of the conditions of the award. Unvested restricted stock entitles the grantees
to dividends, if any, with voting rights determined in each agreement. The fair market values of market condition-based awards
are determined using the Monte Carlo simulation method. The Monte Carlo simulation method is subject to variability as several
factors utilized must be estimated, including the derived service period, which is estimated based on the Company&rsquo;s judgment
of likely future performance and the Company&rsquo;s stock price volatility. The fair value of performance-based awards is determined
using the market closing price on the grant date. Derived service periods and the periods charged with compensation expense for
performance-based awards are estimated based on the Company&rsquo;s judgment of likely future performance and may be adjusted in
future periods depending on actual performance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Preferred Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company applies the guidance enumerated in FASB ASC&nbsp;480-10,
<I>Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity </I>(&ldquo;ASC 480-10&rdquo;)
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 ASC 480-10. All other issuances of preferred
stock are subject to the classification and measurement principles of ASC 480-10. 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&rsquo;s control,
as temporary equity. At all other times, the Company classifies its preferred shares in stockholders&rsquo; equity.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Use of Estimates</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Recently Adopted Accounting Pronouncements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In December 2010, the FASB issued updated guidance on when and
how to perform certain steps of the periodic goodwill impairment test for public entities that may have reporting units with zero
or negative carrying amounts. This guidance is effective for fiscal years, and interim periods within those years, beginning after
December 15, 2010, with early adoption prohibited. It is applicable to the Company&rsquo;s fiscal year beginning April 1, 2011.
The Company evaluated this guidance, and determined it doesn&rsquo;t have a material effect on its consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In December 2010, the FASB also issued guidance to clarify the
reporting of pro forma financial information related to business combinations of public entities and to expand certain supplemental
pro forma disclosures. This guidance is effective prospectively for business combinations that occur on or after the beginning
of the fiscal year beginning on or after December 15, 2010, with early adoption permitted. It is applicable to the Company&rsquo;s
fiscal year beginning April 1, 2011. The Company evaluated this guidance, and determined it doesn&rsquo;t have a material effect
on its consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In May 2011, the FASB issued guidance to amend certain measurement
and disclosure requirements related to fair value measurements to improve consistency with international reporting standards. This
guidance is effective prospectively for public entities for interim and annual reporting periods beginning after December 15, 2011,
with early adoption by public entities prohibited, and is applicable to the Company&rsquo;s fiscal quarter beginning January 1,
2012. The Company evaluated this guidance, and determined it doesn&rsquo;t have a material effect on its consolidated financial
statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In September 2011, the Financial Accounting Standards Board
(FASB) issued amended accounting guidance related to goodwill impairment testing. The new guidance provides the option to perform
a qualitative assessment by applying a more likely than not scenario to determine whether the fair value of a reporting unit is
less than its carrying amount, which may then allow a company to skip the annual two-step quantitative goodwill impairment test
depending on the determination. The amended guidance is effective for annual and interim goodwill impairment tests performed for
fiscal years beginning after December 15, 2011. Earlier adoption is permitted. Management does not expect the adoption of the amended
guidance to have a material impact on the Company&rsquo;s consolidated financial statements. The Company evaluated this guidance,
and determined it doesn&rsquo;t have a material effect on its consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Recently Issued Accounting Pronouncements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In June 2011, the FASB issued new guidance on the presentation
of comprehensive income that will require a company to present components of net income and other comprehensive income in one continuous
statement or in two separate, but consecutive statements. There are no changes to the components that are recognized in net income
or other comprehensive income under current GAAP. This guidance is effective for fiscal years, and interim periods within those
fiscal years, beginning after December 15, 2011, with early adoption permitted. It is applicable to the Company&rsquo;s fiscal
year beginning April 1, 2012. The Company expects this guidance to have an impact on the disclosures related to comprehensive income.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Other recent authoritative guidance issued
by the FASB (including technical corrections to the FASB Accounting Standards Codification), the American Institute of Certified
Public Accountants, and the SEC did not, or are not expected to have a material effect on the Company&rsquo;s consolidated financial
statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 1%; text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="width: 5%; text-autospace: ideograph-numeric ideograph-other; font-weight: bold"><B>4.</B></TD>
    <TD STYLE="width: 94%; text-autospace: ideograph-numeric ideograph-other; font-weight: bold"><B>Fair Value Measurements</B></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;The Company applies the provisions of ASC 820-10, <I>&ldquo;Fair
Value Measurements and Disclosures.&rdquo;</I> ASC 820-10 defines fair value, and establishes a three-level valuation hierarchy
for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported
in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable
estimate of their fair values because of the short period of time between the origination of such instruments and their expected
realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 8%; text-autospace: ideograph-numeric ideograph-other; font-family: Symbol">&nbsp;</TD>
    <TD STYLE="width: 4%; text-autospace: ideograph-numeric ideograph-other; font-family: Symbol">&middot; &nbsp;&nbsp;&nbsp;</TD>
    <TD STYLE="width: 88%; text-autospace: ideograph-numeric ideograph-other">Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other; font-family: Symbol">&nbsp;</TD>
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other; font-family: Symbol">&middot; &nbsp;&nbsp;&nbsp;</TD>
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other">Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 8%; text-autospace: ideograph-numeric ideograph-other; font-family: Symbol">&nbsp;</TD>
    <TD STYLE="width: 4%; text-autospace: ideograph-numeric ideograph-other; font-family: Symbol">&middot;</TD>
    <TD STYLE="width: 88%; text-autospace: ideograph-numeric ideograph-other">Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company analyzes all financial instruments with features
of both liabilities and equity under ASC 480, <I>&ldquo;Distinguishing Liabilities From Equity&rdquo; </I>and ASC 815, <I>&ldquo;Derivatives
and Hedging.&rdquo;</I> Derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease
in the fair value being recorded in results of operations as adjustments to fair value of derivatives. The effects of interactions
between embedded derivatives are calculated and accounted for in arriving at the overall fair value of the financial instruments.
In addition, the fair values of freestanding derivative instruments such as warrant and option derivatives are valued using the
Black-Scholes model.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company uses Level 2 inputs for its valuation methodology
for the warrant derivatives as their fair values were determined by using the Black-Scholes option pricing model based on various
assumptions. The Company&rsquo;s derivative liabilities are adjusted to reflect fair value at each period end, with any increase
or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">At March 31, 2012, the Company determined the fair value of
the derivative warrant liability to be $452 using the Black-Scholes option pricing model with the following assumptions: 1) expected
life 4 years, 2) a risk free interest rate of .51%, 3) a dividend yield of 0% and 4) a volatility of 175%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company identified the following liabilities that are required
to be presented on the balance sheet at fair value:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>Measured at Fair Value on a Recurring Basis</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>Warrant&nbsp;derivative&nbsp;liabilities</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>(in&nbsp;thousands)</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Total</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Level&nbsp;1</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Level&nbsp;2</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Level&nbsp;3</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 48%">March 31, 2012</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">452</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">452</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>March 31, 2011</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">223</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">223</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 60%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 81%; font-size: 10pt; padding-left: 0; padding-bottom: 0">Balance at March 31, 2010</TD><TD STYLE="width: 2%; font-size: 10pt; padding-bottom: 0; padding-left: 0">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left; padding-bottom: 0; padding-left: 0">$</TD><TD STYLE="width: 15%; font-size: 10pt; text-align: right; padding-bottom: 0; padding-left: 0">-</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left; padding-bottom: 0; padding-left: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.24in; padding-bottom: 0">Total gains or losses (realized/unrealized) included in earnings</TD><TD STYLE="font-size: 10pt; padding-bottom: 0; padding-left: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 0; padding-left: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding-bottom: 0; padding-left: 0">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 0; padding-left: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.24in; padding-bottom: 0">Purchases, issuances and settlements</TD><TD STYLE="font-size: 10pt; padding-bottom: 0; padding-left: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 0; padding-left: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding-bottom: 0; padding-left: 0">223</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 0; padding-left: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 0; padding-left: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 0; padding-left: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left; padding-bottom: 0; padding-left: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right; padding-bottom: 0; padding-left: 0">&nbsp;</TD><TD STYLE="padding-bottom: 0; font-size: 10pt; text-align: left; padding-left: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-left: 0; padding-bottom: 0">Balance at March 31, 2011</TD><TD STYLE="font-size: 10pt; padding-bottom: 0; padding-left: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 0; padding-left: 0">$</TD><TD STYLE="font-size: 10pt; text-align: right; padding-bottom: 0; padding-left: 0">223</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 0; padding-left: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.24in; padding-bottom: 0">Total gains or losses (realized/unrealized) included in earnings</TD><TD STYLE="font-size: 10pt; padding-bottom: 0; padding-left: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 0; padding-left: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding-bottom: 0; padding-left: 0">4,447</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 0; padding-left: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.24in; padding-bottom: 0">Purchases, issuances and settlements</TD><TD STYLE="font-size: 10pt; padding-bottom: 0; padding-left: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 0; padding-left: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding-bottom: 0; padding-left: 0">(4,218</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 0; padding-left: 0">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 0; padding-left: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 0; padding-left: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left; padding-bottom: 0; padding-left: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right; padding-bottom: 0; padding-left: 0">&nbsp;</TD><TD STYLE="padding-bottom: 0; font-size: 10pt; text-align: left; padding-left: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-bottom: 0; padding-left: 0">Balance at March 31, 2012</TD><TD STYLE="font-size: 10pt; padding-bottom: 0; padding-left: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left; padding-bottom: 0; padding-left: 0">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right; padding-bottom: 0; padding-left: 0">452</TD><TD STYLE="padding-bottom: 0; font-size: 10pt; text-align: left; padding-left: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-left: 0; padding-bottom: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 0; padding-left: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 0; padding-left: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding-bottom: 0; padding-left: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 0; padding-left: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; padding-bottom: 0">Total amount of gains and losses for the period included in earnings attributable to the change in unrealized gains or losses related to liabilities still held at March 31, 2012</TD><TD STYLE="font-size: 10pt; padding-bottom: 0; padding-left: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 0; padding-left: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding-bottom: 0; padding-left: 0">4,447</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 0; padding-left: 0">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The warrant derivative liability is included in the accompanying
consolidated balance sheet, and is discussed further at Note 12.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company did not identify any other recurring assets
and liabilities that are required to be presented in the consolidated balance sheets at fair value in accordance with ASC 825.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>Measured at Fair Value on A Nonrecurring Basis</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Certain assets&nbsp;and
liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an
ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of
impairment). The following table presents the assets and liabilities carried on the balance sheet by caption and by level
within the fair value hierarchy (as described above) as of March 31, 2012 and 2011, for which a nonrecurring change in fair value
has been recorded during the years ended March 31, 2012 and 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="font-weight: bold; text-align: center">Carrying&nbsp;value&nbsp;at&nbsp;March&nbsp;31,&nbsp;2012</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Cumulative&nbsp;losses</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; font-style: italic; text-align: left">(in&nbsp;thousands)</TD><TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Total</TD><TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Level&nbsp;1</TD><TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Level&nbsp;2</TD><TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Level&nbsp;3</TD><TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">as&nbsp;of&nbsp;March&nbsp;31,&nbsp;2012</TD><TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 35%">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Goodwill and other intangible assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,457</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"></TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"></TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,457</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">74,058</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="font-weight: bold; text-align: center">Carrying&nbsp;value&nbsp;at&nbsp;March&nbsp;31,&nbsp;2011</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Cumulative&nbsp;losses</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; font-style: italic; text-align: left">(in&nbsp;thousands)</TD><TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Total</TD><TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Level&nbsp;1</TD><TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Level&nbsp;2</TD><TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Level&nbsp;3</TD><TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">as&nbsp;of&nbsp;March&nbsp;31,&nbsp;2011</TD><TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 35%">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Goodwill and other intangible assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,975</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"></TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"></TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,975</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">68,770</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Goodwill and other intangible assets measured
at fair value on a nonrecurring basis relate to goodwill and intangible assets that were acquired in connection with an acquisition.
Losses of $74,058 and $68,770 represent the cumulative impairment charge related to these intangible assets recorded in fiscal&nbsp;years
2012 and 2011, respectively. The fair value of these intangible assets was calculated based on the methods and criteria described
in Note 9 &ndash; Goodwill and Intangible Assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company performs a review of the fair value of goodwill
and intangible assets. Fair value is defined under ASC 820, Fair Value Measurements and Disclosures as, &ldquo;The price that would
be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date&rdquo;.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 1%; text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="width: 5%; text-autospace: ideograph-numeric ideograph-other; font-weight: bold"><B>5.</B></TD>
    <TD STYLE="width: 94%; text-autospace: ideograph-numeric ideograph-other; font-weight: bold"><B>Accounts Receivable</B></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">March&nbsp;31,</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">March&nbsp;31,</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 74%">Billed</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">709</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">1,523</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Unbilled</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">589</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,272</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Less: allowance for doubtful accounts</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(108</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(96</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Net Accounts receivable</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">1,190</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">2,699</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: blue; font-weight: bold; font-style: italic">&nbsp;</TD><TD STYLE="color: blue; font-weight: bold; font-style: italic">&nbsp;</TD>
    <TD STYLE="color: blue; font-weight: bold; font-style: italic; text-align: left">&nbsp;</TD><TD STYLE="color: blue; font-weight: bold; font-style: italic; text-align: right">&nbsp;</TD><TD STYLE="color: blue; font-weight: bold; font-style: italic; text-align: left">&nbsp;</TD><TD STYLE="color: blue; font-weight: bold; font-style: italic">&nbsp;</TD>
    <TD STYLE="color: blue; font-weight: bold; font-style: italic; text-align: left">&nbsp;</TD><TD STYLE="color: blue; font-weight: bold; font-style: italic; text-align: right">&nbsp;</TD><TD STYLE="color: blue; font-weight: bold; font-style: italic; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Net Accounts receivable of discontinued operations</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">-</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">-</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;The Company had no significant write-offs or recoveries
during the years ended March 31, 2012 and March 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 1%; text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="width: 5%; text-autospace: ideograph-numeric ideograph-other; font-weight: bold"><B>6.</B></TD>
    <TD STYLE="width: 94%; text-autospace: ideograph-numeric ideograph-other; font-weight: bold"><B>Property and Equipment</B></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">March&nbsp;31,</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">March&nbsp;31,</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 74%">Equipment</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">1,310</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">1,298</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Furniture &amp; fixtures</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">484</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">479</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Leasehold improvements</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">184</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">184</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,978</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,961</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Accumulated depreciation</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">(1,748</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">(1,573</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Net Property and Equipment</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">230</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">388</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Net Property and Equipment of discontinued operations</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">-</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">-</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;Depreciation expense for the years ended March 31, 2012
and 2011 was $199 and $291, respectively for continuing operations and $0 and $27 for discontinued operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 1%; text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="width: 5%; text-autospace: ideograph-numeric ideograph-other; font-weight: bold"><B>7.</B></TD>
    <TD STYLE="width: 94%; text-autospace: ideograph-numeric ideograph-other; font-weight: bold"><B>Description of Stock Plans</B></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On May 26, 2011, our board of directors adopted the 2011 Equity
Incentive Plan of NeuMedia, Inc. and on April 27, 2012, our board of directors amended and restated the plan and the related plan
documents to change references to the name of our company from the &ldquo;NeuMedia, Inc.&rdquo; to &ldquo;Mandalay Digital Group,
Inc.&rdquo; and further directed that they be submitted to stockholders for their consideration and approval. On May 23, 2012,
our stockholders approved and adopted by written consent the Amended and Restated 2011 Equity Incentive Plan of Mandalay Digital
Group, Inc. (the &ldquo;Plan&rdquo;) and the Mandalay Digital Group, Inc. Amended and Restated 2011 Equity Incentive Plan Notice
of Grant and Restricted Stock Agreement and the Mandalay Digital Group, Inc. Amended and Restated 2011 Equity Incentive Plan Notice
of Grant and Stock Option Agreement (collectively, the &ldquo;Related Documents&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On September 27, 2007, the stockholders of the Company adopted
the 2007 Employee, Director and Consultant Stock Plan (&ldquo;Plan&rdquo;). 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&rsquo;s shall only be issued to employees. Generally, ISO&rsquo;s
and NQO&rsquo;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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&nbsp;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Option Plans</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table summarizes options granted under the Company&rsquo;s
2007 Employee, Director and Consultant Stock Plan equity compensation plan for the years ended March 31, 2012 and 2011:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>(in&nbsp;thousands)</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Number&nbsp;of</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Weighted&nbsp;Average</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Shares</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Exercise&nbsp;Price</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 74%">Outstanding at March 31, 2010</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">6,187</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">2.49</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Granted</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Canceled</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Exercised</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Outstanding at March 31, 2011</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,187</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1.79</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Granted</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Canceled</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(572</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.60</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Forfeited</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(817</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2.55</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">Exercised</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Outstanding at March 31, 2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,531</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1.80</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt">Exercisable at March 31, 2012</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,798</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1.80</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In April 2011, two former employees each agreed to cancel options
to purchase 173,622 shares of common stock in connection with their respective termination agreements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In December 2011, the Company recorded the cancellation of 9,122
shares of common stock relating to three former employees.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In March 2012, the Company recorded the cancellation of 215,841
shares of common stock.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In March 2012, the Company recorded the forfeiture of 816,667
shares of common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The exercise price for options outstanding and options exercisable
at March 31, 2012 was as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 85%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Weighted</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Average</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Weighted</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Remaining</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Number</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Average</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Aggregate</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="2" STYLE="text-align: center">Range&nbsp;of</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Contractual&nbsp;Life</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Outstanding</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Exercise</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Intrinsic</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Exercise&nbsp;Price</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">(Years)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">March&nbsp;31,&nbsp;2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Price</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Value</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 18%; text-align: right">$0 - $1.00</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 17%; text-align: right">4.27</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 17%; text-align: right">2,698</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 17%; text-align: right">0.47</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 17%; text-align: right">1,303,500</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">$2.00 - $3.00</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6.22</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,300</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2.75</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">$4.00 - $5.00</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">5.87</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">800</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">$</TD><TD STYLE="padding-bottom: 1pt; text-align: right">4.75</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: right">5.06</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,798</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">$</TD><TD STYLE="padding-bottom: 2.5pt; text-align: right">1.80</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,303,500</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Stock Plans</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">A summary of the status of the Company&rsquo;s 2007 Employee,
Director and Consultant Stock Plan equity compensation plan, nonvested options as of March 31, 2012 and 2011 pursuant to the Plan,
and changes during the years ended March 31, 2012 and 2011 is presented below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>(in&nbsp;thousands)</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Weighted&nbsp;Average</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Number&nbsp;of</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Grant&nbsp;Date</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Shares</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Fair Value</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Nonvested at March 31, 2010</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 74%">Granted</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">1,200</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">0.25</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Vested</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,200</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.25</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Exercised</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt">Nonvested at March 31, 2011</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Granted</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Vested</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Exercised</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt">Nonvested at March 31, 2012</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Cumulative forfeited, March 31, 2011</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(218</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.61</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Cumulative forfeited, March 31, 2012</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,035</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2.55</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Cumulative canceled, March 31, 2012</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(572</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.60</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of March 31, 2012, under the Company&rsquo;s 2007 Employee,
Director and Consultant Stock Plan equity compensation plan, there was $0 of total unrecognized compensation cost related to nonvested
share-based compensation arrangements granted under the Plan. The total fair value of shares vested during the year ended March
31, 2012 was $0, and $0 was forfeited to cover individual tax withholdings. The total fair value of shares vested during the year
ended March 31, 2011 was $2,100, and $0 was forfeited to cover individual tax withholdings.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Option Plans and Stock Plans</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Total stock compensation expense for the Company&rsquo;s 2007
Employee, Director and Consultant Stock Plan equity compensation plan and Amended and Restated 2011 Equity Incentive Plan is included
in the following statements of operations components:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 70%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="color: blue; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Twelve&nbsp;Months&nbsp;Ended</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Twelve&nbsp;Months&nbsp;Ended</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="color: blue; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">March&nbsp;31,</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">March&nbsp;31,</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 74%; text-align: left">Product development</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">69</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">7</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Sales and marketing</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left"></TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left"></TD><TD STYLE="text-align: right">19</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">General and administrative</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">7,233</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">413</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">7,302</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">439</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 1%; text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="width: 5%; text-autospace: ideograph-numeric ideograph-other; font-weight: bold"><B>8.</B></TD>
    <TD STYLE="width: 94%; text-autospace: ideograph-numeric ideograph-other; font-weight: bold"><B>Discontinued Operations</B></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;The Company had been negotiating a restructuring of debt
with its senior debt holder for some time.&nbsp;&nbsp;These negotiations were finalized on June 21, 2010.&nbsp;&nbsp;On that date,
the Company signed and closed a number of transactions, which included the sale of AMV. Pursuant to the Agreement, ValueAct Small
Cap Master Fund, L.P.&nbsp;(&ldquo;ValueAct&rdquo;) and Nate MacLeitch and Jonathan Cresswell (the &ldquo;AMV Founders&rdquo;),
acting through a newly formed company, acquired the operating subsidiaries of AMV in exchange for the release of $23,231 of secured
indebtedness, which included a release of all amounts due and payable under the&nbsp;secured promissory note in the aggregate principal
amount of $5,375 (the &ldquo;AMV Note&rdquo;)&nbsp;and all of the amounts due and payable under the Senior Secured Note, issued
by Twistbox, due July 31, 2010, as amended on February 12, 2008 (the &ldquo;ValueAct Note&rdquo;) except for $3,500 in principal,
which is due in one lump sum principal payment on June 21, 2013. In addition, all intercompany balances at that date were cancelled,
and all shares of common stock and warrants of the Company held by ValueAct were cancelled. In addition, approximately 3,541 shares
of common stock of the Company held by two of the founders of AMV were acquired by the Company.&nbsp;&nbsp;As of June 30, 2010
the Company accrued $300 to a related party pertaining to the sale of AMV.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In accordance with FASB ASC 205-20, <I>Discontinued Operations</I>,
the operating results and net assets and liabilities related to AMV were reclassified as of June 21, 2010 and reported as discontinued
operations in the accompanying consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In accordance with FASB ASC 360, Property, Plant and Equipment,
the Company recorded a gain of $4,200 on the sale of AMV.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following is a summary of assets and liabilities of
the discontinued operations as of March 31, 2010 and as of the disposal date of June 21, 2010 and the resulting gain on sale:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">June 21,</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">March 31,</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold">Assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 74%">Cash</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">641</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">1,251</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Working Capital, net of cash</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,536</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,501</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Property and Equipment, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">591</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">668</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Goodwill and intangibles</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">15,948</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">15,955</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">Net Assets Sold</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left; border-bottom: Black 1pt solid">$</TD><TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 1pt solid">18,716</TD><TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left; border-bottom: Black 1pt solid">$</TD><TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 1pt solid">19,375</TD><TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Direct costs associated with the sale</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,173</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Currency translation adjustment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">234</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Other</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">5</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">$</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">20,128</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Consideration</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">24,343</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">Gain on sale, net of taxes</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left; border-bottom: Black 1pt solid">$</TD><TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 1pt solid">4,215</TD><TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 1%; text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="width: 5%; text-autospace: ideograph-numeric ideograph-other; font-weight: bold"><B>9.</B></TD>
    <TD STYLE="width: 94%; text-autospace: ideograph-numeric ideograph-other; font-weight: bold"><B>Goodwill and Intangible Assets</B></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;<B>Goodwill</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">A reconciliation of the changes to the Company's carrying amount
of goodwill for the years ended March 31, 2012 and 2011 was as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 70%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 87%">Balance at March 31, 2010</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">8,155</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Goodwill impairment</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,546</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Balance at March 31, 2011</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">6,609</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Goodwill impairment</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,969</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">Balance at March 31, 2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">$</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">3,640</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Fair value is defined under ASC 820, Fair Value Measurements
and Disclosures as, &ldquo;The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date&rdquo;. The Company considered the income and market approaches to derive an
opinion of value. Under the income approach, the Company utilized the discounted cash flow method, and under the market approach,
consideration was given to the guideline public company method, the merger and acquisition method, and the market capitalization
method.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As a result of the assessment, the Company determined that its
net book value exceeded the implied fair value; and recorded an impairment charge of $2,969 for the year ended March 31, 2012 and $1,546 for the year ended March 31, 2011 to write down goodwill. The impairment
charge is included &ldquo;Impairment of goodwill and intangible assets&rdquo; within operating expenses in the statements of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Intangible Assets</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">A reconciliation of the changes to the Company's carrying amount
of intangible assets for the years ended March 31, 2012 and 2011 was as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 75%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Amortizable</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Unamortizable</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Total</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Intangible&nbsp;Assets</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Intangible&nbsp;Assets</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Intangible&nbsp;Assets</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 61%">Balance at March 31, 2010</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">1,704</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">6,491</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">8,195</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Amortization</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(347</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(347</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">Impairment of intangibles</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(464</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(4,018</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(4,482</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Balance at March 31, 2011</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">893</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,473</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,366</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Amortization</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(230</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(230</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Impairment of intangibles</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(2,319</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(2,319</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">Balance at March 31, 2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">$</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">663</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">$</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">154</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">$</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid"> 817</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company performed its annual review of the fair value of
intangible assets in the fourth quarter of fiscal 2012. The Company considered the income and market approaches to derive an opinion
of value. As a result of the assessment, the Company determined that its net book value exceeded the implied fair value; and recorded
an impairment charge of $2,319 for the year ended March 31, 2012 and $4,018 for the year ended March 31, 2011 to write down intangible assets. The impairment charge is included &ldquo;Impairment of goodwill
and intangible assets&rdquo; within operating expenses in the statements of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The components of intangible assets as at March 31, 2011 and
2012 were as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 70%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="text-align: center; border-bottom: Black 1pt solid">As&nbsp;of&nbsp;March&nbsp;31,&nbsp;2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Accumulated</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Cost</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Amortization</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Net</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 61%">Software</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">1,611</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">(948</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">663</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Trade name / Trademark</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">154</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">154</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Customer list</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,220</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,220</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(0</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">License agreements</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">443</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(443</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(0</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,428</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,611</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">817</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 70%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="text-align: center; border-bottom: Black 1pt solid">As&nbsp;of&nbsp;March&nbsp;31,&nbsp;2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Accumulated</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Cost</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Amortization</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Net</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 61%">Software</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">1,611</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">(718</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">893</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Trade name / Trademark</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,473</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2,473</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Customer list</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,220</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,220</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(0</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">License agreements</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">443</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(443</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(0</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,747</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,381</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,366</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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 years ended March
31, 2012 and 2011, the Company recorded amortization expense for continuing operations&nbsp;in the amount of $230 and $295, respectively,
in cost of revenues; and amortization expense in the amount of $0 and $54 respectively, in operating expenses. During the years
ended March 31, 2012 and 2011 the Company recorded amortization expense for discontinued operations in the amount of $0 and $26,
respectively, in cost of revenues; and amortization expense in the amount of $0 and $40, respectively, in operating expenses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Based on the amortizable intangible assets as of March 31, 2012,
we estimate amortization expense for the next five years to be as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 70%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: left">Amortization</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">Year Ending March 31,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: left; border-bottom: Black 1pt solid">Expense</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: left">(in thousands)</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 80%; text-align: right">2013</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 15%; text-align: right">232</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2014</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">232</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">2015</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">199</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">663</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;Below is a summary impairment of Goodwill and Intangible
assets:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 60%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Intangible<BR>
Assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Goodwill</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 74%; padding-bottom: 1pt">Balance as of March 31, 2010</TD><TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 1pt solid; text-align: right">9,676</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 1pt solid; text-align: right">53,066</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">Impairment</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">4,482</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">1,546</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">Balance as of March 31, 2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">14,158</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">54,612</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">Impairment</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">2,319</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">2,969</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">Balance as of March 31, 2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">16,477</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">57,581</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 1%; text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="width: 5%; text-autospace: ideograph-numeric ideograph-other; font-weight: bold"><B>10.</B></TD>
    <TD STYLE="width: 94%; text-autospace: ideograph-numeric ideograph-other; font-weight: bold">Debt</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">March&nbsp;31,</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">March&nbsp;31,</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; font-style: italic">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; font-style: italic; text-align: left">Short Term Debt</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 74%; text-align: left">Note Payable</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">100</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Equipment Leases and accrued interest on debt</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">15</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Senior secured note, short term accrued interest</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">73</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">66</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Secured Note, short term accrued interest</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">92</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">75</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">273</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">March&nbsp;31,</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">March&nbsp;31,</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; font-style: italic; text-align: left">Long Term Debt</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 74%; text-align: left; padding-left: 9pt; text-indent: -9pt">Senior secured note, including PIK interest, net of discount, of $1,020 and $1,856, respectively</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">1,881</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">776</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt; text-indent: -9pt">Convertible note, including accrued interest, net of discount, of $1,132 and $0, respectively</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">60</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt; text-indent: -9pt">Secured note, including PIK interest</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">1,136</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">3,685</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">3,077</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">4,461</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Convertible Debt</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On December 29, 2011, the Company sold and issued $7,000 of
subordinated short term convertible notes (the &ldquo;New Convertible Note&rdquo;). The New Convertible Note is subordinated to
the New Senior Secured Notes. The New Convertible Note bears interest at a rate of 3% per annum payable at the time of conversion.
The term of the New Convertible Note is the earlier of (i) the date of the Company&rsquo;s next equity financing round or (ii)
the date that is one year following the date of the New Convertible Note. The New Convertible Note will automatically convert into
shares of the Company&rsquo;s common stock one year from the date of the New Convertible Note at a conversion price equal to (x)
if in connection with a next equity financing round, a 25% discount to the actual or implied stock price in such financing or (y)
if the Company does not complete the next equity financing round within one year of the date of the New Convertible Note, at 75%
of the average trading price of the Company&rsquo;s common stock for the 30-day period immediately prior to conversion. In no event
shall the conversion price be less than $0.50.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The purchaser of the New Convertible Note also received a warrant
(&ldquo;Convertible Note Warrant&rdquo;) to purchase shares of common stock of the Company. The number of shares which may be purchased
under the Convertible Note Warrant is equal to an amount calculated by multiplying 25% by the quotient obtained by dividing the
amount of the principal under the New Convertible Note outstanding immediately prior to conversion by the conversion price. The
conversion price is to be determined based on a qualified event or one year with an exercise price of no less than $0.50 per share.
The Convertible Note Warrant has a five year term and the issuer can require conversion of the Convertible Note Warrant if (i)
the common stock of issuer is traded on NASDAQ (or other national stock exchange); (ii) for at least (60) consecutive days at a
price equal to or greater than 150% of the Conversion Price, and (iii) the common stock has traded with an average daily volume
of at least 200,000 shares. The Convertible Note Warrant was initially recorded as a derivative liability upon issuance. As discussed in Note 12, the
Company received a waiver from the Senior Secured Convertible note holders on March 26, 2012 which allowed the Company to
reclassify the Convertible Note Warrant from a derivative liability to additional paid-in capital.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company determined that the New Convertible Note has an
embedded conversion feature that is required to be bifurcated and measured at fair value at each reporting. At the date of issuance,
the fair value of the embedded conversion feature and the Convertible Note Warrant of the New Convertible Note was $6,078 using
the Black-Scholes option pricing model with the following assumptions:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Expected life of 1 year</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Risk free interest rate of .12%</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Dividend yield of 0%</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Volatility of 175%</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5pt">The Company determined the fair value of the Convertible
Note Warrants to be $2,177, using the Black-Scholes option pricing model with the following assumptions:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Expected life of 5 years</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Risk free interest rate of .88%</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Dividend yield of 0%</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Volatility of 175%</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5pt">The combined total discount pertaining to the
conversion feature of the New Convertible Note and the Convertible Note Warrant was originally limited to the face value of
the New Convertible Note of $7,000 and is being amortized over the term of the New Convertible Note, with the $1,255 fair
value that exceeded the face value being charged to operations as interest expense.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On March 1, 2012, the Company amended the
New Convertible Note including the following amendments:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">The conversion price was amended to $0.70 for the entire principal and all accrued and unpaid interest.</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">The warrants to become exercisable as of March 1, 2012. Previously the warrants
                                                                                                               could only be exercised by the holder on or after the date on which the common stock had traded on NASDAQ (or any other
                                                                                                               nationally recognized securities exchange) at a price equal to or greater than the conversion price for a period of 60
                                                                                                               consecutive trading days with an average daily volume of at least 200,000 shares.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">The warrant exercise price was amended to $0.70.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On March 1, 2012, the entire amount of the New
Convertible Note of $7,000 including accrued interest of $37 was converted into 10,053 shares based on an agreed upon
conversion rate of $0.70. The Company assessed the debt modification for the New Convertible Note and determined that it met
the requirements for extinguishment accounting per FASB ASC 470 and accordingly, recorded a gain on extinguishment of debt of
$2,117 for the year ended March 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company had recorded a debt discount based on the fair value
of the Convertible Note Warrant and the embedded conversion feature. Due to the conversion of the New Convertible Note, the Company
expensed the $7,000 debt discount to interest expense.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>ValueAct Note</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As described in Note 8, in connection with the disposal of AMV
on June 21, 2010, all amounts due and payable under the AMV Note were released, and the ValueAct Note was amended and restated
in its entirety and reduced to $3,500 of principal (the &ldquo;Amended ValueAct Note&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On December 16, 2011, the ValueAct Note was purchased in its
entirety by Taja LLC (&ldquo;Taja) and was amended to remove certain negative covenants from the Note (the &ldquo;Amended Taja
Note&rdquo;). The Purchase of the ValueAct Note was independent of the Company, and the Company did not receive or pay out any
cash related to this transaction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On December 29, 2011, the Company and Taja entered into a
binding term sheet for convertible note financing (&ldquo;Taja Convertible Note&rdquo;) and effectively a third amendment to
the Second Amended Note (&ldquo;Third Amended Note&rdquo;). The Taja Convertible Note became effective on February 27, 2012.
The Third Amended Note (1) changed the maturity date from June 21, 2013 to June 21, 2015, (2) extended the payment in kind
(&ldquo;PIK&rdquo;) election to the note through the revised term, and (3) stripped out $3,000 of principal to create the
Taja Convertible Note, leaving a principal balance of $500 plus accrued interest of $562 for a total of $1,062. As
consideration for amending the note, Taja also received a warrant (&ldquo;Incentive Warrant&rdquo;) to purchase 2,000 shares
of common stock of the Company at an exercise price of $0.25 per share, subject to adjustment. Taja also received 25% warrant
coverage (&ldquo;Coverage Warrant&rdquo;) determined by dividing the principal amount of the Taja Convertible Note by the
conversion price multiplied by 25%. The Incentive Warrant and the Coverage Warrant have a five year term and vest one year
from issue date. The Coverage Warrant was initially recorded as a derivative liability upon issuance. As discussed in Note
12, the Company received a waiver from the Senior Secured Convertible note holders on March 26, 2012 which allowed the Company
to reclassify the Convertible Note Warrant from a derivative liability to additional paid-in capital. The Company assessed the
debt modification for the Third Amended Note and determined that it met the requirements for extinguishment accounting per FASB
ASC 470 and accordingly, recorded a loss on extinguishment of debt of $1,459 for the year ended March 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Page; Sequence: 112; Value: 1 -->
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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On March 1, 2012, the Company and Taja entered into a second
binding term sheet (&ldquo;Amended Taja Convertible Note&rdquo;) to amend certain provisions of the December 29, 2011 binding term
sheet (1) the maturity date was revised to March 1, 2014, (2) the conversion price was amended to $0.70 share, (3) conversion of
the note must not cause the holder to exceed 4.9% ownership, except that on the maturity date the entire remaining amount of principle
and interest shall automatically convert into shares of common stock of the Company (4) the Amended Taja Convertible Note becomes
accelerated and immediately due and payable upon the consummation by the Company of one or more equity sales from and after March
1, 2012 resulting in aggregate net proceeds of at least $10,000, (5) the conversion date is to occur the earlier of (x) the date
that the long-form documents are executed and delivered to all parties, and (y) March 19, 2012, (6) the 2,000 Incentive Warrants
issued as consideration for the Third Amended Note were amended to vest and be exercisable one year from March 1, 2012, (7) the
exercise date of the Coverage Warrants was amended to one year following the conversion date, and (8) the term sheet was binding
on the parties and their respective successors and assigns regardless of whether the parties execute long form agreements, as opposed
to the previous term sheet that contemplated going to long form agreements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company determined that the Amended Taja Convertible Note
has an embedded conversion feature that is required to be bifurcated and measured at fair value at each reporting. At the date
of issuance, the fair value of the embedded conversion feature was $2,250 using the Black-Scholes option pricing model with the
following assumptions:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Expected life of 1 years</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Risk free interest rate of .17%</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Dividend yield of 0%</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Volatility of 175%.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company determined the fair value of the Coverage Warrant
and the Incentive Warrant to be $750 and $1,459, respectively, using the Black-Scholes option pricing model with the following
assumptions:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Expected life of 5 years</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Risk free interest rate of .84%</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Dividend yield of 0%</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Volatility of 175%.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The combined total discount pertaining to the conversion factor
of the Taja Convertible Note and the Coverage warrant was originally limited to the face value of the Taja Convertible Note of
$3,000 and is being amortized over the term, with the $837 fair value of the embedded conversion feature that exceeded the face
value being charged to operations as interest expense. </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On March 19, 2012, the Company issued 2,600 shares of its common
stock to Taja for the conversion of $1,820 of the Amended Taja Convertible Note. The Company expensed to interest expense the
debt discount on a pro rata basis of the amount converted to the original debt amount to reflect the conversion of the $1,820.
During the year ended March 31, 2012, the Company recorded interest expense of $1,873 related to the amortization of the debt
discount. The remaining discount of $1,127 will be amortized over the period ending March 1, 2014. The Company assessed the conversion
of $1,820 and determined that it met the requirements for extinguishment accounting per FASB ASC 470 and accordingly, recorded
a gain on extinguishment of debt of $1,346 for the year ended March 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of March 31, 2012, the $1,180 outstanding principal balance
is convertible into approximately 1,686,000 shares of common stock at a conversion price of $0.70. At March 31, 2012, the if-converted
value exceeds the principal by approximately $405.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Senior Secured Convertible Notes</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On June 21, 2010, for purposes of capitalizing the Company,
the Company sold and issued $2,500 of Senior Secured Convertible Notes due June 21, 2013 of the Company (the &ldquo;New Senior
Secured Notes&rdquo;) to certain of the Company&rsquo;s significant stockholders.&nbsp;&nbsp;The New Senior Secured Notes have
a three year term and bear interest at a rate of 10% per annum payable in arrears semi-annually. The entire principal balance is
due in one lump sum payment on June 21, 2013. Notwithstanding the foregoing, at any time on or prior to the 18th month following
the original issue date of the New Senior Secured Notes, the Company may, at its option, in lieu of making any cash payment of
interest, elect that the amount of any interest due and payable on any interest payment date on or prior to the 18th month following
the original issue date of the New Senior Secured Notes be added to the principal due under the New Senior Secured Notes. The accrued
and unpaid principal and interest due on the New Senior Secured Notes are convertible at any time at the election of the holder
into shares of common stock of the Company at a conversion price of $0.15 per share, subject to adjustment. The New Senior Secured
Notes are secured by a first lien on substantially all of the assets of the Company and its subsidiaries pursuant to the terms
of that certain Guarantee and Security Agreement, dated as of June 21, 2010, among Twistbox, the Company, each of the subsidiaries
thereof party thereto, the investors party thereto and Trinad Management. The Amended ValueAct Note is subordinated to the New
Senior Secured Notes pursuant to the terms of that certain Subordination Agreement, dated as of June 21, 2010, by and between Trinad
Capital Master Fund, and ValueAct, and each of the Company and Twistbox.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Each purchaser of a New Senior Secured Note also received a
warrant (&ldquo;Warrant&rdquo;) to purchase shares of common stock of the Company at an exercise price of $0.25 per share, subject
to adjustment.&nbsp;&nbsp;For each $1 of New Senior Secured Notes purchased, the purchaser received a Warrant to purchase 3.33
shares of common stock of the Company.&nbsp;&nbsp;Each Warrant has a five year term.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Warrants granted to the New Senior Secured Note holders
on June 21, 2010 and conversion feature in the New Senior Secured Notes are not considered derivative instruments since the Warrants
and the New Senior Secured Notes have a set conversion price and all of the requirements for equity classification were met. The
Company determined the fair value of the detachable warrants issued in connection with the New Senior Secured Notes to be $1,678,
using the Black-Scholes option pricing model and the following assumptions:&nbsp;&nbsp;expected life of&nbsp;5 years, a risk free
interest rate of&nbsp;2.05%, a dividend yield of 0% and volatility of&nbsp;54.62%. In addition, the Company determined the value
of the beneficial conversion feature to be $5,833. The combined total discount for the New Senior Secured Notes&nbsp;is&nbsp;limited
to the face value of the New Senior Secured Notes&nbsp;of $2,500 and is being amortized over the term of the New Senior Secured
Notes. For the year ended March 31, 2012, the Company amortized $835 of the aforesaid discounts as interest and financing costs
in the accompanying consolidated statements of operations. The remaining discount of $1,020 will be amortized over the period ending
June 21, 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of March 31, 2012, the $2,974 outstanding principal and accrued
interest is convertible into approximately 19,827 shares of common stock at a conversion price of $0.15. At March 31, 2012, the
if-converted value exceeds the principal and accrued interest by approximately $15,663.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 12px; text-autospace: ideograph-numeric ideograph-other; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 36px; text-autospace: ideograph-numeric ideograph-other; font-size: 10pt; font-weight: bold"><B>11.</B></TD>
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other; font-size: 10pt; font-weight: bold"><B>Related Party Transactions</B></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company engages in various business relationships with shareholders
and officers and their related entities. The significant relationships are disclosed below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On September 14, 2006, the Company entered into a five year
management agreement (&ldquo;Agreement&rdquo;) with Trinad Management, the manager of Trinad Capital Master Fund, which is one
of our principal stockholders. In addition, Robert Ellin, our director, is the managing director of and portfolio manager for Trinad
Management. Pursuant to the terms of the Agreement, Trinad Management provides certain management services, including, without
limitation, relating to 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 related expenses reasonably incurred. The Agreement
expired on September 14, 2011, but was extended to December 31, 2011. During the years ended March 31, 2012 and 2011, the Company
incurred management fees under the agreement of $270 and $360, respectively. At March 31, 2012 and March 31, 2011, the accrued
payable to Trinad Management was $135 and $180, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 12px; text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="width: 36px; text-autospace: ideograph-numeric ideograph-other; font-weight: bold"><B>12.</B></TD>
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other; font-weight: bold"><B>Capital Stock Transactions</B></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Preferred Stock</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">There are 100 shares of Series A Convertible Preferred Stock
(&ldquo;Series A&rdquo;) authorized, issued and outstanding. The Series A has a par value of $0.0001 per share. The Series A holders
are entitled to: (1) vote on an equal per share basis as common stock, (2) dividends paid to the common stock holders on an as
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 to the common stock holders on an as if-converted basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I></I></B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Common Stock and Warrants</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In addition, in connection with the New Senior Secured Notes
described in Note 10, on June 21, 2010, each purchaser of a New Senior Secured Note also received a warrant (&ldquo;Warrant&rdquo;)
to purchase shares of common stock of the Company at an exercise price of $0.25 per share, subject to adjustment. For each $1 of
New Senior Secured Notes purchased, the purchaser received a Warrant to purchase 3.33 shares of common stock of the Company. Each
Warrant has a five year term. The warrants were valued at $1,678 using the Black Scholes pricing model (see Note 10) and were originally
recorded as equity.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In February 2011, a former officer of the Company, agreed to
cancel 300,000 shares underlying an option to purchase 350,000 shares of common stock of the Company, and the Company granted
an option to purchase 300,000 shares of the Company&rsquo;s common stock at an exercise price of $0.25 per share. The Company
determined the incremental fair value of the options issued to be $37, using the Black-Scholes option pricing model and the following
assumptions: expected life of 6.98 years, a risk free interest rate of 2.99%, a dividend yield of 0% and volatility of 75%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In February 2011, an officer of the Company, agreed to cancel 400,000
shares underlying an option to purchase 450,000 shares of common stock of the Company, and the Company granted an option to purchase
400,000 shares of the Company&rsquo;s common stock at an exercise price of $0.25 per share. The Company determined the incremental
fair value of the options issued to be $50, using the Black-Scholes option pricing model and the following assumptions: expected
life of 6.98 years, a risk free interest rate of 2.99%, a dividend yield of 0% and volatility of 75%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="color: black">In September 2010, the Company entered
into a consulting agreement, pursuant to which, the Company issued warrants to purchase 150,000 shares of the Company&rsquo;s
common stock at an exercise price of $0.39 per share. The Company determined the fair value of the warrants issued to be $26,
using the Black-Scholes option pricing model and the following assumptions: expected life of 3.00 years, a risk free interest
rate of 0.70%, a dividend yield of 0% and volatility of 75%. In February 2011, an officer of the Company, agreed to cancel an
option to purchase 500,000 shares of common stock of the Company, and the Company granted an option to purchase 500,000 shares
of the Company&rsquo;s common stock at an exercise price of $0.25 per share. The Company determined the incremental fair value
of the options issued to be $26, using the Black-Scholes option pricing model and the following assumptions: expected life of
3.00 years, a risk free interest rate of 1.02%, a dividend yield of 0% and volatility of 75%.</FONT>&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On April 1, 2011, 347,244 shares of common stock of the Company
were issued to two former employees of the Company, as compensation, at the closing market price on that date of $0.58 cents per
share, resulting in a total value of $201. In addition, the employees each agreed to cancel options to purchase 173,622 shares
of common stock in connection with their respective termination agreements which were valued at $132. The Company determined the
fair value of the cancelled options using the Black-Scholes option pricing model and the following assumptions: expected life of
5.11 years, a risk free interest rate of 1.76%, a dividend yield of 0% and volatility of 75%. The net value of the termination
was $69.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On April 6, 2011, the Company entered into a consulting agreement.
On January 3, 2012 the Company issued 150,000 shares of common stock of the Company to the consultant. The shares vest over a one
year period. The shares were valued at the closing market price on that date of $0.58 cents per share. The overall value was determined
to be $87, of which $87 was recorded through the period ended March 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On April 6, 2011, the Company issued warrants to purchase 75,000
shares of the Company&rsquo;s common stock to a vendor, as compensation for services rendered, at $0.25 cents per share. The Company
determined the fair value of the warrants issued to be a $34, using the Black-Scholes option pricing model and the following assumptions:&nbsp;&nbsp;expected
life of&nbsp;3.00 years, a risk free interest rate of&nbsp;.81%, a dividend yield of 0% and volatility of&nbsp;75%. The warrants
vest over a six month period and $34 of expense has been recorded through the period ended March 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In May 2011, 150,000 shares of common stock of the Company were
issued to a vendor as a settlement, at the closing market price on that date of $0.40 cents per share, resulting in a total value
of $60.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In June 2011, the Company entered into a consulting agreement,
pursuant to which, the Company issued warrants to purchase 150,000 shares of the Company&rsquo;s common stock at an exercise price
of $0.47 cents per share. At June 30, 2011, the Company determined the fair value of the warrants issued to be $53, using the Black-Scholes
option pricing model and the following assumptions:&nbsp;&nbsp;expected life of&nbsp;3.00 years, a risk free interest rate of&nbsp;0.81%,
a dividend yield of 0% and volatility of&nbsp;75%. The warrants vest over a one year period and $53 of expense has been recorded
through the period ended March 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In June 2011, the Company entered into a consulting agreement,
pursuant to which, the Company issued warrants to purchase 150,000 shares of the Company&rsquo;s common stock at an exercise price
of $0.47 cents per share. At June 30, 2011, the Company determined the fair value of the warrants issued to be $92, using the Black-Scholes
option pricing model and the following assumptions:&nbsp;&nbsp;expected life of&nbsp;3.00 years, a risk free interest rate of&nbsp;0.83%,
a dividend yield of 0% and volatility of&nbsp;75%. The warrants vest over a one year period and $48 of expense has been recorded
in the period ended March 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On December 29, 2011, the Company issued a convertible promissory
note for $7,000, pursuant to which the Company issued warrants to purchase 3,500,000 shares based on 25% coverage and a conversion
rate of $0.50. The exercise price was $0.50 at the date of issuance with a five year life. At December 29, 2011, the Company determined
the fair value of the warrants to be $2,177 using the Black-Scholes option pricing model and the following assumptions:&nbsp;&nbsp;expected
life of&nbsp;5 years, a risk free interest rate of&nbsp;0.88%, a dividend yield of 0% and volatility of&nbsp;175%. The fair value
of the warrants was recorded as a debt discount. On March 1, 2012 the note was amended, changing the conversion price to $0.70
cents per share, and the Company issued 10,053,333 shares of common stock of the Company in full payment of principle and interest
of the New Convertible Note at the new conversion price, and recognized the full expense of the warrants and debt discount in interest
expense as of March 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In December 2011, the Company issued 50,000 shares of
common stock of the Company to Digital Turbine Group LLC for the purchase of its assets. The shares were valued at the
closing market price on that date of $0.65 cents per share. The overall value was determined to be $31, and was recorded as
production expense as of December 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In December 2011, the Company issued 50,000 shares of common
stock of the Company to a consultant. The shares are partially vested, but are restricted for a one year period. The vesting of
the shares is both performance and market based, and as such, the Company performed a valuation under ASC 718 and determined overall
value to be $39, and $11 was recorded as an expense through March 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In December 2011, the Company issued 100,000 shares of common
stock of the Company to a consultant. The shares are partially vested, but are restricted for a one year period. The vesting of
the shares is both performance and market based, and as such, the Company performed a valuation under ASC 718 and determined the
overall value to be $77, and $22 was recorded as an expense through March 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In December 2011, the Company issued 100,000 shares of common
stock of the Company to a consultant. The shares are partially vested, but are restricted for a one year period. The vesting of
the shares is both performance and market based, and as such, the Company performed a valuation under ASC 718 and determined the
overall value to be $77, and $22 was recorded as an expense through March 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In December 2011, the Company issued 1,787,500 shares of common
stock of the Company to a consultant. The shares are partially vested, but are restricted for a one year period. The vesting of
the shares is both performance and market based, and as such, the Company performed a valuation under ASC 718 and determined the
overall value to be $1,379, and $400 was recorded as an expense through March 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In December 2011, the Company issued 50,000 shares of common
stock of the Company to a consultant. The shares are partially vested, but are restricted for a one year period. The vesting of
the shares is both performance and market based, and as such, the Company performed a valuation under ASC 718 and determined the
overall value to be $39, and $11 was recorded as an expense through March 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In December 2011, the Company issued 100,000 shares of common
stock of the Company to a consultant. The shares are partially vested, but are restricted for a one year period. The vesting of
the shares is both performance and market based, and as such, the Company performed a valuation under ASC 718 and determined the
overall value to be $77, and $22 was recorded as an expense through March 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In December 2011, the Company issued 9,037,500 shares of common
stock of the Company to a consultant. The shares are partially vested, but are restricted for a one year period. The vesting of
the shares is both performance and market based, and as such, the Company performed a valuation under ASC 718 and determined the
overall value to be $6,974, and $2,025 was recorded as an expense through March 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In December 2011, the Company issued 200,000 shares of common
stock of the Company to a consultant. The shares are partially vested, but are restricted for a one year period. The vesting of
the shares is both performance and market based, and as such, the Company performed a valuation under ASC 718 and determined the
overall value to be $154, and $44 was recorded as an expense through March 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In December 2011, the Company issued 500,000 shares of common
stock of the Company to a consultant. The shares are partially vested, but are restricted for a one year period. The vesting of
the shares is both performance and market based, and as such, the Company performed a valuation under ASC 718 and determined the
overall value to be $386, and $112 was recorded as an expense through March 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In December 2011, the Company issued 25,000 shares of common
stock of the Company to a consultant. The shares are partially vested, but are restricted for a one year period. The vesting of
the shares is both performance and market based, and as such, the Company performed a valuation under ASC 718 and determined the
overall value to be $19, and $6 was recorded as an expense through March 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In December 2011, the Company issued 500,000 shares of common
stock of the Company to a consultant. The shares are partially vested, but are restricted for a one year period. The vesting of
the shares is both performance and market based, and as such, the Company performed a valuation under ASC 718 and determined the
overall value to be $386, and $112 was recorded as an expense through March 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In December 2011, the Company issued 1,000,000 shares of common
stock of the Company to a director. The shares vest over a period of one year. The shares were valued at the closing market price
on that date of $0.62 cents per share. The overall value was determined to be $620, and $207 of expense was recorded through the
period ended March 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In December 2011, the Company issued 1,000,000 shares of common
stock of the Company to a director. The shares vest over a period of one year. The shares were valued at the closing market price
on that date of $0.62 cents per share. The overall value was determined to be $620, and $207 of expense was recorded through the
period ended March 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In December 2011, the Company issued 1,000,000 shares of common
stock of the Company to a director. The shares vest over a period of one year. The shares were valued at the closing market price
on that date of $0.61 cents per share. The overall value was determined to be $610, and $158 of expense was recorded through the
period ended March 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In December 2011, the Company issued 3,400,000 shares of common
stock of the Company to a director. The shares are partially vested, but are restricted for a one year period. The vesting of the
shares is both performance and market based, and as such, the Company performed a valuation under ASC 718 and determined the overall
value to be $2,624, and $1,454 of expense was recorded through the period ended March 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In December 2011, the Company issued 3,600,000 shares of common
stock of the Company to a director. The shares are vested, but are restricted for a one year period. The shares were valued at
the closing market price on that date of $0.61 cents per share. The overall value was determined to be $2,196, and $2,196 of expense
was recorded in the period ended December 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In January 2012, the Company entered into a consulting agreement,
pursuant to which, the Company issued 150,000 shares of common stock of the Company. The shares are vested and were valued at the
closing market price on that date of $0.65 cents per share. The overall value was determined to be $98, and $98 of expense was
recorded in the period ended January 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In January 2012, the Company entered into a consulting agreement,
pursuant to which, the Company issued 150,000 shares of common stock of the Company. The shares vest over one year and were valued
at the closing market price on that date of $0.65 cents per share. The overall value was determined to be $98, and $59 of expense
was recorded through the period ended March 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In January 2012, the Company issued 1,375,000 shares of common
stock of the Company to three employees. 875,000 of the shares are vested, but are restricted for a two year period. The shares
were valued at the closing market price on that date of $0.65 cents per share. The overall value was determined to be $894, and
$569 of expense was recorded through the period ended March 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In March 2012, the Company issued 50,000 shares of common stock
of the Company to a vendor. The shares are vested, but restricted for a one year period. The shares were valued at the closing
market price on that date of $0.85 cents per share. The overall value was determined to be $42, of which $42 was recorded in the
period ended March 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In March 2012, the Company issued 150,000 shares of common stock
of the Company to a vendor. The shares vest over one year and were valued at the closing market price on that date of $0.90 cents
per share. The overall value was determined to be $135, of which $2 was recorded through the period ended March 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In March 2012, the Company sold 3,857,143 shares of common stock
of the Company to investors for $0.70 cents per share. In connection with this sale of common stock, the Company issued warrants
to purchase 964,286 shares of common stock of the Company at an exercise price of $0.70 cents per share with a term of 5 years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In March 2012, the Company issued warrants to purchase 2,000,000
shares of common stock of the Company at an exercise price of $0.70 cents per share with a term of 5 years. The warrants were issued
as consideration related to the modification of an existing note to convertible debt and treated as debt modification expense of
$1,459 as of March 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In March 2012, the Company issued 1,071,429 warrants to purchase
shares of common stock of the Company at an exercise price of $0.70 cents per share. The Company recorded expense of $610 through
the period ended March 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>Derivative liabilities</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of March 31, 2012, the Company determined that certain warrants
were considered derivatives because they did not meet the scope exception in ASC 815-10-15-74. The fair value of these warrants
was $452 and $223 at March 31, 2012 and 2011, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On December 29, 2011, the Company issued a $7,000 New Convertible
Note with conversion rate at 75% of the average trading price of the Company&rsquo;s common stock for the 30-day period immediately
prior to conversion with a floor of $0.50. Pursuant to the agreement, the Company issued a Coverage Warrant equal to multiplying
25% by the quotient obtained by dividing the amount of the principal under the convertible note outstanding immediately prior to
conversion by the conversion price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Previously issued warrants and embedded conversion features
had met the scope exception in ASC 815-10-15-74; however, due to the increased number of potential common shares that would need
to be issued upon conversion of the note, the Company did not have sufficient authorized and unissued shares as required by</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">ASC 815-40-25-10 (b) causing all outstanding derivatives and
embedded conversion features to not meet the scope exception in ASC 815-10-15-74. As a result, the Company was required to separately
account for the outstanding warrants and embedded conversion options as derivative liabilities, carried at fair value and marked-to-market
each reporting period, with changes in the fair value each period being charged or credited to operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5pt">On December 29, 2011, the Company valued all previously
outstanding warrants and embedded conversion features using the Black-Scholes model and reclassified $17,549 from additional paid-in
capital to derivative liabilities. The Company also recorded a derivative liability of $8,255 representing the fair value of the
embedded conversion option and the Coverage Warrant issued with the New Convertible Note. The Company determined the fair value
using the Black-Scholes option pricing model with the following assumptions:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Previously&nbsp;Outstanding&nbsp;Instruments</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">New&nbsp;Convertible&nbsp;Note</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Embedded</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Embedded</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Conversion</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Conversion</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Coverage</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Warrants</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Options</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Option</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Warrant</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 36%; text-align: left">Estimated Life (years)</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">1.82 &ndash; 4.5</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">1.48</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">1</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">5</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Risk Free Interest Rate</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">.28 - .88</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.12</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.12</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.88</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Dividend Yield</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Volatility</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">175</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">175</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">175</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">175</TD><TD STYLE="text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On March 26, 2012, the Senior Secured Convertible Note holders
issued a waiver to the Company stating that they would not convert their notes until the Company has notified them in writing that
the Company has increased its authorized capital sufficiently so that the conversion, exchange or exercise of all convertible securities
can be effectuated without the Company exceeding its authorized capital.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">With the issuance of the waiver, the Company determined that
the outstanding warrants and embedded conversion options met the scope exception of ASC 815-10-15-74 as it had sufficient authorized
and unissued shares as required by ASC 815-40-25-10 (b). Therefore, the Company valued all outstanding warrants and embedded conversion
options on March 26, 2011 and reclassified $28,733 from derivative liability to additional paid-in capital. The Company determined
the fair value using the Black-Scholes option pricing model with the following assumptions:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 60%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Embedded</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Conversion</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Warrants</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Options</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 56%; text-align: left">Estimated Life (years)</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 18%; text-align: right">1.60 - 4.93</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 18%; text-align: right">1.24</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Risk Free Interest Rate</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.36% - 1.04</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.12</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Dividend Yield</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Volatility</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">175</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">175</TD><TD STYLE="text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Restricted Stock Agreements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During the year ended March 31, 2012, the Company entered into
restrictive stock agreements (&ldquo;RSAs&rdquo;) with certain employees and consultants. The RSAs have performance conditions,
market conditions, time conditions or a combination. Once the stock vests, the individual is restricted from selling the shares
of stock for a certain defined period from three months to two years depending on the RSA. Certain RSA are granted voting rights
while other RSAs are not granted voting rights.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Performance and Market Condition RSAs</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On December 28, 2011, the Company issued 15,850 restricted shares
with vesting criteria based on both performance and market conditions. The vesting is as follows: (i) one third (1/3) shall vest
immediately upon the completion of one or more debt or equity financings during the period ending two (2) years from the date hereof
(the &ldquo;Measurement Period&rdquo;) in favor of the Company of gross proceeds of at least $5 million; (ii) one third (1/3) shall
vest immediately if on any date during the Measurement Period the Company&rsquo;s total enterprise value (computed by multiplying
the number of outstanding shares of Common Stock on a fully diluted (taking into account only those stock options that are in-the-money
on such date), as-converted basis by the average daily trading price for Common Stock for the thirty (30) trading day period immediately
preceding the date of determination) equals or exceeds $100 million; and (iii) one third (1/3) shall vest immediately if on any
date during the Measurement Period the Company&rsquo;s total enterprise value (calculated as set forth in clause (ii) above) equals
or exceeds $200 million; provided, however, that all unvested shares of restricted common stock shall vest immediately upon the
sale of all or substantially all of the assets of the Company, upon the merger or reorganization of the Company following which
the equity holders of the Company immediately prior to the consummation of such merger or reorganization collectively own less
than 50% of the voting power of the resulting entity, or upon the sale of equity securities of the Company representing 50% or
more of the voting power of the Company or 50% or more of the economic interest in the Company in a single transaction or in a
series of related transactions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Each share is restricted from the individual selling the stock
for a period of one year from the date of vesting.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Of the 15,850 restricted shares, the 5,283 vested shares and
8,292 unvested shares were granted voting rights and have been included in the outstanding shares as of March 31, 2012. The remaining
unvested shares do not have voting rights and have been excluded from the outstanding shares as of March 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On December 28, 2011, one third of the restricted shares vested
due to the $7,000 financing agreement entered into by the Company. The Company valued the 5,283 vested RSAs at $3,223 using the
Company&rsquo;s ending share price at December 28, 2011 of $0.61.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For accounting purposes, the one third unvested shares related
to the $100,000 enterprise value and the one third unvested shares related to the $200,000 enterprise value are considered to have
a market condition. The effect of the market condition is reflected in the grant date fair value of the award and, thus compensation
expense is recognized on this type of award provided that the requisite service is rendered (regardless of whether the market condition
is achieved). The Company estimated the grant date fair value to be $0.279 per share and $0.206 per share for the $100,000 enterprise
value and $200,000 enterprise value, respectively, using a Monte Carlo simulation that uses the following assumptions:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Volatility &ndash; 100%</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Restricted stock discount &ndash; 36.1%</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Risk free interest rate of 0.1%</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Dividend yield of 0%</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company expensed $3,552 related to the 15,850 RSAs issued
on December 28, 2011 and will expense the remaining $2,233 over the period ended December 28, 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Time and Performance Condition RSAs</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On January 3, 2012, the Company issued 2,375 restricted shares
with vesting criteria based on both time and performance conditions. At January 3, 2012, 1,025 restricted shares vested immediately
and the remaining 1,375 unvested shares must meet certain performance criteria which has either not been defined by the Board of
Directors or the Company has determined that the probability of meeting the performance criteria is 0%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Each share is restricted from the individual selling the stock
for a period from one year up to two years from the date of vesting.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Of the 2,375 restricted shares, the 1,025 vested shares are
determined to have voting rights and have been included in the outstanding shares as of March 31, 2012. The remaining 1,350 unvested
shares do not have voting rights and have been excluded from the outstanding shares as of March 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="color: black">For accounting purposes, the Company
determined the grant date fair value to be $0.65 per share which is the closing price of the Company&rsquo;s stock price on January
3, 2012. </FONT>The Company expensed $662, related to the 2,375 RSAs issued on January 3, 2012. No further expense will be taken
until the Board of Directors details the performance criteria.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Time Condition RSAs</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On various dates during the year ended March 31, 2012, the Company
issued 7,100 restricted shares with vesting criteria based on time conditions. As of March 31, 2012, 3,650 restricted shares were
vested with each share being restricted from the individual selling the stock for a period from three months up to two years from
the date of vesting.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Of the 7,100 restricted shares, the 3,650 vested shares are
determined to have voting rights and have been included in the outstanding shares as of March 31, 2012. The remaining 3,450 unvested
shares do not have voting rights and have been excluded from the outstanding shares as of March 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="color: black">For accounting purposes, the Company
determined the weighted average grant date fair value to be $0.62 per share based on the closing price of the Company&rsquo;s stock
price on the various issue dates. </FONT>The Company expensed $2,957 related to the 7,100 RSAs and will expense the remaining $2,142
grant date fair value over the year ended March 31, 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table summarizes the RSA activity:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">Weighted</TD><TD STYLE="font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">(in thousands, except grant date fair value)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">Average</TD><TD STYLE="font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">Number of</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">Grant Date</TD><TD STYLE="font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">Shares</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">Fair Value</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt">Unvested at March 31, 2010</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 70%; font-size: 10pt">Granted</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">300</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">0.250</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt">Canceled</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt">Vested</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">300</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">Unvested at March 31, 2011</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">0.25</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">Granted</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">25,325</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0.463</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt">Canceled</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt">Vested</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(9,958</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">0.618</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">Unvested at March 31, 2012</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">15,667</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">0.36</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 12px; text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="width: 36px; text-autospace: ideograph-numeric ideograph-other; font-weight: bold"><B>13.</B></TD>
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other; font-weight: bold"><B>Employee Benefit Plans</B></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company has an employee 401(k) savings plan covering full-time
eligible employees.&nbsp;&nbsp;These employees may contribute eligible compensation up to the annual IRS limit. The Company does
not make matching contributions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Mandalay Digital Group, Inc. and Subsidiaries</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(formerly known as NeuMedia, Inc.)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 12px; text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="width: 36px; text-autospace: ideograph-numeric ideograph-other; font-weight: bold"><B>14.</B></TD>
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other; font-weight: bold"><B>Income Taxes</B></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The difference between taxes at actual rates and the federal
statutory rate was as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 65%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.5in">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">Year Ended</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">Year Ended</TD><TD STYLE="font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">March 31</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">March 31</TD><TD STYLE="font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">2012</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">2011</TD><TD STYLE="font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 62%; font-size: 10pt; text-align: left">Statutory Federal Income Taxes</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 15%; font-size: 10pt; text-align: right">(10,086</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">)</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 15%; font-size: 10pt; text-align: right">(2,528</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">State income taxes, net of federal benefit</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(1,447</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(440</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Write down of goodwill and other perm diff</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,790</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">535</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Foreign Expense</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">88</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(809</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Increase in Valuation Allowance</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">9,765</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">2,680</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">Income tax provision (benefit)</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">110</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">(562</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Less discontinued Operations</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"></TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">809</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">Income tax provision (benefit) for Continuing Ops</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">110</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">247</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Deferred tax assets and liabilities consist of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 65%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.5in">
<TR>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">Year Ended</FONT></TD><TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">Year Ended</FONT></TD><TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">March 31,</FONT></TD><TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">March 31,</FONT></TD><TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">2012</FONT></TD><TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">2011</FONT></TD><TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 62%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">Net Operating Loss Carryforward</FONT></TD><TD STYLE="width: 1%; font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="width: 15%; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">24,188</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="width: 1%; font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="width: 15%; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">22,891</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">Amortization of Intangible Asset</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">(1,404</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">)</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">(1,404</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">Stock-based compensation</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">11,735</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">3,358</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">Credit Carryforwards</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">(248</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">)</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">Other</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">54</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">(15</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">Deferred Tax</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">34,326</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">24,830</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">Valuation Allowance</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">(34,326</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">)</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">(24,830</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt"><FONT STYLE="font-size: 10pt">Net Deferred Tax Asset</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In accordance with ASC 740 and based on all available evidence
on a jurisdictional basis, the Company believes that, it is more likely than not that its deferred tax assets will not be utilized,
and has recorded a full valuation allowance against its net deferred tax assets in each jurisdiction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of March 31, 2012, the Company had net operating loss (NOL)
carry-forwards to reduce future Federal income taxes of approximately $60,355, expiring in various years ranging through 2031.
Utilization of the NOLs may be subject to a substantial annual limitation due to ownership change limitations that may have occurred
or that could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended (the &quot;Code&quot;),
as well as similar state limitations.&nbsp;&nbsp;These ownership changes may limit the amount of NOLs that can be utilized annually
to offset future taxable income and tax, respectively.&nbsp;&nbsp;In general, an &quot;ownership change&quot; as defined by Section
382 of the Code, results from a transaction of series of transactions over a three-year period resulting in an ownership change
of more than 50 percentage points of the outstanding stock by a company by certain stockholders or public groups.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of March 31, 2012, realization of the Company's net deferred
tax asset of approximately $34,326 was not considered more likely than not and, accordingly, a valuation allowance of $34,326 has
been provided. During the year ended March 31, 2012, the valuation allowance increased by $9,496.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">ASC 740 requires the consideration of a valuation allowance
to reflect the likelihood of realization of deferred tax assets.&nbsp;&nbsp;Significant management judgment is required in determining
any valuation allowance recorded against deferred tax assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company adopted the provisions of ASC 740 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 ASC 740 and those after the adoption of ASC 740. There were no unrecognized tax benefits not subject to valuation allowance
as at March 31, 2012 and March 31, 2011. The Company recognized no interest and penalties on income taxes in its statement of operations
for the year ended March 31, 2012; or the year ended March 31, 2011.&nbsp;&nbsp;Management has evaluated and concluded that there
are no significant uncertain tax positions requiring recognition in the Company&rsquo;s financial statements as of March 31, 2012.
The Company&rsquo;s Federal and State income tax returns remain subject to examination for all tax years ended 2008 and 2007, respectively.
The Company is currently under audit examination by the IRS of the tax year December 31, 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 12px; text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="width: 36px; text-autospace: ideograph-numeric ideograph-other; font-weight: bold"><B>15.</B></TD>
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other; font-weight: bold"><B>Segment and Geographic information</B></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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&rsquo;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, 2012:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 88%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">North</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Other</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">America</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Europe</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Regions</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Consolidated</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Twelve Months ended March 31, 2012</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 44%; text-align: left; padding-left: 9pt">Net sales to unaffiliated customers</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">215</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">4,977</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">2,038</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">7,230</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Property and equipment, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 9pt">at March 31, 2012</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">177</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">52</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">230</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 88%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">North</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Other</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">America</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Europe</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Regions</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Consolidated</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Twelve Months ended March 31, 2011</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 44%; text-align: left; padding-left: 9pt">Net sales to unaffiliated customers</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">688</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">6,819</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">1,679</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">9,186</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Property and equipment, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 9pt">at March 31, 2011</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">322</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">65</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">388</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our largest customer accounted for 41% of gross revenues in
the year ended March 31, 2012; and 49%&nbsp;in the year ended March 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 12px; text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="width: 36px; text-autospace: ideograph-numeric ideograph-other; font-weight: bold"><B>16.</B></TD>
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other; font-weight: bold"><B>Commitments and Contingencies</B></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Operating Lease Obligations</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company leases office facilities and equipment under noncancelable
operating leases expiring in various years through 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Following is a summary of future minimum payments under initial
terms of leases as of:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 88%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Year Ending March 31,</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 84%; text-align: left; padding-left: 0.5in">2013</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">32</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.5in">2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Total minimum lease payments</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">37</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">These amounts do not reflect future escalations for real estate
taxes and building operating expenses.&nbsp;&nbsp;Rental expense for continuing operations amounted to $170 and $291, respectively,
for the years ended March 31, 2012 and&nbsp;2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Other Obligations</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of March 31, 2012, the Company was obligated for payments
under various distribution agreements, equipment lease agreements, employment contracts and consulting agreements with initial
terms greater than one year at March 31, 2012.&nbsp;&nbsp;Annual payments relating to these commitments at March 31, 2012 are as
follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 88%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Year Ending March 31,</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 84%; text-align: left; padding-bottom: 1pt; padding-left: 0.5in">2013</TD><TD STYLE="width: 2%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="width: 12%; border-bottom: Black 1pt solid; text-align: right">1,108</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Total minimum payments</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,108</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On December 28, 2011, the Company entered into an employment
agreement with Peter Adderton to serve as the Company&rsquo;s Chief Executive Officer and as a member of the Company&rsquo;s Board
of Directors.&nbsp; The term of the agreement is one year.&nbsp; Pursuant to the agreement, the Company agreed to the following:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Annual Fees: For all services rendered by the Chief Executive Officer under this agreement, the Company shall pay the Executive
an aggregate fee of four hundred fifty thousand dollars ($450,000) per annum.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Special Incentive Bonus:&nbsp; Mr. Adderton&nbsp; is to receive a bonus of $250,000 payable (A) 50% upon completion of a $5
million financing(s) during the two years following the date of the employment agreement (&ldquo;Measurement Period&rdquo;)&nbsp;
and (B) the remaining $125,000 upon the successful completion of additional debt or equity financing(s) during the Measurement
Period, which, when aggregated with any prior financings during the Measurement Period, result in the Company realizing at least
$10 million of gross proceeds.</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Annual Bonus:&nbsp; Mr. Adderton shall be entitled to be paid an annual incentive bonus in cash in an amount of up to 100%
of his salary based upon satisfaction of performance-related milestones. The performance-related milestones shall be mutually determined
by the Board of Directors and Mr. Adderton within sixty (60) days of the effective Date of the employment agreement.</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Restricted Stock Grant: The Company granted Mr. Adderton 9,037,500 shares of the Company&rsquo;s restricted common stock, subject
to the certain terms and conditions specified in the restricted stock agreement, which shall vest as follows: (i) one third (1/3)
shall vest immediately upon the completion of one or more debt or equity financings during the Measurement Period in favor of the
Company&nbsp; of gross proceeds of at least $5 million; (ii) one third (1/3) shall vest immediately if on any date during the Measurement
Period the Company&rsquo;s total enterprise value (computed by multiplying the number of outstanding shares of the Employer&rsquo;s
common stock on a fully diluted (taking into account only those stock options that are in-the-money on such date), as-converted
basis by the average daily trading price for the Company&rsquo;s common stock for the thirty (30) trading day period immediately
preceding the date of determination) equals or exceeds $100 million; and (iii) one third (1/3) shall vest immediately if on any
date during the Measurement Period the Company&rsquo;s total enterprise value (calculated as set forth in clause (ii) above) equals
or exceeds $200 million; provided , however , that all unvested shares of restricted common stock shall vest immediately upon the
sale of all or substantially all of the assets of the Company, upon the merger or reorganization of the Company following which
the equity holders of the Company immediately prior to the consummation of such merger or reorganization collectively own less
than 50% of the voting power of the resulting entity, or upon the sale of equity securities of the Company representing 50% or
more of the voting power of the Company or 50% or more of the economic interest in the Company in a single transaction or in a
series of related transactions (i.e., a &ldquo;Change of Control&rdquo;). All shares shall be subject to a one (1) year lock-up
following the vesting of such shares.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Additional Performance Bonuses:&nbsp; Mr. Adderton shall be entitled to payment of (i) a performance bonus equal to $2.5 million
in cash or registered and freely tradable stock of the Company, at Mr. Adderton&rsquo;s choice, if, on any date during the Measurement
Period the Company&rsquo;s total enterprise value (calculated as set forth in Section 4(e)(ii) above) equals or exceeds $150 million;
and (ii) payment of a performance bonus equal to $10 million in cash or registered and freely tradable stock of the Company, at
Mr.&nbsp; Adderton&rsquo;s choice, if, on any date during the Measurement Period, the Company&rsquo;s total enterprise value (calculated
as set forth in Section 4(e)(ii) above) equals or exceeds $1 billion. Any bonus payable under this subsection (f) shall vest upon
the achievement of the specified criteria and shall be paid on or within thirty (30) days of such vesting date.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company entered into an agreement with Robert Ellin to serve
as the Company&rsquo;s&nbsp;Executive Chairman.&nbsp; The term of the agreement is one year.&nbsp; Pursuant to the agreement, the
Company agreed to the following:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Annual Fees: For all services rendered by the Chairman under this agreement, the Company shall pay the Chairman an aggregate
fee of four hundred fifty thousand dollars ($450,000) per annum.</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Annual Bonus:&nbsp; Mr. Ellin shall be entitled to be paid an annual incentive bonus in cash in an amount of up to 100% of
his salary based upon satisfaction of performance-related milestones. The performance-related milestones shall be mutually determined
by the Board of Directors and Mr. Ellin within sixty (60) days of the effective Date of the employment agreement.</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"></P>

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<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Restricted Stock Grant: The Company granted Mr. Ellin 3,400,000 shares of the Company&rsquo;s restricted common stock, subject
to the certain terms and conditions specified in the restricted stock agreement, which shall vest as follows: (i) one third (1/3)
shall vest immediately upon the completion of one or more debt or equity financings during the Measurement Period in favor of the
Company&nbsp; of gross proceeds of at least $5 million; (ii) one third (1/3) shall vest immediately if on any date during the Measurement
Period the Company&rsquo;s total enterprise value (computed by multiplying the number of outstanding shares of the Employer&rsquo;s
common stock on a fully diluted (taking into account only those stock options that are in-the-money on such date), as-converted
basis by the average daily trading price for the Company&rsquo;s common stock for the thirty (30) trading day period immediately
preceding the date of determination) equals or exceeds $100 million; and (iii) one third (1/3) shall vest immediately if on any
date during the Measurement Period the Company&rsquo;s total enterprise value (calculated as set forth in clause (ii) above) equals
or exceeds $200 million; provided , however , that all unvested shares of restricted common stock shall vest immediately upon the
sale of all or substantially all of the assets of the Company, upon the merger or reorganization of the Company following which
the equity holders of the Company immediately prior to the consummation of such merger or reorganization collectively own less
than 50% of the voting power of the resulting entity, or upon the sale of equity securities of the Company representing 50% or
more of the voting power of the Company or 50% or more of the economic interest in the Company in a single transaction or in a
series of related transactions (i.e., a &ldquo;Change of Control&rdquo;). All shares shall be subject to a one (1) year lock-up
following the vesting of such shares.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Additional Performance Bonuses:&nbsp; Mr. Ellin shall be entitled to payment of (i) a performance bonus equal to $1.5 million
in cash or registered and freely tradable stock of the Company, at Mr. Ellin&rsquo;s choice, if, on any date during the Measurement
Period the Company&rsquo;s total enterprise value (calculated as set forth in Section 4(e)(ii) above) equals or exceeds $150 million;
and (ii) payment of a performance bonus equal to $3.3 million in cash or registered and freely tradable stock of the Company, at
Mr.&nbsp; Ellin&rsquo;s choice, if, on any date during the Measurement Period, the Company&rsquo;s total enterprise value (calculated
as set forth in Section 4(e)(ii) above) equals or exceeds $1 billion. Any bonus payable under this subsection (f) shall vest upon
the achievement of the specified criteria and shall be paid on or within thirty (30) days of such vesting date.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Litigation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Twistbox&rsquo;s wholly owned subsidiary, WAAT Media Corp. (&ldquo;WAAT&rdquo;)
and General Media Communications, Inc. (&ldquo;GMCI&rdquo;) were parties to a content license agreement dated May 30, 2006, whereby
GMCI granted to WAAT certain exclusive rights to exploit GMCI branded content via mobile devices. GMCI terminated the agreement
on January 26, 2009 based on its claim that WAAT failed to cure a material breach pertaining to the non-payment of a minimum royalty
guarantee installment in the amount of $485. On or about March 16, 2009, GMCI filed a complaint seeking the balance of the minimum
guarantee payments due under the agreement in the approximate amount of $4,085. WAAT counter-sued claiming GMCI was not entitled
to the claimed amount and that it had breached the agreement by, among other things, failing to promote, market and advertise the
mobile services as required under the agreement and by fraudulently inducing WAAT to enter into the agreement based on GMCI&rsquo;s
repeated assurances of its intention to reinvigorate its flagship brand. GMCI filed a demurrer to the counter-claim. WAAT subsequently
filed an amended counter-claim. On August 16, 2011, the LA Superior Court ruled in favor of WAAT&rsquo;s Summary Judgment Motion.
As a result, GMCI&rsquo;s potential damages were limited to the amount of minimum royalty installments that accrued prior to termination
of the content license agreement in the amount of approximately $800. Trial had been scheduled for April 16, 2012, however on December
22, 2011 the parties agreed to a settlement of $300 in favor of GMCI, pursuant to which WAAT will be required to pay GMCI $300
over a 30 month period, beginning December 28, 2011. As of March 31, 2012 the Company has accrued $260, which is included in Accounts
Payable on the balance sheet.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On March 6, 2012 the Company received a notice of levy in the
amount of $73 pertaining to a dispute with a service provider. The Company has recorded the full amount in Accounts Payable on
the consolidated balance sheet.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On May 4, 2012 the Company received notice of a judgment in
the amount of &pound;23 pertaining to a dispute with a previous employee. The Company has recorded the full amount in Accrued Compensation
on the consolidated balance sheet.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company is subject to various claims and legal proceedings
arising in the normal course of business. Based on the opinion of the Company&rsquo;s legal counsel, management believes that the
ultimate liability, if any in the aggregate of other claims 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.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 12px; text-autospace: ideograph-numeric ideograph-other">&nbsp;</TD>
    <TD STYLE="width: 36px; text-autospace: ideograph-numeric ideograph-other; font-weight: bold"><B>17.</B></TD>
    <TD STYLE="text-autospace: ideograph-numeric ideograph-other; font-weight: bold"><B>Subsequent Events</B></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As previously reported on a Current Report on Form 8-K filed
March 23, 2012, on February 22, 2012, the Company received notice from the OTC Bulletin Board (OTC BB) that its common stock would
be removed from OTC BB under NASD Rule 6530(e), under which any OTC BB issuer that is delinquent in its reporting obligations
three times in a 24-month period is ineligible for quotation on the OTC BB for a period of one year. The Company requested and
received a hearing to review the OTC BB's determination, which occurred on April 2, 2012 before the Financial Industry Regulatory
Authority (FINRA). On May 16, 2012, the Company received notice of decision from FINRA that the Company&rsquo;s securities are
not eligible for continued quotation on the OTC BB and would be promptly removed from the OTC BB. The Company believes that while
it is seeking a long term solution to enhanced stockholder liquidity, its common stock will continue to be traded in other over
the counter markets under its same ticker symbol (MNDL or MNDLE), such as the OTC Market's OTC QB (accessed through <U>www.otcmarkets.com</U>,
but not incorporated by reference herein). Although there are no guarantees of success, the Company is actively pursuing appropriate
steps to ensure the long term liquidity of the Company's common stock, including seeking listing on a national securities exchange.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On April 12, 2012, the Company entered into a Separation and
General Release Agreement with Mr. David Mandell, Executive Vice President and General Counsel of Mandalay Digital Group, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On May 6, 2012, the Board of Directors of the Company elected
Mr. Christopher Rogers as a director.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As previously reported on a Current Report on Form 8-K filed
May, 30, 2012, on May 18, 2012 the Company entered into amendments to the restricted stock agreements governing grants of shares
of restricted common stock made to Mr. Peter Adderton, chief executive officer, and Mr. Robert Ellin, executive chairman, the original
details of which were previously disclosed on the Company&rsquo;s Current Report on Form 8-K filed on January 4, 2012. These amendments
clarified that the holders of such shares have all rights of a stockholder with respect to those shares (vested or unvested), including
voting and dividend rights, subject to the restrictions and forfeiture provisions of the restricted stock agreements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On May 23, 2012, the Company received the written consent from
stockholders holding a majority of its outstanding common stock to permit (but not require) the Board of Directors of the Company
to amend its Amended and Restated Certificate of Incorporation to (i) effect a reverse stock split of the Company&rsquo;s common
stock at any time prior to April 26, 2013, by a ratio of not less than one-for-two and not more than one-for-ten, with the exact
ratio to be set at a whole number within this range as determined by the Board of Directors in its sole discretion (the &ldquo;Reverse
Stock Split&rdquo;) and (ii) to increase the number of authorized shares of the Company&rsquo;s capital stock to 202,000,000 shares
of stock, of which 200,000,000 shares would be classified as Company common stock and 2,000,000 shares would be classified as Company
preferred stock (the &ldquo;Authorized Stock Increase&rdquo;). In addition, such stockholders, pursuant to the written consent,
also approved the Company&rsquo;s Amended and Restated 2011 Equity Incentive Plan of the Company, and related forms of Equity Incentive
Plan Notice of Grant Restricted Stock Agreement, and Notice of Grant and Stock Option Agreement (the &ldquo;Plan Approval&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On June 7, 2012, the Company entered into an Equity Financing
Binding Term Sheet, with an accredited investor, pursuant to which the Company agreed to issue an aggregate of 1,428,571 shares
of its common stock and warrants to purchase 357,142 shares of its common stock (subject to adjustment), for an aggregate purchase
price of $1,000,000. The warrants have an exercise price of $0.70 per share (subject to adjustment) and a five year term. In addition,
the Equity Agreement provides that (a) the Company will use its best efforts to file a registration statement covering the shares
of common stock issued and the shares of common stock issuable upon exercise of the warrants within 120 calendar days after the
date of the Equity Agreements and use its best efforts to cause the registration statement to become effective as soon as possible
thereafter; and (b) the applicable investor will have a right to participate in future financings by the Company (subject to standard
exceptions) for a period of two years on a pro rata basis in accordance with his ownership interests in the Company (on a fully
diluted basis assuming exercise of the applicable warrant).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On June, 7, 2012, Adage Capital Partners, LP agreed that it
would not to abstain from exercising its warrant to purchase 2,500,000 shares of common stock, issued December 29, 2011, as amended
March 1, 2012, until informed in writing by the Company that the Company has increased its authorized capital sufficiently so that
exercise can be effectuated without the Company being in an over-issuance position with respect to the shares underlying such warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On June, 7, 2012, TAJA, LLC agreed that it would abstain
from exercising the following warrants and convertible note, until informed in writing by the Company that the Company has increased
its authorized capital sufficiently so that exercise can be effectuated without the Company being in an over-issuance position
with respect to the shares underlying such warrants and note: (1) Warrant to Purchase 1,071,429 shares of Common Stock, issued
December 29, 2011, as amended on March 1, 2012; (2) Warrant to Purchase 2,000,000 shares of Common Stock issued December 29 ,2011
as amended on March 1, 2012; (3) Unsecured Subordinated Convertible Note, due June 21, 2015, in the original principal amount of
$3,000,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>
<P STYLE="margin: 0">&nbsp;</P>

<HR NOSHADE SIZE="4" STYLE="color: Black; width: 100%; margin-top: 3pt; margin-bottom: 3pt">
<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="font: 24pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Mandalay Digital Group, Inc. </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><img src="logo1.jpg"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PROSPECTUS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>23,310,473 shares of </B></P>

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Common Stock, par value $0.0001 per share
</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2012 </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
<HR NOSHADE SIZE="4" STYLE="color: Black; width: 100%; margin-top: 3pt; margin-bottom: 3pt">
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PART II </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INFORMATION NOT REQUIRED IN PROSPECTUS
</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 9%; font-size: 10pt; font-weight: bold">Item&nbsp;13.</TD>
    <TD STYLE="width: 91%; font-size: 10pt; font-weight: bold">Other Expenses of Issuance and Distribution.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">Set forth below is an estimate (except
for registration fees, which are actual) of the approximate amount of the fees and expenses payable by us in connection with the
issuance and distribution of the shares of common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; border-bottom: Black 1pt solid">EXPENSE</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">AMOUNT</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 80%; text-align: left; text-indent: -12pt; padding-left: 12pt">Registration Fees</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 17%; text-align: right">1,990</TD><TD STYLE="width: 1%; text-align: left"></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -12pt; padding-left: 12pt">Legal Fees</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">50,000</TD><TD STYLE="text-align: left"></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -12pt; padding-left: 12pt">Accounting Fees</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">18,700</TD><TD STYLE="text-align: left"></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -12pt; padding-left: 12pt">Miscellaneous Fees and Expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,810</TD><TD STYLE="padding-bottom: 1pt; text-align: left"></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: -12pt; padding-left: 0.5in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -12pt; padding-left: 0.5in">Total</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">72,500</TD><TD STYLE="text-align: left"></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 9%; font-weight: bold">Item&nbsp;14.</TD>
    <TD STYLE="width: 91%; font-weight: bold">Indemnification of Directors and Officers.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">Section&nbsp;145 of
the Delaware Law General Corporation, or the Delaware Law, provides that a corporation may indemnify directors and officers as
well as other employees and individuals against expenses (including attorneys&rsquo; fees), judgments, fines and amounts paid in
settlement in connection with specified actions, suits or proceedings, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation&nbsp;&mdash; a &ldquo;derivative action&rdquo;), if they acted in good
faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. A similar standard is applicable
in the case of derivative actions, except that indemnification only extends to expenses (including attorneys&rsquo; fees) incurred
in connection with defense or settlement of such action, and the statute requires court approval before there can be any indemnification
where the person seeking indemnification has been found liable to the corporation. Under Section&nbsp;145 of the Delaware Law,
a corporation shall indemnify an agent of the corporation for expenses actually and reasonably incurred if and to the extent such
person was successful on the merits in a proceeding or in defense of any claim, issue or matter therein.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">The Company may from
time to time be subject to Section&nbsp;2115 of the California Corporations Code, or the California Code, according to which Section&nbsp;317
of the California Code applies to the indemnification of officers and directors of the Company. Under Section&nbsp;317 of the California
Code, permissible indemnification by a corporation of its officers and directors is substantially the same as permissible indemnification
under Section&nbsp;145 of the Delaware Law, except that (i)&nbsp;permissible indemnification does not cover actions the person
reasonably believed were not opposed to the best interests of the corporation, as opposed to those the person believed were in
fact in the best interests of the corporation, (ii)&nbsp;the Delaware Law permits advancement of expenses to agents other than
officers and directors only upon approval of the board of directors, (iii)&nbsp;in a case of stockholder approval of indemnification,
the California Code requires certain minimum votes in favor of such indemnification and excludes the vote of the potentially indemnified
person, and (iv)&nbsp;the California Code only permits independent counsel to approve indemnification if an independent quorum
of directors is not obtainable, while the Delaware Law permits the directors in any circumstances to appoint counsel to undertake
such determination.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">Section&nbsp;145 of
the Delaware Law and Section&nbsp;317 of the California Code provide that they are not exclusive of other indemnification that
may be granted by a corporation&rsquo;s charter, bylaws, disinterested director vote, stockholders vote, agreement or otherwise.
The limitation of liability contained in our certificate of incorporation and the indemnification provision included in our bylaws
are consistent with the Delaware Law Sections 102(b)(7) and 145, and California Code Section&nbsp;317.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">Section&nbsp;145 of
the Delaware Law authorizes a court to award, or a corporation&rsquo;s board of directors to grant, indemnity to directors and
officers in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities (including reimbursement
for expenses incurred) arising under the Securities Act of 1933, as amended. The Company&rsquo;s amended and restated certificate
of incorporation and bylaws provide for indemnification of its directors, officers, employees and other agents to the maximum extent
permitted by the Delaware Law. Insofar as indemnification for liabilities arising under the Securities Act of 1933&nbsp;may be
permitted to directors, officers or persons controlling the Company pursuant to such provisions, the Company has been informed
that in the opinion of the SEC such indemnification is against public policy as expressed in such Act and is therefore unenforceable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 9%; font-weight: bold">Item&nbsp;15.</TD>
    <TD STYLE="width: 91%; font-weight: bold">Recent Sales of Unregistered Securities.&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.45pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.45pt">The following is
a summary of transactions by us during the past three years, involving sales of our securities that were not registered under the
Securities Act. Each sale was exempt from registration under either Section 4(2) of the Securities Act or Section 3(a)(9) of the
Securities Act because (i) the securities were offered and sold only to accredited investors; (ii) there was no general solicitation
or general advertising related to the offerings; (iii) each investor was given the opportunity to ask questions and receive answers
concerning the terms of and conditions of the offering and to obtain additional information; (iv) the investors represented that
they were acquiring the securities for their own account and for investment; and (v) the securities were issued with restrictive
legends where required.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">On
June 15, 2012, the Company issued 150,000 shares of common stock of the Company to Merriman Capital, Inc. under the terms of a
restricted stock agreement </FONT>as consideration for financial and capital markets advisory services for the Company performed
by Merriman Capital, Inc. The Company agreed to register the securities purchased in this offering. Merriman Capital, Inc. is a
broker-dealer. <FONT STYLE="color: black">The shares vest over one year. </FONT>We have been advised that Merriman Capital, Inc.
acquired such shares in the ordinary course of business, not for resale, and did not, at the time of purchase, have any agreements
or understandings, directly or indirectly, with any person to distribute such securities other than this registration statement<FONT STYLE="color: black">.
</FONT>We relied on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of
common stock under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: 27.35pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27.35pt">On June
8, 2012, the Company sold 1,428,571 shares of its common stock and a warrant to purchase 357,142 shares of common stock to an accredited
investor for an aggregate purchase price of $1,000,000. The warrant has an exercise price of $0.70 per share (subject to adjustment)
and a five year term from the date of issuance. The warrant may not be exercised prior to the first anniversary of the date of
issuance. The Company agreed to register the securities purchased in this offering. The securities were issued pursuant to the
exemption provided by Section 4(2) of the Securities Act of 1933, as amended, for transactions by an issuer not involving any public
offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27.35pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27.35pt"><FONT STYLE="color: black">In
March 2012, the Company sold an aggregate of </FONT>3,857,143<FONT STYLE="color: black"> </FONT>shares of its common stock and
warrants to purchase an aggregate of 964,284 shares of common stock to accredited investors for an aggregate purchase price of
$2.7 million. Each warrant has an exercise price of $0.70 per share (subject to adjustment) and a five year term from the date
of issuance. Each warrant may not be exercised prior to the first anniversary of the date of issuance. The Company agreed to register
the securities purchased in this offering. The securities were issued pursuant to the exemption provided by Section 4(2) of the
Securities Act of 1933, as amended, for transactions by an issuer not involving any public offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27.35pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27.35pt">In March
2012, the Company entered into a Convertible Note Financing Binding Term Sheet (the &ldquo;Adage Term Sheet&rdquo;) with Adage
Capital Partners, L.P. (&ldquo;Adage&rdquo;), pursuant to which the parties agreed to restructure certain terms of the convertible
note financing consummated on December 29, 2011. In connection with the restructuring, $7,037,333, representing the entire outstanding
principal amount and all accrued and unpaid interest thereon under the Subordinated Convertible Promissory Note in the original
principal amount of $7,000,000 issued by the Company to Adage (the &ldquo;Adage Note&rdquo;), was converted into 10,053,333<B>
</B>shares of common stock of the Company effective as of March 1, 2012, and the exercise price of the warrant to purchase common
stock of the Company issued to Adage in connection with the purchase and sale of the Adage Note was changed to $0.70 per share,
subject to adjustment. As a result of the change to the exercise price, the warrant gives Adage the right to purchase up to 2,500,000
shares of common stock of the Company, subject to adjustment. We relied on Section 3(a)(9) of the Securities Act of 1933, as amended,
as providing an exemption from registration for this transaction and relied on Section 4(2) of the Securities Act of 1933, as amended,
as providing for an exemption for the original issuance of the Adage Note and warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
March 2012, the Company issued to </FONT>TAJA, LLC <FONT STYLE="color: black">warrants to purchase 2,000,000 shares of common
stock of the Company at an exercise price of $0.70 cents per share with a term of 5 years. In connection with the same
transaction, the Company issued 1,071,429 warrants to purchase shares of common stock of the Company at an exercise price of
$0.70 cents per share. The warrants were issued as consideration related to the modification of an existing note to
convertible debt. Also in connection with the same transaction, the Company issued 2,600,000 shares of common stock of the
Company as payment of $1,820.000 of principle of a convertible note. </FONT>We relied on Section 3(a)(9) of the Securities
Act as providing an exemption from registering the issuance of these shares of common stock under the Securities Act inasmuch
as the conversion was made with our existing security holders exclusively and no commission or other remuneration was paid or
given directly or indirectly for soliciting the exchange.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
March 2012, the Company issued 50,000 shares of common stock of the Company to Hayden IR in consideration of investor
relations services. The shares are vested, but restricted for a one year period. The shares were valued at the closing market
price on that date of $0.85 cents per share. </FONT>We relied on Section 4(2) of the Securities Act as providing an exemption
from registering the issuance of these shares of common stock under the Securities Act inasmuch as the conversion was made
with our existing security holders exclusively and no commission or other remuneration was paid or given directly or
indirectly for soliciting the exchange.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
January 2012, the Company issued 1,375,000 shares of common stock of the Company to three employees </FONT>Lisa Higgins-Lucero,
David Mandell and David Waldman<FONT STYLE="color: black">. The shares are vested, but are restricted for a two year period. The
shares were valued at the closing market price on that date of $0.65 cents per share. </FONT>We relied on Section 4(2) of the
Securities Act, as providing an exemption from registering the sale of these shares of common stock under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt">In January
2012, the Company entered into a consulting agreement with Andrew Schleimer for advisory board services, pursuant to which, the
Company issued 150,000 shares of common stock of the Company under a two-year lock-up and an additional 850,000 shares of common
stock of the Company that vests upon the achievement of certain company milestons. We relied on Section 4(2) of the Securities
Act, as providing an exemption from registering the sale of these shares of common stock under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt">In January
2012, the Company entered into a consulting agreement with Michael Lambert for advisory
board services, pursuant to which, the Company issued 150,000 shares of common stock of the Company. The shares vest over one year
and were valued at the closing market price on that date of $0.65 cents per share. We relied on Section 4(2) of the Securities
Act, as providing an exemption from registering the sale of these shares of common stock under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
December 2011, the Company issued 3,600,000 shares of common stock of the Company to a director. The shares are vested, but are
restricted for a one year period. The shares were valued at the closing market price on that date of $0.61 cents per share. </FONT>We
relied on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock
under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
December 2011, the Company issued 3,400,000 shares of common stock of the Company to a director. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.&nbsp;</FONT>We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
December 2011, the Company issued 1,000,000 shares of common stock of the Company to a director. The shares vest over a period
of one year. The shares were valued at the closing market price on that date of $0.61 cents per share. </FONT>We relied on Section
4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under the Securities
Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
December 2011, the Company issued 1,000,000 shares of common stock of the Company to a director. The shares vest over a period
of one year. The shares were valued at the closing market price on that date of $0.62 cents per share. </FONT>We relied on Section
4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under the Securities
Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
December 2011, the Company issued 1,000,000 shares of common stock of the Company to a director. The shares vest over a period
of one year. The shares were valued at the closing market price on that date of $0.62 cents per share. </FONT>We relied on Section
4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under the Securities
Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
December 2011, the Company issued 500,000 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.&nbsp;</FONT>We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
December 2011, the Company issued 25,000 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.&nbsp;</FONT>We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
December 2011, the Company issued 500,000 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.&nbsp;</FONT>We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
December 2011, the Company issued 200,000 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.&nbsp;</FONT>We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
December 2011, the Company issued 9,037,500 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.&nbsp;</FONT>We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
December 2011, the Company issued 100,000 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.&nbsp;</FONT>We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
December 2011, the Company issued 50,000 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.&nbsp;</FONT>We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
December 2011, the Company issued 1,787,500 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.&nbsp;</FONT>We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
December 2011, the Company issued 100,000 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.&nbsp;</FONT>We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
December 2011, the Company issued 100,000 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.&nbsp;</FONT>We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
December 2011, the Company issued 50,000 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.&nbsp;</FONT>We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
December 2011, the Company issued 50,000 of common stock of the Company to Digital Turbine Group LLC for the purchase of its assets.
The shares were valued at the closing market price on that date of $0.65 cents per share.&nbsp;</FONT>We relied on Section 4(2)
of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under the Securities
Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">On
December 29, 2011, the Company issued a convertible promissory note for $7,000,000 pursuant to which the Company issued warrants
to purchase 3,500,000 shares based on 25% coverage and a conversion rate of $0.50. The exercise price was $0.50 at the date of
issuance with a five year life. On March 1, 2012 the note was amended, changing the conversion price to $0.70 cents per share,
and the Company issued 10,053,333 shares of common stock of the Company in full payment of principle and interest of the New Convertible
Note at the new conversion price.</FONT> We relied on Section 4(2) of the Securities Act, as providing an exemption from registering
the sale of these shares of common stock under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">On
December 29, 2011, the Company </FONT>completed a convertible note financing with TAJA, LLC by exchanging $3,000,000 of principal
amount of an existing senior subordinated secured note with an unsecured subordinated convertible note in the same principal amount
due June 21, 2013 and extending the term of the existing senior subordinated secured note to June 21, 2015. The new subordinated
secured note was issued with 25% warrant coverage with the warrant exericsable for five years at an exercise price based on the
conversion price of the note. In addition, in connection with the exchange, TAJA, LLC was issued a warrant exercisable for 2,000,000
shares of Common Stock exericisable for a five-year term at an exercise price equal to $0.25, but is not exercisable for one year
following its issuance. We relied on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of
these shares of common stock under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
June 2011, the Company entered into a consulting agreement, pursuant to which, the Company issued warrants to purchase 150,000
shares of the Company&rsquo;s common stock at an exercise price of $0.47 cents per share. The warrants vest over a one year period.</FONT>
We relied on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common
stock under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
June 2011, the Company entered into a consulting agreement, pursuant to which, the Company issued warrants to purchase 150,000
shares of the Company&rsquo;s common stock at an exercise price of $0.47 cents per share. The warrants vest over a one year period.&nbsp;</FONT>We
relied on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock
under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">In
May 2011, 150,000 shares of common stock of the Company were issued to a vendor as a settlement, at the closing market price on
that date of $0.40 cents per share.&nbsp;</FONT>We relied on Section 4(2) of the Securities Act, as providing an exemption from
registering the sale of these shares of common stock under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">On
April 6, 2011, the Company issued warrants to purchase 75,000 shares of the Company&rsquo;s common stock to a vendor, as compensation
for services rendered, at $0.25 cents per share. The warrants vest over a six month period.&nbsp;</FONT>We relied on Section 4(2)
of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under the Securities
Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt"><FONT STYLE="color: black">On
April 6, 2011, the Company entered into a consulting agreement. On January 3, 2012 the Company issued 150,000 shares of common
stock of the Company to the consultant. The shares vest over a one year period. </FONT>The shares were valued at the closing market
price on that date of $0.58 cents per share. We relied on Section 4(2) of the Securities Act, as providing an exemption from registering
the sale of these shares of common stock under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27pt">On April
1, 2011, 347,244 shares of common stock of the Company were issued to two former employees of the Company, as compensation, at
the closing market price on that date of $0.58 cents per share. In addition, the employees each agreed to cancel options to purchase
173,622 shares of common stock in connection with their respective termination agreements. &nbsp;We relied on Section 4(2) of the
Securities Act, as providing an exemption from registering the sale of these shares of common stock under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27.35pt">In September
2009, the Company issued a warrant to purchase 1,200,000 shares of common stock to Vivid Entertainment, LLC at an exercise price
of $1.25 per share., which included an obligation to register such shares in connection with a registration by the Company. In
January 2011, the warrant terms were amended and restated to provide the vendor with a warrant to acquire 1,500,000 shares of common
stock at an exercise price of $0.25 per share and the Company issued to the vendor 2,500,000 shares of common stock under the terms
of a restricted stock agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27.35pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 27.35pt">On April
24, 2009, the Company granted certain senior executives 229,388 shares of the Company's common stock in exchange for them agreeing
to reduce their salaries from April 1, 2009 through April 30, 2010. 187,348 of the shares granted to such senior executives are
subject to forfeiture in the event that the senior executive leaves the Company within one year from the date of grant, and becomes
fully vested one year from the date of grant or in the event of change of control of the Company. The securities were issued pursuant
to the exemption from registration permitted under Rule 506 of Regulation D promulgated under the Securities Act of 1933, as amended.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 9%; font-weight: bold">Item&nbsp;16.</TD>
    <TD STYLE="width: 91%; font-weight: bold">Exhibits and Financial Statement Schedules</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">(a) <I>Exhibits</I>.&nbsp;&nbsp;The exhibits
are incorporated by reference to the Exhibit Index attached hereto and a part hereof by reference.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">(b) <I>Financial Statements.</I>&nbsp;&nbsp;See
page F-1 for an index of the financial statements and financial statement schedules included in the Registration Statement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 9%; font-weight: bold">Item&nbsp;17.</TD>
    <TD STYLE="width: 91%; font-weight: bold">Undertakings.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 4%">(a)</TD>
    <TD STYLE="width: 96%">The undersigned registrant hereby undertakes:</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD STYLE="width: 4%">&nbsp;</TD>
    <TD STYLE="width: 4%; vertical-align: top">(1)</TD>
    <TD STYLE="width: 92%; vertical-align: top">To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 5%; vertical-align: top">(i)</TD>
    <TD STYLE="width: 87%; vertical-align: top">To include any prospectus required by Section&nbsp;10(a)(3) of the Securities Act;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 5%; vertical-align: top">(ii)</TD>
    <TD STYLE="width: 87%; vertical-align: top">To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement.&nbsp;Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the &ldquo;Calculation of Registration Fee&rdquo; table in the effective registration statement; and</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 5%; vertical-align: top">(iii)</TD>
    <TD STYLE="width: 87%; vertical-align: top">To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD STYLE="width: 4%">&nbsp;</TD>
    <TD STYLE="width: 4%; vertical-align: top">(2)</TD>
    <TD STYLE="width: 92%; vertical-align: top">That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial <I>bona fide</I> offering thereof. </TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD STYLE="width: 4%">&nbsp;</TD>
    <TD STYLE="width: 4%; vertical-align: top">(3)</TD>
    <TD STYLE="width: 92%; vertical-align: top">To remove from registration by means of a post-effective amendment any of the securities being registered that remain unsold at the termination of the offering.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD STYLE="width: 4%">&nbsp;</TD>
    <TD STYLE="width: 4%; vertical-align: top">(4)</TD>
    <TD STYLE="width: 92%; vertical-align: top">That, for the purpose of determining liability under the Securities Act to any purchaser, if the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness.&nbsp;<I>Provided, however</I>, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use. </TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 4%">(b)</TD>
    <TD STYLE="width: 96%">Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SIGNATURES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">Pursuant to the requirements of the Securities
Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that the registrant meets all of the
requirements for filing on Form S-1 and has duly caused this registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Los Angeles, State of California, on this 9<SUP>th</SUP>&nbsp;day of July, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold">MANDALAY DIGITAL GROUP, INC.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 55%">&nbsp;</TD>
    <TD STYLE="width: 6%">&nbsp;</TD>
    <TD STYLE="width: 39%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">By:</TD>
    <TD STYLE="text-align: center; border-bottom: Black 1pt solid">/S/&nbsp;&nbsp;PETER ADDERTON</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: center">Peter Adderton<BR>
Chief Executive Officer (Principal<BR> Executive Officer)</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt"><B>KNOW ALL PERSONS BY THESE PRESENTS</B>,
that each person whose signature appears below constitutes and appoints Peter Adderton and Lisa Higgins-Lucero, and each of them,
as his true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration
Statement on Form S-1 (and any related registration statement filed pursuant to Rule 462 under the Securities Act of 1933), and
to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite
and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent or any of them, or of their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">Pursuant to the requirements of the Securities
Act of 1933, as amended, this prospectus has been signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 26%; border-bottom: black 1pt solid; font-weight: bold; text-align: center">Signature</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 56%; border-bottom: black 1pt solid; font-weight: bold; text-align: center">Title</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 16%; border-bottom: black 1pt solid; font-weight: bold; text-align: center">Date</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: black 1pt solid; text-align: center">/s/ Peter Adderton</TD>
    <TD>&nbsp;</TD>
    <TD>Chief Executive Officer and Director </TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">July 9, 2012</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt; text-align: center">PETER ADDERTON</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;(Principal Executive Officer)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: black 1pt solid; text-align: center">/s/ Lisa Higgins-Lucero</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;Chief Financial Officer, Twistbox</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">July 9, 2012</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt; text-align: center"><FONT STYLE="text-transform: uppercase">Lisa Higgins-Lucero</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD>&nbsp;(Principal Financial and Accounting Officer)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: black 1pt solid; text-align: center">/s/ Robert S. Ellin</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;Executive Chairman of the Board</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">July 9, 2012</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">ROBERT S. ELLIN</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: black 1pt solid; text-align: center">/s/ Peter Guber</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;Chairman</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">July 9, 2012</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">PETER GUBER</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: black 1pt solid; text-align: center">/s/ Paul Schaeffer</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;Vice-Chairman</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">July 9, 2012</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">PAUL SCHAEFFER</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; border-bottom: Black 1pt solid">/s/ Chris Rogers</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;Director</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">July 9, 2012</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">CHRIS ROGERS</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
</TABLE>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>EXHIBIT INDEX</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">Agreements included as exhibits to this
Registration Statement on Form S-1 are included to provide information regarding their terms and are not intended to provide any
other factual or disclosure information about our company (including its consolidated subsidiary) or the other parties to the agreements.&nbsp;&nbsp;Where
an agreement contains representations and warranties by any party, those representations and warranties have been made solely for
the benefit of the other parties to the agreement or express third-party beneficiaries as explicitly set forth in the agreement.&nbsp;&nbsp;Any
such representations and warranties:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 16.95pt"></TD><TD STYLE="width: 16.95pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>should not be treated as categorical statements of fact, but rather as an allocation of risk;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 16.95pt"></TD><TD STYLE="width: 16.95pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>may have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable
agreement, which disclosures are not necessarily reflected in the agreement;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 16.95pt"></TD><TD STYLE="width: 16.95pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors;
and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 16.95pt"></TD><TD STYLE="width: 16.95pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement
and may be subject to more recent developments.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">Accordingly, any such representations and
warranties may not describe the actual state of affairs as of the date they were made or at any other time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 8%; font-weight: bold; text-align: center">Exhibit<BR> No.</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 90%; font-weight: bold; text-align: center">Description</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>2.1</TD>
    <TD>&nbsp;</TD>
    <TD>Amended Disclosure Statement filed with the United States Bankruptcy Court for the Southern District of New York. (1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>2.2</TD>
    <TD>&nbsp;</TD>
    <TD>Amended Plan of Reorganization filed with the United States Bankruptcy Court for the Southern District of New York. (1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>2.3</TD>
    <TD>&nbsp;</TD>
    <TD>Order Confirming Amended Plan of Reorganization issued by the United States Bankruptcy Court for the Southern District of New York. (1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>2.4</TD>
    <TD>&nbsp;</TD>
    <TD>Plan and Agreement of Merger, dated September 27, 2007, of NeuMedia Media, Inc., a Delaware corporation, and Mediavest, Inc., a New Jersey corporation. (2)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>2.5</TD>
    <TD>&nbsp;</TD>
    <TD>Certificate of Merger merging Mediavest, Inc., a New Jersey corporation, with and into NeuMedia Media, Inc., a Delaware corporation, as filed with the Secretary of State of the State of Delaware. (2)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>2.6</TD>
    <TD>&nbsp;</TD>
    <TD>Certificate of Merger merging Mediavest, Inc., a New Jersey corporation, with and into NeuMedia Media, Inc., a Delaware corporation, as filed with the Secretary of State of the State of New Jersey. (2)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>2.7</TD>
    <TD>&nbsp;</TD>
    <TD>Agreement and Plan of Merger, dated as of December 31, 2007, by and among NeuMedia Media, Inc., Twistbox Acquisition, Inc., Twistbox Entertainment, Inc. and Adi McAbian and Spark Capital, L.P.<SUP> </SUP>(3)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>2.8</TD>
    <TD>&nbsp;</TD>
    <TD>Amendment to Agreement and Plan of Merger, dated as of February 12, 2008, by and among NeuMedia Media, Inc., Twistbox Acquisition, Inc., Twistbox Entertainment, Inc. and Adi McAbian and Spark Capital, L.P. (4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>2.9</TD>
    <TD>&nbsp;</TD>
    <TD>Certificate of Ownership merging Mandalay Digital Group, Inc. into Neumedia, Inc., dated February 2, 2012. (32)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>3.1</TD>
    <TD>&nbsp;</TD>
    <TD>Certificate of Incorporation. (2) </TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>3.2</TD>
    <TD>&nbsp;</TD>
    <TD>Bylaws. (2)</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 8%">3.3</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 90%">Certificate of Amendment to Bylaws. (28)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>4.1</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Warrant to Purchase Common Stock dated September 14, 2006.<SUP> </SUP>(5)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>4.2</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Warrant to Purchase Common Stock dated October 12, 2006. (6)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>4.3</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Warrant to Purchase Common Stock dated December 26, 2006. (7)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>4.4</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Warrant Issued to David Chazen to Purchase Common Stock dated August 3, 2006. (8)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>4.5</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Warrant issued to Investors, dated October 23, 2008. (9)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>4.6</TD>
    <TD>&nbsp;</TD>
    <TD>Warrant dated September 23, 2009 issued to Vivid Entertainment, LLC and related Registration Rights Agreement. (23)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>4.7</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Warrant issued to Investors, dated June 21, 2010. (25)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>4.8</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Senior Secured Convertible Note due June 21, 213. (25)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>4.9</TD>
    <TD>&nbsp;</TD>
    <TD>Amended and Restated Senior Subordinated Secured Note due June 21, 2013, by Twistbox Entertainment, Inc. in favor of ValueAct SmallCap Master Fund, L.P. (25)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>4.10</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Warrant Relating to Equity Financing Binding Term Sheet, dated as of March 1, 2012 (32)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>4.11</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Warrant Relating to Equity Financing Binding Term Sheets, dated as of March 5, 2012 (32)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>4.12</TD>
    <TD>&nbsp;</TD>
    <TD>Amended and Restated Warrant Issue Agreement, dated January 1, 2011. (32)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>4.13</TD>
    <TD>&nbsp;</TD>
    <TD>Allonge to Warrant, dated January 1, 2011. (32)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>5.1</TD>
    <TD>&nbsp;</TD>
    <TD>Opinion of Manatt, Phelps &amp; Phillips, LLP regarding the validity of the common stock being registered. **</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.1</TD>
    <TD>&nbsp;</TD>
    <TD>2007 Employee, Director and Consultant Stock Plan. (2)&dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.1.1</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Non-Qualified Stock Option Agreement. (2)&dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.2</TD>
    <TD>&nbsp;</TD>
    <TD>Amendment to 2007 Employee, Director and Consultant Stock Plan. (4)&dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.3</TD>
    <TD>&nbsp;</TD>
    <TD>Second Amendment to 2007 Employee, Director and Consultant Stock Plan. (10&dagger;)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.4</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Restricted Stock Agreement. (11)&dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.5</TD>
    <TD>&nbsp;</TD>
    <TD>Twistbox 2006 Stock Incentive Plan. (4)&dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.6</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Stock Option Agreement for Twistbox 2006 Stock Incentive Plan. (4)&dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.7</TD>
    <TD>&nbsp;</TD>
    <TD>Loan Agreement with Trinad Capital Master Fund, Ltd., dated March 20, 2006. (4)&dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.8</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Subscription Agreement between the Company and certain investors listed thereto dated September 14, 2006. (5)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.9</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Subscription Agreement between the Company and certain investors listed thereto dated October 12, 2006. (6)</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 8%">10.10</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 90%">Series A Convertible Preferred Stock Purchase Agreement dated October 12, 2006 between the Company and Trinad Management, LLC. (6)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.11</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Subscription Agreement between the Company and certain investors listed thereto dated December 26, 2006. (7)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.12</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Subscription Agreement between the Company and certain investors listed thereto. (13)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.13</TD>
    <TD>&nbsp;</TD>
    <TD>Employment Letter, by and between the Company and James Lefkowitz, dated as of June 28, 2007. (14)&dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.14</TD>
    <TD>&nbsp;</TD>
    <TD>Salary Reduction Letter by and between Mandalay Media, Inc. and James Lefkowitz, dated March 16, 2009. (11)&dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.15</TD>
    <TD>&nbsp;</TD>
    <TD>Securities Purchase Agreement, dated July 30, 2007, by and among Twistbox Entertainment, Inc., the Subsidiary Guarantors and ValueAct SmallCap Master Fund, L.P. (4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.16</TD>
    <TD>&nbsp;</TD>
    <TD>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)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.17</TD>
    <TD>&nbsp;</TD>
    <TD>Control Agreement, dated July 30, 2007, by and among Twistbox Entertainment. Inc. and ValueAct SmallCap Master Fund, L.P. to East West Bank. (4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.18</TD>
    <TD>&nbsp;</TD>
    <TD>Trademark Security Agreement, dated July 30, 2007, by Twistbox, in favor of ValueAct SmallCap Master Fund, L.P. (4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.19</TD>
    <TD>&nbsp;</TD>
    <TD>Copyright Security Agreement, dated July 30, 2007, by Twistbox in favor of ValueAct SmallCap Master Fund, L.P. (4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.20</TD>
    <TD>&nbsp;</TD>
    <TD>Guaranty given as of February 12, 2008, by Mandalay Media, Inc. to ValueAct SmallCap Master Fund, L.P. (4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.21</TD>
    <TD>&nbsp;</TD>
    <TD>Termination Agreement, dated as of February 12, 2008, by and between Twistbox Entertainment, Inc. and ValueAct SmallCap Master Fund, L.P. (4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.22</TD>
    <TD>&nbsp;</TD>
    <TD>Waiver to Guarantee and Security Agreement, dated February 12, 2008, by and between Twistbox Entertainment, Inc. and ValueAct SmallCap Master Fund, L.P. (4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.23</TD>
    <TD>&nbsp;</TD>
    <TD>Standard Industrial/Commercial Multi-Tenant Lease, dated July 1, 2005, by and between Berkshire Holdings, LLC and The WAAT Corp. (4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.24</TD>
    <TD>&nbsp;</TD>
    <TD>Letter Agreement, dated May 16, 2006, between The WAAT Corp. and Adi McAbian. (4)&dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.25</TD>
    <TD>&nbsp;</TD>
    <TD>Amendment to Employment Agreement by and between Twistbox Entertainment, Inc. and Adi McAbian, dated as of December 31, 2007. (4)&dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.26</TD>
    <TD>&nbsp;</TD>
    <TD>Second Amendment to Employment Agreement, dated February 12, 2008, by and between Twistbox Entertainment, Inc. and Adi McAbian. (4)&dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.27</TD>
    <TD>&nbsp;</TD>
    <TD>Letter Agreement, dated May 16, 2006 between The WAAT Corp. and Ian Aaron. (4)&dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.28</TD>
    <TD>&nbsp;</TD>
    <TD>Salary Reduction Letter by and between Mandalay Media, Inc. and Ian Aaron, dated March 16, 2009. (11)&dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.29</TD>
    <TD>&nbsp;</TD>
    <TD>Amendment to Employment Agreement, by and between Twistbox Entertainment, Inc. and Ian Aaron, dated as of December 31, 2007. (4)&dagger;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 8%">10.30</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 90%">Second Amendment to Employment Agreement by and between Twistbox Entertainment, Inc. and Ian Aaron, dated February 12, 2008. (4)&dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.31</TD>
    <TD>&nbsp;</TD>
    <TD>Employment Agreement, dated May 9, 2006, between Charismatix and Eugen Barteska. (4)&dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.32</TD>
    <TD>&nbsp;</TD>
    <TD>Employment Agreement, dated June 5, 2006, between The WAAT Corp. and David Mandell. (4)&dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.33</TD>
    <TD>&nbsp;</TD>
    <TD>First Amendment to Employment Agreement, by and between Twistbox Entertainment, Inc. and David Mandell, dated February 12, 2008. (4)&dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.34</TD>
    <TD>&nbsp;</TD>
    <TD>Employment Agreement, dated December 11, 2006 between Twistbox and Russell Burke. (4)&dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.35</TD>
    <TD>&nbsp;</TD>
    <TD>First Amendment to Employment Agreement by and between Twistbox Entertainment, Inc. and Russell Burke, dated February 12, 2008. (4)&dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.36</TD>
    <TD>&nbsp;</TD>
    <TD>Directory Agreement, dated as of May 1, 2003, between Vodafone Global Content Services Limited and The WAAT Corporation. (4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.37</TD>
    <TD>&nbsp;</TD>
    <TD>Contract Acceptance Notice &ndash; Master Global Content Reseller Agreement by Vodafone Hungary Ltd. (4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.38</TD>
    <TD>&nbsp;</TD>
    <TD>Master Global Content Agency Agreement, effective as of December 17, 2004, between Vodafone Group Services Limited and The WAAT Media Corporation. (4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.39</TD>
    <TD>&nbsp;</TD>
    <TD>Letter of Amendment, dated February 27, 2007, by and between WAAT Media Corporation and Vodafone UK Content Services Limited. (4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.40</TD>
    <TD>&nbsp;</TD>
    <TD>Content Schedule, dated December 17, 2004, by and between WAAT Media Corporation and Vodafone Group Services Limited. (4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.41</TD>
    <TD>&nbsp;</TD>
    <TD>Contract Acceptance Notice &ndash; Master Global Content Agency Agreement by Vodafone D2 GmbH. (4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.42</TD>
    <TD>&nbsp;</TD>
    <TD>Contract Acceptance Notice &ndash; Master Global Content Agency Agreement by Vodafone Sverige AB. (4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.43</TD>
    <TD>&nbsp;</TD>
    <TD>Master Global Content Reseller Agreement, effective January 17, 2005, between Vodafone Group Services Limited and The WAAT Corporation. (4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.44</TD>
    <TD>&nbsp;</TD>
    <TD>Contract Acceptance Notice &ndash; Master Global Content Agency Agreement by Vodafone New Zealand Limited. (4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.45</TD>
    <TD>&nbsp;</TD>
    <TD>Contract Acceptance Notice &ndash; Master Global Content Agency Agreement by Vodafone Espa&ntilde;a, S.A. (4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.46</TD>
    <TD>&nbsp;</TD>
    <TD>Contract Acceptance Notice &ndash; Master Global Content Reseller Agreement by Vodafone UK Content Services LTD. (4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.47</TD>
    <TD>&nbsp;</TD>
    <TD>Contract Acceptance Notice &ndash; Master Global Content Reseller Agreement by VODAFONE-PANAFON Hellenic Telecommunications Company S.A. (4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.48</TD>
    <TD>&nbsp;</TD>
    <TD>Content Schedule, dated January 17, 2005, by and between WAAT Media Corporation and Vodafone Group Services Limited. (4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.49</TD>
    <TD>&nbsp;</TD>
    <TD>Contract Acceptance Notice &ndash; Master Global Content Agency Agreement by Belgacom Mobile NV.<SUP> </SUP>(4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.50</TD>
    <TD>&nbsp;</TD>
    <TD>Content Schedule, dated January 17, 2005, by and between WAAT Media Corporation and Vodafone Group Services Limited. (4)</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 8%">10.51</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 90%">Contract Acceptance Notice &ndash; Master Global Content Agency Agreement by Swisscom Mobile. (4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.52</TD>
    <TD>&nbsp;</TD>
    <TD>Linking Agreement, dated November 1, 2006 between Vodafone Libertel NV and Twistbox Entertainment, Inc. (4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.53</TD>
    <TD>&nbsp;</TD>
    <TD>Agreement, dated as of March 23, 2007, between Twistbox Entertainment, Inc. and Vodafone Portugal &ndash; COMUNICA&Ccedil;&Otilde;ES PESSOAIS, S.A (4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.54</TD>
    <TD>&nbsp;</TD>
    <TD>Contract for Content Hosting and Services &ldquo;Applications and Games Services,&rdquo; effective August 27, 2007 between Vodafone D2 GmbH and Twistbox Games Ltd &amp; Co. KG. (4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.55</TD>
    <TD>&nbsp;</TD>
    <TD>Partner Agreement, dated August 27, 2007, by and between Vodafone D2 GmbH and Twistbox. (4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.56</TD>
    <TD>&nbsp;</TD>
    <TD>Letter of Amendment, dated February 25, 2006 by and between WAAT Media Corporation and Vodafone UK Content Services Limited. (4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.57</TD>
    <TD>&nbsp;</TD>
    <TD>Letter of Amendment, dated August 2007, by and between WAAT Media Corporation and Vodafone UK Content Services Limited. (4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.58</TD>
    <TD>&nbsp;</TD>
    <TD>Content Schedule, dated December 17, 2004, by and between WAAT Media Corporation and Vodafone Group Services Limited. (4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.59</TD>
    <TD>&nbsp;</TD>
    <TD>Consolidated financial statements of Twistbox Entertainment, Inc. for the fiscal years ended March 31, 2006 and March 31, 2007. (4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.60</TD>
    <TD>&nbsp;</TD>
    <TD>Consolidated financial statements of Twistbox Entertainment, Inc. for the six months ended September 20, 2006 and September 30, 2007. (4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.61</TD>
    <TD>&nbsp;</TD>
    <TD>Stock Purchase Agreement, by and among Mandalay Media, Inc., Jonathan Cresswell, Nathaniel MacLeitch and the shareholders of AMV Holding Limited signatories thereto, dated as of October 8, 2008. (15)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.62</TD>
    <TD>&nbsp;</TD>
    <TD>Amendment to the Stock Purchase Agreement, between Mandalay Media, Inc. and Nathaniel MacLeitch as the Sellers&rsquo; Representative, dated as of October 23, 2008. (9)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.63</TD>
    <TD>&nbsp;</TD>
    <TD>Employment Agreement, by and between AMV Holding Limited and Nathaniel MacLeitch, dated as of October 23, 2008. (9)&dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.64</TD>
    <TD>&nbsp;</TD>
    <TD>Employment Agreement, by and between AMV Holding Limited and Jonathan Cresswell (a/k/a Jack Cresswell), dated as of October 23, 2008. (9)&dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.65</TD>
    <TD>&nbsp;</TD>
    <TD>Securities Purchase Agreement, by and among Mandalay Media, Inc. and the investors set forth therein, dated as of October 23, 2008. (9)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.66</TD>
    <TD>&nbsp;</TD>
    <TD>Note, dated October 23, 2008, issued by Mandalay Media, Inc. to Nathaniel MacLeitch, as the Sellers&rsquo; Representative. (9)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.67</TD>
    <TD>&nbsp;</TD>
    <TD>Management Agreement dated September 14, 2006 between the Company and Trinad Management, LLC. (5)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.68</TD>
    <TD>&nbsp;</TD>
    <TD>Commercial Lease Agreement, dated as of March 1, 2007, between Trinad Management LLC and Mediavest, Inc.<SUP> </SUP>(16)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.69</TD>
    <TD>&nbsp;</TD>
    <TD>First Amendment to Promissory Note, dated August 14, 2009, issued by Mandalay Media, Inc. to Nathaniel MacLeitch, as the Sellers&rsquo; Representative. (21)</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 8%">10.70</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 90%">Severance and Release Agreement, by and among Mandalay Media, Inc., Twistbox Entertainment, Inc. and Ian Aaron, dated as of October 7, 2009.<SUP> </SUP>(22)&dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.71</TD>
    <TD>&nbsp;</TD>
    <TD>Waiver to Senior Secured Note by and among Mandalay Media, Inc., Twistbox Entertainment, Inc. and ValueAct&nbsp;SmallCap Master Fund, L.P., dated as of January 25, 2010.<SUP> </SUP>(24)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.72</TD>
    <TD>&nbsp;</TD>
    <TD>Agreement, dated as of June 21, 2010, between ValueAct SmallCap Master Fund, L.P., NeuMedia, Inc., Jonathan Cresswell, Nathaniel MacLeitch, Robert Ellin, Trinad Management, LLC, Trinad Capital Master Fund, Ltd. and the Guber Family Trust. (25)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.73</TD>
    <TD>&nbsp;</TD>
    <TD>Mutual Release, dated as of June 21, 2010, among ValueAct SmallCap Master Fund, L.P., Antiphony (Management Holdings) Limited, Nathaniel MacLeitch, Jonathan Cresswell, NeuMedia, Inc., Twistbox Entertainment, Inc., Peter Guber, Robert Ellin, Paul Schaeffer, Adi McAbian, Richard Spitz, Ray Schaaf, Keith McCurdy, Russell Burke, James Lefkowitz and Trinad Management.<SUP> </SUP>(25)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.74</TD>
    <TD>&nbsp;</TD>
    <TD>Subordination Agreement, dated as of June 21, 2010, by and between Trinad Capital Master Fund, Ltd., and ValueAct SmallCap Master Fund, L.P., and each of NeuMedia, Inc. and Twistbox Entertainment, Inc. (25)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.75</TD>
    <TD>&nbsp;</TD>
    <TD>Deed Poll Release, dated as of June 21, 2010, between NeuMedia, Inc., Twistbox Entertainment, Inc., James Lefkowitz and Russell Burke. (25)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.76</TD>
    <TD>&nbsp;</TD>
    <TD>Non-Competition Agreement, dated as of June 21, 2010, among NeuMedia, Inc., Antiphony (Management Holdings) Limited,&nbsp;&nbsp;Jack Cresswell and Nate MacLeitch. (25)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.77</TD>
    <TD>&nbsp;</TD>
    <TD>Earn-Out Termination Letter Agreement, dated as of June 21, 2010, among ValueAct SmallCap Master Fund, L.P., NeuMedia, Inc., Jonathan Cresswell, Nathaniel MacLeitch and certain other parties. (25)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.78</TD>
    <TD>&nbsp;</TD>
    <TD>Amended and Restated Guaranty, dated as of June 21, 2010, by NeuMedia, Inc. to ValueAct SmallCap Master Fund, L.P. (25)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.79</TD>
    <TD>&nbsp;</TD>
    <TD>Letter Agreement, dated as of June 21, 2010, between ValueAct SmallCap Master Fund, L.P., NeuMedia, Inc., Rob Ellin and Trinad Management, LLC. (25)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.80</TD>
    <TD>&nbsp;</TD>
    <TD>Amended and Restated Guarantee and Security Agreement, dated as of June 21, 2010, among Twistbox Entertainment, Inc., NeuMedia, Inc. and each of its subsidiaries identified on Schedule I as being a subsidiary guarantor, the investors party thereto and ValueAct SmallCap Master Fund, L.P. (25)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.81</TD>
    <TD>&nbsp;</TD>
    <TD>Guarantee and Security Agreement, dated as of June 21, 2010, among Twistbox Entertainment, Inc., NeuMedia, Inc., each of the subsidiaries thereof party thereto, the investors party thereto and Trinad Capital Management, LLC. (26)&dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.82</TD>
    <TD>&nbsp;</TD>
    <TD>Confidential Separation, Transition and Release Agreement, dated as of February 22, 2011, by and between Ray Schaaf and NeuMedia, Inc. (26)&dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.83</TD>
    <TD>&nbsp;</TD>
    <TD>Restricted Stock Agreement, dated as of February 22, 2011, by and between Ray Schaaf and NeuMedia, Inc. (26)&dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.84</TD>
    <TD>&nbsp;</TD>
    <TD>Confidential Separation, Transition and Release Agreement, dated as of February 21, 2011, by and between Russell Burke and NeuMedia, Inc. (26)&dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.85</TD>
    <TD>&nbsp;</TD>
    <TD>Non-Qualified Stock Option Agreement, dated as of February 21, 2011, by and between Russell Burke and NeuMedia, Inc. (26)&dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.86</TD>
    <TD>&nbsp;</TD>
    <TD>Amendment to Employment Letter Agreement, dated as of February 21, 2011, by and between James Lefkowitz and NeuMedia, Inc. (26)&dagger;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 8%">10.87</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 90%">Non-Qualified Stock Option Agreement, dated as of February 21, 2011, by and between James Lefkowitz and NeuMedia, Inc. (26)&dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.88</TD>
    <TD>&nbsp;</TD>
    <TD>Subordinated Convertible Promissory Note, dated December 23, 2011, made by NeuMedia, Inc. in favor of Adage Capital Management L.P. (29)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.89</TD>
    <TD>&nbsp;</TD>
    <TD>Warrant, dated December 23, 2011, made by NeuMedia, Inc. in favor of Adage Capital Management L.P. (29)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.90</TD>
    <TD>&nbsp;</TD>
    <TD>Letter Agreement, dated December 23, 2011, made by and between NeuMedia, Inc. and Adage Capital Management L.P. (29)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.91</TD>
    <TD>&nbsp;</TD>
    <TD>Letter Agreement, dated December 28, 2011, made by and between NeuMedia, Inc. and Trinad Management, LLC. (29)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.92</TD>
    <TD>&nbsp;</TD>
    <TD>Second Amended and Restated Senior Subordinated Secured Note due June 21, 2013, made by Twistbox Entertainment, Inc. in favor of Taja, LLC. (29)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.93</TD>
    <TD>&nbsp;</TD>
    <TD>Restricted Stock Agreement, dated January 1, 2011. (32)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.93</TD>
    <TD>&nbsp;</TD>
    <TD>Employment Agreement, dated as of December 28, 2011, by and between NeuMedia, Inc. and Peter Adderton.<SUP> </SUP>(27)&dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.94</TD>
    <TD>&nbsp;</TD>
    <TD>Asset Purchase Agreement, dated as of December 28, 2011, by and among Digital Turbine, Inc., Digital Turbine Group, LLC, Peter Adderton and Fred Golding.<SUP> </SUP>(27)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.95</TD>
    <TD>&nbsp;</TD>
    <TD>Executive Chairman Agreement, dated as of December 28, 2011, by and between NeuMedia, Inc. and Robert Ellin.<SUP> </SUP>(27) &dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.96</TD>
    <TD>&nbsp;</TD>
    <TD>Convertible Note Financing Binding Term Sheet, effective March 1, 2012 with TAJA, LLC. (32)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.97</TD>
    <TD>&nbsp;</TD>
    <TD>Convertible Note Financing Binding Term Sheet, effective March 1, 2012 with Adage Capital Partners, L.P. (32)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.98</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Equity Financing Binding Term Sheet, effective as of March 1, 2012 (32)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.99</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Equity Financing Binding Term Sheet, dated as of March 5, 2012 (32)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.101</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Indemnification with Directors and Executive Officers. (30) &dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.102</TD>
    <TD>&nbsp;</TD>
    <TD>Restricted Stock Agreement, dated December 28, 2011, between Mandalay Digital Group, Inc. and Peter Adderton, for 9,037,500 shares of common stock. (31) &dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.103</TD>
    <TD>&nbsp;</TD>
    <TD>Restricted Stock Agreement, dated December 28, 2011, between Mandalay Digital Group, Inc. and Robert Ellin, for 3,600,000 shares of common stock. (31) &dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.104</TD>
    <TD>&nbsp;</TD>
    <TD>Restricted Stock Agreement, dated December 28, 2011 between Mandalay Digital Group, Inc. and Robert Ellin, for 3,400,000 shares of common stock. (31) &dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.105</TD>
    <TD>&nbsp;</TD>
    <TD>Restricted Stock Agreement, dated December 28, 2011, between Mandalay Digital Group, Inc. and Robert Ellin, for 1,000,000 shares of common stock. (31) &dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.106</TD>
    <TD>&nbsp;</TD>
    <TD>Amendment to Restricted Stock Agreement, dated May 18, 2012, between Mandalay Digital Group, Inc. and Peter Adderton. (31) &dagger;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 8%">10.107</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 90%">Amendment to Restricted Stock Agreements, dated May 18, 2012, between Mandalay Digital Group, Inc. and Robert Ellin. (31) &dagger;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.108</TD>
    <TD>&nbsp;</TD>
    <TD>Amended and Restated 2011 Equity Incentive Plan of Mandalay Digital Group, Inc. (31)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.109</TD>
    <TD>&nbsp;</TD>
    <TD>Amended and Restated 2011 Equity Incentive Plan Notice of Grant and Restricted Stock Agreement of Mandalay Digital Group, Inc. (31)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.110</TD>
    <TD>&nbsp;</TD>
    <TD>Amended and Restated 2011 Equity Incentive Plan Notice of Grant and Stock Option Agreement of Mandalay Digital Group, Inc. (31)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.111</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Equity Financing Binding Term Sheet, dated as of June 7, 2012. (32)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>21</TD>
    <TD>&nbsp;</TD>
    <TD>List of Subsidiaries. (32)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>23.1</TD>
    <TD>&nbsp;</TD>
    <TD>Consent of SingerLewak LLP. *</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>23.2</TD>
    <TD>&nbsp;</TD>
    <TD>Consent of Manatt, Phelps &amp; Phillips, LLP (included in Exhibit 5.1 filed herewith)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>24.1</TD>
    <TD>&nbsp;</TD>
    <TD>Powers of Attorney (included in the signature pages to this registration statement).</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 8%">*&nbsp;</TD>
    <TD STYLE="width: 92%">Filed herewith.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>**</TD>
    <TD>To be filed by amendment.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&dagger;</TD>
    <TD>Management or compensatory plan or arrangement.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(1)</TD><TD>Incorporated by reference to the Registrant&rsquo;s Annual Report on Form 10-KSB (File No. 000-10039), filed with the Commission
on December 2, 2005.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(2)</TD><TD>Incorporated by reference to the Registrant&rsquo;s Current Report on Form 8-K (File No. 000-10039), filed with the Commission
on November 14, 2007.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(3)</TD><TD>Incorporated by reference to the Registrant&rsquo;s Current Report on Form 8-K (File No. 000-10039), filed with the Commission
on January 2, 2008.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(4)</TD><TD>Incorporated by reference to the Registrant&rsquo;s Current Report on Form 8-K (File No. 000-10039), filed with the Commission
on February 12, 2008.&nbsp;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(5)</TD><TD>Incorporated by reference to the Registrant&rsquo;s Current Report on Form 8-K (File No. 000-10039), filed with the Commission
on September 20, 2006.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(6)</TD><TD>Incorporated by reference to the Registrant&rsquo;s Current Report on Form 8-K (File No. 000-10039), filed with the Commission
on October 18, 2006.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(7)</TD><TD>Incorporated by reference to the Registrant&rsquo;s Current Report on Form 8-K (File No. 000-10039), filed with the Commission
on January 3, 2007.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(8)</TD><TD>Incorporated by reference to the Registrant&rsquo;s Current Report on Form 8-K (File No. 000-10039), filed with the Commission
on August 9, 2006.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(9)</TD><TD>Incorporated by reference to the Registrant&rsquo;s Current Report on Form 8-K (File No. 000-10039), filed with the Commission
on October 27, 2008.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(10)</TD><TD>Incorporated by reference to the Registrant's Current Report on Form 8-K (File No. 000-10039), filed with the Commission on
March 28, 2008.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(11)</TD><TD>Incorporated by reference to the Registrant&rsquo;s Current Report on Form 8-K (File No. 000-10039), filed with the Commission
on March 20, 2009.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(12)</TD><TD>Incorporated by reference to the Registrant&rsquo;s Current Report on Form 8-K (File No. 000-10039), filed with the Commission
on March 23, 2006.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(13)</TD><TD>Incorporated by reference to the Registrant&rsquo;s Current Report on Form 8-K (File No. 000-10039), filed with the Commission
on July 30, 2007.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(14)</TD><TD>Incorporated by reference to the Registrant&rsquo;s Current Report on Form 8-K (File No. 000-10039), filed with the Commission
on July 3, 2007.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-indent: -27pt">&nbsp;</P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-indent: -27pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(15)</TD><TD>Incorporated by reference to our Current Report on Form 8-K (File No. 000-10039 ), filed with the Commission on October 15,
2008.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(16)</TD><TD>Incorporated by reference to our Registrant&rsquo;s&nbsp;Transition Report on Form 10-KT&nbsp;(File No. 000-10039), filed with
the Commission on July 15, 2008.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(17)</TD><TD>Incorporated by reference to our Current Report on Form 8-K (File No. 000-10039 ), filed with the Commission on May 16, 2007.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(18)</TD><TD>Incorporated by reference to our Current Report on Form 8-K (File No. 000-10039 ), filed with the Commission on June 2, 2008.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(19)</TD><TD>Incorporated by reference to our Current Report on Form 8-K (File No. 000-10039 ), filed with the Commission on February 23,
2009.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(20)</TD><TD>Incorporated by reference to our Current Report on Form 8-K (File No. 000-10039 ), filed with the Commission on June 4, 2009.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(21)</TD><TD>Incorporated by reference to our Quarterly Report on Form 10-Q (File No. 000-10039 ), filed with the Commission on August 14,
2009.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(22)</TD><TD>Incorporated by reference to our Current Report on Form 8-K (File No. 000-10039 ), filed with the Commission on October 14,
2009.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(23)</TD><TD>Incorporated by reference to our Quarterly Report on Form 10-Q (File No. 000-10039 ), filed with the Commission on November
16, 2009.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(24)</TD><TD>Incorporated by reference to our Current Report on Form 8-K (File No. 000-10039 ), filed with the Commission on January 28,
2010.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(25)</TD><TD>Incorporated by reference to our Current Report on Form 8-K (File No. 000-10039 ), filed with the Commission on June 23, 2010.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(26)</TD><TD>Incorporated by reference to our Quarterly Report on Form 10-Q (File No. 000-10039 ), filed with the Commission on February
22, 2011.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(27)</TD><TD>Incorporated by reference to our Current Report on Form 8-K (File No. 000-10039 ), filed with the Commission on January 4,
2012.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(28)</TD><TD>Incorporated by reference to our Current Report on Form 8-K (File No. 000-10039 ), filed with the Commission on February 7,
2012.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(29)</TD><TD>Incorporated by reference to our Quarterly Report on Form 10-Q (File No. 000-10039 ), filed with the Commission on February
24, 2012.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(30)</TD><TD>Incorporated by reference to our Current Report on Form 8-K (File No. 000-10039 ), filed with the Commission on May 10, 2012.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(31)</TD><TD>Incorporated by reference to our Current Report on Form 8-K (File No. 000-10039 ), filed with the Commission on May 30, 2012.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(32)</TD><TD>Incorporated by reference to Annual Report on Form 10-K (File No. 000-10039), filed with the Commission
on June 29, 2012.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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As filed with the Securities and Exchange
Commission on July 9, 2012
No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
MANDALAY DIGITAL GROUP, INC.
(Exact name of registrant as specified
in its charter)
Delaware
6794
22-2267658
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification Number)
4751 Wilshire Boulevard, Third Floor
Los Angeles, California 90010
(310) 601-2500
(Address, including zip code, and
telephone number, including
area code, of registrant's principal
executive offices)
Peter Adderton
Chief Executive Officer
4751 Wilshire Boulevard, Third Floor
Los Angeles, California 90010
(310) 601-2500
(Name, address,
including zip code, and telephone number, including area
code, of agent for service)
With Copies to:
Robert H. Platt, Esq.
Manatt, Phelps & Phillips, LLP
11355 West Olympic Boulevard
Los Angeles, CA 90064
(310) 312-4000
(310) 312-4224 Facsimile
Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this registration statement.
If any of the securities being registered
on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the
following box.
þ
If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same offering.
¨
If this Form is a post-effective amendment
filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
¨
If this Form is a post-effective amendment
filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
¨
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 the definitions
of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2
of the Securities Exchange Act of 1934. (Check one):
Large accelerated filer
¨
Accelerated filer
¨
Non-accelerated filer
¨
(Do not check
    if a smaller reporting company)
Smaller reporting company
þ
CALCULATION OF REGISTRATION FEE
Title of Each Class of
Securities to be Registered
Amount
to be
Registered
Proposed
Maximum
Offering Price
Per Share
Proposed
Maximum
Aggregate
Offering Price
Amount of
Registration Fee
Shares of common stock,
par value $0.0001 per share
23,310,473(1)(2)
$0.745 (3)
$17,366,302
$1,990.18
(1)
Consists of 17,989,047 issued and outstanding shares of common stock and 5,321,426 shares of
common stock issuable upon the exercise of certain warrants to purchase common stock. The shares registered are offered for
resale by the selling stockholders named in the prospectus.
(2)
Pursuant to Rule 416 under the Securities Act of 1933, as amended, there is also being registered hereby such indeterminate
number of additional shares of common stock of the registrant as may be issued or issuable in respect of the registered shares
to prevent dilution resulting from stock splits, stock dividends, stock distributions and similar transactions.
(3)
Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c)
under the Securities Act of 1933 and based on the average of the high and the low price of common stock on July 5, 2012,
as reported by the OTC QB market operated by OTC Markets Group, Inc.
The registrant hereby amends this registration statement
on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which
specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities
and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not
complete and may be changed. The selling stockholders may not sell these securities under this prospectus until the registration
statement of which it is a part and filed with the Securities and Exchange Commission is effective. This prospectus is not
an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale
is not permitted.
SUBJECT
TO COMPLETION, DATED
July 9,
2012
PROSPECTUS
Mandalay Digital
Group, Inc.
23,310,473 Shares
of Common Stock
This prospectus relates to the offering
by the selling stockholders of Mandalay Digital Group, Inc. named in this prospectus of up to 23,310,473 shares of common stock,
par value
$
0.0001 per share. All of the shares of common stock offered by this prospectus are being sold by the selling
stockholders. These shares include 17,989,047 issued and outstanding shares of common stock and 5,321,426 shares of common stock
issuable upon the exercise of certain warrants to purchase common stock.
The selling security holders will offer
their shares of our common stock at a fixed price of $1.00 per share until the shares of our common stock are quoted on the OTC
Bulletin Board, or listed for trading or quoted on any other public market, and thereafter at prevailing market prices or privately
negotiated prices.
The selling stockholders may sell the common
shares to or through underwriters, brokers or dealers or directly to purchasers. Underwriters, brokers or dealers may receive discounts,
commissions or concessions from the selling stockholders, purchasers in connection with sales of the common shares, or both. Additional
information relating to the distribution of the common shares by the selling stockholders can be found in this prospectus under
the heading "Plan of Distribution." If underwriters or dealers are involved in the sale of any securities offered by
this prospectus, their names, and any applicable purchase price, fee, commission or discount arrangement between or among them,
will be set forth, or will be calculable from the information set forth, in a supplement to this prospectus.
The selling security holders may dispose
of their securities from time to time through one or more of the means described in the section entitled "Plan of Distribution"
beginning on page  30 of this prospectus.
We will not receive any proceeds from the
sale of common stock by the selling stockholders. We will receive proceeds from the selling stockholders from any exercise of their
warrants made on a cash basis.
Our common stock is traded on the OTC QB
market operated by OTC Markets Group, Inc. under the symbol "MNDL." On July 5, 2012, the closing price
of our common stock was $0.79 per share.
Investing in our common stock involves
a high degree of risk. Before making any investment in our common stock, you should read and carefully consider the risks
described in this prospectus under "Risk Factors" beginning on page 7 of this prospectus.
You should rely only on the information
contained in this prospectus or any prospectus supplement or amendment thereto. We have not authorized anyone to provide you
with different information.
Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful
or complete. Any representation to the contrary is a criminal offense.
This prospectus is dated                 ,
2012
TABLE OF CONTENTS
Page
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
ii
ABOUT THIS PROSPECTUS
iii
WHERE YOU CAN FIND MORE INFORMATION
iii
PROSPECTUS SUMMARY
1
RISK FACTORS
7
SELLING STOCKHOLDERS
27
DETERMINATION OF OFFERING PRICE
30
PLAN OF DISTRIBUTION
30
USE OF PROCEEDS
32
MARKET PRICE OF AND DIVIDENDS ON COMMON STOCK
    AND RELATED MATTERS
32
BUSINESS
38
MANAGEMENT'S DISCUSSION AND ANALYSIS
    OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
44
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
    GOVERNANCE
65
EXECUTIVE COMPENSATION
68
DIRECTOR COMPENSATION
73
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
    AND MANAGEMENT
75
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    AND DIRECTOR INDEPENDENCE
77
DESCRIPTION OF CAPITAL STOCK
80
LEGAL MATTERS
83
EXPERTS
83
FINANCIAL STATEMENTS
F-1
i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This prospectus contains
forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Our forward-looking statements relate to future events or our future performance and
include, but are not limited to, statements concerning our strategy, future operations, future financial position, projected expenses,
prospects and plans and objectives of management. Other statements contained in this prospectus that are not historical facts are
also forward-looking statements.  You can sometimes identify forward-looking statements by our use of forward-looking
words like "may," "will," "could," "should," "expects," "intends,"
"plans," "anticipates," "projects," "believes," "estimates," "seeks,"
"predicts," "potential," or "continue" or the negative of these terms and other similar expressions
and terminology.
We caution investors
that any forward-looking statements presented in this prospectus, or that we may make orally or in writing from time to time, are
based on the beliefs of, assumptions made by, and information currently available to, us. Although we believe that the plans, objectives,
expectations and intentions reflected in or suggested by our forward-looking statements are reasonable, those statements are based
only on the current beliefs and assumptions of our management and on information currently available to us and, therefore, they
involve uncertainties and risks as to what may happen in the future.  Accordingly, we cannot guarantee that our plans,
objectives, expectations or intentions will be achieved.  Our actual results, performance (financial or operating) or
achievements could differ from those expressed in or implied by any forward-looking statement in this prospectus as a result of
many known and unknown factors, many of which are beyond our ability to predict or control, and those differences may be material.
For further discussion
of these and other factors see the sections in this prospectus entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Risk Factors." This prospectus and all other written and oral forward-looking
statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements
contained in or referred to in this section.
Our forward-looking
statements speak only as of the date they are made and should not be relied upon as representing our plans, objectives, expectations
and intentions as of any subsequent date.  Although we may elect to update or revise forward-looking statements at some
time in the future, we specifically disclaim any obligation to do so, even if our plans, objectives, expectations or intentions
change.
ii
ABOUT THIS PROSPECTUS
You should rely only
on the information contained in this prospectus. We have not authorized any person to provide you with different or inconsistent
information. If anyone provides you with different or inconsistent information, you should not rely on it. Neither we nor the selling
stockholders are making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should
assume that the information appearing in this prospectus is accurate only as of their respective dates. The Company's business,
financial condition, results of operations and prospects may have changed since such dates.
Unless otherwise indicated
or unless the context requires otherwise, all references in this prospectus to the "Company," "the registrant,"
"we," "us," and "our" mean Mandalay Digital Group, Inc., a Delaware corporation, including
our wholly-owned subsidiary Twistbox Entertainment, Inc. ("Twistbox").
WHERE YOU CAN FIND MORE INFORMATION
We file annual reports,
quarterly reports, current reports, proxy statements and other information with the Securities and Exchange Commission, or SEC. You
may read or obtain a copy of these reports at the SEC, public reference room at 100 F Street, N.E., Room 1580, Washington, D.C.
20549, on official business days during the hours of 10:00 am to 3:00 pm. You may obtain information on the operation of the
public reference room and its copy charges by calling the SEC at 1-800-SEC-0330. The SEC maintains a website that contains
registration statements, reports, proxy information statements and other information regarding registrants that file electronically
with the SEC. The address of the website is www.sec.gov.
We have filed with
the SEC a Registration Statement on Form S-1 under the Securities Act with respect to the shares of common stock being offered
by this prospectus. This prospectus is part of that registration statement. This prospectus does not contain all of the
information set forth in the registration statement or the exhibits to the registration statement. For further information
with respect to us and the shares offered by the selling stockholders pursuant to this prospectus, you should refer to the registration
statement and its exhibits. Statements contained in this prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete, and you should refer to the copy of that contract or other documents filed as
an exhibit to the registration statement. You may read or obtain a copy of the registration statement at the SEC's public
reference room and website referred to above.
iii
PROSPECTUS SUMMARY
This summary highlights
information contained throughout this prospectus and is qualified in its entirety to the more detailed information and financial
statements included elsewhere in this prospectus. This summary does not contain all of the information that should be considered
before investing in our common stock. Investors should read the entire prospectus carefully, including the more detailed
information regarding our business, the risks of purchasing our common stock discussed in this prospectus under "Risk Factors"
beginning on page 7 of this prospectus and our financial statements and the accompanying notes beginning on page F-1 of
this prospectus.
Our Company
Mandalay Digital Group,
Inc. ("Mandalay" or the "Company" or, in the first person as "we" "us" and "our"),
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 May 11, 2010, Mandalay
Media, Inc. merged into its wholly-owned, newly formed subsidiary, NeuMedia Inc., with NeuMedia as the surviving corporation. NeuMedia
issued: (1) one new share of common stock in exchange for each share of outstanding common stock of Mandalay Media, Inc. and (2)
one new share of preferred stock in exchange for each share outstanding preferred stock of Mandalay Media, Inc. as of May 11, 2010.
The preferred and common stock of NeuMedia had the same status and par value as the respective stock of Mandalay Media, Inc. and
NeuMedia acceded to all the rights, acquired all the assets and assumed all of the liabilities of Mandalay Media, Inc.
On October 27, 2004,
and as amended on December 17, 2004, NeuMedia 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) NeuMedia's net operating assets and liabilities were transferred
to the holders of its secured notes in satisfaction of the principal and accrued interest thereon; (2) $400,000 was transferred
to a liquidation trust and used to pay administrative costs and certain preferred creditors; (3) $100,000 was retained by NeuMedia
to fund the expenses of remaining public; (4) 3.5% of the new common stock of NeuMedia (140,000 shares) was issued to the holders
of record of NeuMedia's preferred stock in settlement of their liquidation preferences; (5) 3.5% of the new common stock
of NeuMedia (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 NeuMedia (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, NeuMedia 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, NeuMedia was a public shell company with no operations, and controlled by its significant stockholder, Trinad Capital Master
Fund, L.P.
From February 12, 2008
to October 23, 2008, our sole operations were those of our wholly-owned subsidiary, Twistbox. In October 2008, we acquired AMV
Holding Limited and its subsidiaries, a mobile media and marketing company. On June 21, 2010, we sold AMV Holding Limited and its
subsidiaries.
1
Current Operations
Mandalay is at the convergence of Internet
media content and mobile communications. We are an established provider of mobile services enabling mobile content distribution
and transactions serving Mobile Operators, End Consumers, and Original Equipment Manufactures (OEM's) of mobile devices and
tablets. Our software as a service ("SaaS") based platform delivers a mobile services platform that works with mobile
operators and third-party publishers to provide portal management, user interface, content development and billing technology that
enables the ecosystem required for the global distribution of mobile content. Our platforms enable our customers to implement an
intuitive user experience and storefront, enabling the discovery, purchase and download of mobile content. Our integrated solutions
address the mobile ecosystem spanning mobile optimized websites, mobile applications, mobile merchandising and content management,
mobile messaging, mobile advertising, mobile billing and predictive analytics. Our solutions allow our customers to drive loyalty,
generate revenue and reengineer business processes to capture the advantages of their mobile-enabled customer base. Our predictive
analytics capabilities allow our customers to recommend the right solution to their end-customer based upon the consumers'
tastes and preferences. We are headquartered in Los Angeles and have offices in Europe to support global sales and marketing.
Digital Turbine
On December 28, 2011,
the Company acquired the assets of Digital Turbine Group, LLC, the developer of Digital Turbine ("DT"), a technology
platform that allows media companies, mobile carriers, and their OEM handset partners to take advantage of multiple mobile operating
systems across multiple networks, and offers solutions that allow them to maintain their own branding and personalized, one-to-one
relationships with each end-user. DT's cross-platform user interface and multimedia management system for carriers and OEMs
can be integrated with different operating systems to provide a more organized and unified experience for end-users of mobile content
across search, discovery, billing, and delivery. Other aspects of the platform, such as a smart content discovery toolbar, allows
carriers and OEMs to control the data presented to their users while giving the end-user a more efficient way of finding and purchasing
the desired content.
With the acquisition
and integration of the assets of Digital Turbine, the Company will be able to provide an end-to-end, modular platform to the Company's
existing carrier customers. The combined Digital Turbine offering allows new and existing customers to choose from a fully outsourced,
smart mobile ecosystem to more efficient, modular components that can be integrated with different operating systems to provide
a more unified experience for end-users of mobile content across search, discovery, billing, and delivery.
Based upon the initial
launch data, the Company believes there is an opportunity to integrate its DT platform with new and existing mobile carriers. Mobile
carriers are facing increased competition from competing mobile application storefronts and improved user experiences from other
retailing, social networking, and operating system providers including Apple, Google, Amazon, and Facebook. As a result, operators
are looking for new, innovative solutions for how they better manage their existing user experience. The DT platform can be "white-labeled"
to allow operators to custom tailor their own unique branding experience to the customer.
In addition to improved
user experiences, many operators are looking for end-to-end solutions for their mobile storefronts that include procuring and programming
the content, managing the content experience, ingesting content into the content management system (CMS), securely installing and
de-installing applications from the device, and integrating with the back-end elements such as billing interfaces, analytics, settlement,
and reporting.
Twistbox Entertainment, Inc.
Twistbox Entertainment,
Inc. ("Twistbox") is a global publisher, developer and enabler of mobile content and data services across mobile networks.
Twistbox provides its services in over 14 countries supporting over 50 carriers. Since operations began in 2003, Twistbox has developed
an intellectual property portfolio that includes a proprietary mobile publishing platform covering: tools that automate device
management; distribution and billing technology; a mobile games development, distribution and retail platform; and a content ratings
system adopted by wireless carriers globally to assist with the deployment of age-verified content. Twistbox has leveraged its
intellectual property and carrier-class platforms to secure agreements with leading mobile operators throughout the world including,
among others, Vodafone, Telefonica, Orange, and Hutchison's 3.
We are considering
the future status and role of Twistbox in relation to our focus on the DT platform. Although it is our only active business, Twistbox
revenues have been declining, which we expect to continue for the foreseeable future. At the same time, we intend to seek to leverage
its existing customer base for offerings by DT. While we believe the offering of DT's platform to Twistbox customers is an
attractive strategy, it entails significant risks, some of which are described in "Risk Factors", and include the possibility
that Twistbox may operate at a deficit while we need to make investments to effectively launch DT, which, in turn, entails business
and financial risks and the possibility of needing additional capital and the associate dilution.
2
Twistbox's target
customers are the highly-mobile, digitally-aware 18 to 40 year old demographic. This group is a leading consumer of new mobile
handsets and represents more than 50% of mobile content consumption revenue globally. In addition, this group is very focused on
consumer lifestyle brands and is much sought after by advertisers.
On February 12, 2008,
the Company completed its acquisition of Twistbox Entertainment, Inc. pursuant to an Agreement and Plan of Merger entered into
on December 31, 2007, as subsequently amended by the Amendment to Agreement and Plan of Merger dated February 12, 2008, with Twistbox
Acquisition, Inc., a Delaware corporation and a wholly-owned subsidiary of NeuMedia ("Merger Sub"), Twistbox Entertainment,
Inc. ("Twistbox"), and Adi McAbian and Spark Capital, L.P., as representatives of the stockholders of Twistbox, as
part of which Merger Sub merged with and into Twistbox, with Twistbox as the surviving corporation (the "Merger").
Following the Merger, Twistbox became the sole operating subsidiary of NeuMedia until the acquisition of AMV Holding Limited, a
United Kingdom private limited company ("AMV") on October 23, 2008 as described further in this prospectus.
The principal offices of Mandalay Digital Group, Inc. are located
at 4751 Wilshire Boulevard, Third Floor, Los Angeles, CA 90010. The principal offices of our subsidiary Twistbox are headquartered
at 14242 Ventura Boulevard, 3rd Floor, Sherman Oaks, California 91423. The telephone number at our principal executive office is
(310) 601-2500. Our website address is www.mandalaydigital.com
.
Information contained on our website
is not deemed part of this prospectus.
Recent Developments
On May 23, 2012,
the Company received the written consent from stockholders holding a majority of its outstanding common stock to permit (but
not require) the Board of Directors of the Company to amend its Amended and Restated Certificate of Incorporation to (i)
effect a reverse stock split of the Company's common stock at any time prior to April 26, 2013, by a ratio of not less
than one-for-two and not more than one-for-ten, with the exact ratio to be set at a whole number within this range as
determined by the Board of Directors in its sole discretion (the "Reverse Stock Split") and (ii) to increase the
number of authorized shares of the Company's capital stock to 202,000,000 shares of stock, of which 200,000,000 shares
would be common stock and 2,000,000 shares would be preferred stock (the "Authorized Stock Increase"). The
written consents to the Reverse Stock Split and the Authorized Stock Increase included consents with respect to 15,510,476
shares (representing 18.8% of our common stock as of May 23, 2012) held by stockholders who had previously agreed to vote in
favor of such proposals in separate voting agreements they entered into in connection with their purchase from the Company of
the stock being registered hereby.  The shares being registered hereby of selling stockholders Adage Capital Partners, L.P.
and William C Powers Trust Dtd 12/19/09 were included in such shares subject to the voting agreement. In addition, such
stockholders, pursuant to the written consent, also approved the Company's Amended and Restated 2011 Equity Incentive
Plan of the Company, and related forms of Equity Incentive Plan Notice of Grant Restricted Stock Agreement, and Notice of
Grant and Stock Option Agreement.
Notwithstanding receipt
of stockholder approval of the Reverse Stock Split and the Authorized Stock Increase, the Board of Directors reserves the right,
without further action by the stockholders, to elect not to proceed with the Reverse Stock Split and/or the Authorized Stock Increase
if, at any time prior to the filing of a Certificate of Amendment for the Reverse Stock Split and/or Authorized Stock Increase,
the Board of Directors, in its sole discretion, determines that it is no longer in the Company's best interest and the best
interests of the Company's stockholders to proceed with the Reverse Stock Split and/or Authorized Stock Increase.
3
The Offering
This prospectus relates to the resale from
time to time by the selling stockholders identified in this prospectus of up to 23,310,473 shares of our common stock.  These
shares include 17,989,047 issued and outstanding shares of common stock and 5,321,426 shares of common stock issuable upon the
exercise of certain warrants to purchase common stock (see "–Background"). No shares are being offered for sale
by us.
Common stock outstanding prior to offering
85,953,136 (1)
Common stock equivalents outstanding prior to offering
86,053,136 (2)
Common stock offered by the selling stockholders
23,310,473 (3)
Common stock to be outstanding after the offering
91,274,562 (4)
Use of Proceeds
We will not receive any proceeds from the sale of the 23,310,473
        shares of common stock offered by the selling stockholders under this prospectus.
However, we will receive up to $3,049,998 in the aggregate from
        the selling stockholders if they exercise in full, on a cash basis, all of their unexercised warrants to purchase 5,321,426 shares
        of common stock.
OTC QB market symbol
"MNDL."
(1)
As of June 23, 2012.
(2)
As of June 23, 2012. Based on 85,953,136 outstanding shares of our common stock and 100,000 shares of common stock issuable upon conversion of our outstanding shares of Series A Convertible Preferred Stock (based on an assumed conversion price of $1.00 per share).
(3)
These shares include 17,989,047 issued and outstanding shares of common stock and 5,321,426 shares of common stock issuable upon the exercise of certain warrants to purchase common stock. Of these shares of common stock issuable under warrants, 964,284 are not exercisable by the holder prior to March 19, 2013 and 357,142 are not exercisable by the holder prior to June 7, 2013.
(4)
Based on the number of shares of common stock outstanding as of June 23, 2012. Assumes the full exercise of the unexercised warrants held by the selling stockholders as of June 23, 2012 to acquire 5,321,426 shares of common stock and that no other outstanding warrants and options are exercised.
4
Background
In connection with
the private placement transactions referred to below, we agreed with certain stockholders to register the shares of common stock
acquired in such transactions, including the shares of common stock underlying warrants to purchase common stock issues in such
private placements. In addition to these shares, we have also included certain other shares as referenced below.
On
June 15, 2012, the Company issued 150,000 shares of common stock of the Company to Merriman Capital, Inc. under the terms of a
restricted stock agreement
as consideration for financial and capital markets advisory services for the Company performed
by Merriman Capital, Inc. The Company agreed to register the securities purchased in this offering. Merriman Capital, Inc. is a
broker-dealer.
The shares vest over one year.
We have been advised that Merriman Capital, Inc.
acquired such shares in the ordinary course of business, not for resale, and did not, at the time of purchase, have any agreements
or understandings, directly or indirectly, with any person to distribute such securities other than this registration statement
.
We relied on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of
common stock under the Securities Act.
On June 8, 2012 (the "June
2012 Offering"), the Company sold 1,428,571 shares of its common stock and a warrant to purchase 357,142 shares of common
stock to an accredited investor for an aggregate purchase price of $1,000,000. The warrant has an exercise price of $0.70 per share
(subject to adjustment) and a five year term from the date of issuance. The warrant may not be exercised prior to the first anniversary
of the date of issuance. The Company agreed to register the securities purchased in this offering. The securities were issued pursuant
to the exemption provided by Section 4(2) of the Securities Act of 1933, as amended, for transactions by an issuer not involving
any public offering.
In
March 2012
(the "March 2012 Offering")
, the Company sold an aggregate of
3,857,143
shares of its common stock and warrants to purchase an aggregate of 964,284 shares of common stock to accredited investors
for an aggregate purchase price of $2.7 million. Each warrant has an exercise price of $0.70 per share (subject to adjustment)
and a five year term from the date of issuance. Each warrant may not be exercised prior to the first anniversary of the date of
issuance. The Company agreed to register the securities purchased in this offering. The securities were issued pursuant to the
exemption provided by Section 4(2) of the Securities Act of 1933, as amended, for transactions by an issuer not involving any public
offering.
In March 2012, the Company
entered into a Convertible Note Financing Binding Term Sheet (the "Adage Term Sheet") with Adage Capital Partners,
L.P. ("Adage"), pursuant to which the parties agreed to restructure certain terms of the convertible note financing
consummated on December 29, 2011. In connection with the restructuring, $7,037,333, representing the entire outstanding principal
amount and all accrued and unpaid interest thereon under the Subordinated Convertible Promissory Note in the original principal
amount of $7,000,000 issued by the Company to Adage (the "Adage Note"), was converted into 10,053,333
shares
of common stock of the Company effective as of March 1, 2012, and the exercise price of the warrant to purchase common stock of
the Company issued to Adage in connection with the purchase and sale of the Adage Note was changed to $0.70 per share, subject
to adjustment. As a result of the change to the exercise price, the warrant gives Adage the right to purchase up to 2,500,000 shares
of common stock of the Company, subject to adjustment. We relied on Section 3(a)(9) of the Securities Act of 1933, as amended,
as providing an exemption from registration for this transaction and relied on Section 4(2) of the Securities Act of 1933, as amended,
as providing for an exemption for the original issuance of the Adage Note and warrants.
In September 2009, the Company
issued a warrant to purchase 1,200,000 shares of common stock to Vivid Entertainment, LLC at an exercise price of $1.25 per share.,
which included an obligation to register such shares in connection with a registration by the Company. In January 2011, the warrant
terms were amended and restated to provide the vendor with a warrant to acquire 1,500,000 shares of common stock at an exercise
price of $0.25 per share and the Company issued to the vendor 2,500,000 shares of common stock under the terms of a restricted
stock agreement.
5
Plan of Distribution
The selling security
holders will offer their shares of our common stock at a fixed price of $1.00 per share until the shares of our common stock are
quoted on the OTC Bulletin Board, or listed for trading or quoted on any other public market, and thereafter at prevailing market
prices or privately negotiated prices.
The selling stockholders
themselves directly, or through their agents, or through their brokers or dealers, may sell their shares from time to time, in
(i) privately negotiated transactions, (ii) in one or more transactions, including block transactions in accordance with
the applicable rules of the OTC QB market operated by OTC Markets Group, Inc. or any other stock exchange, market or trading facility
on which our shares are traded or (iii) otherwise in accordance with the section of this prospectus entitled "Plan of
Distribution." To the extent required, the specific shares to be sold, the names of the selling stockholders, the respective
purchase prices and public offering prices, the names of any agent, broker or dealer and any applicable commission or discounts
with respect to a particular offer will be described in an accompanying prospectus supplement. In addition, any securities
covered by this prospectus which qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to this
prospectus.
For additional information
on the methods of sale, you should refer to the section of this prospectus entitled "Plan of Distribution," beginning
on page 30.
6
RISK FACTORS
Investing in our common stock involves
a high degree of risk. Current investors and potential investors should consider carefully the risks and uncertainties described
below together with all other information contained in this prospectus before making investment decisions with respect to our common
stock. If any of the following risks actually occurs, our business, financial condition, results of operations and our future growth
prospects would be materially and adversely affected. Under these circumstances, the trading price and value of our common stock
could decline, resulting in a loss of all or part of your investment. The risks and uncertainties described in this prospectus
are not the only ones facing us. Additional risks and uncertainties of which we are not presently aware, or that we currently consider
immaterial, may also affect our business operations.
Risks Relating to Our Business
The Company 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 past periods should not be considered indicative of our future performance.
In fact, in future periods, our revenues could decline as they have in recent years. Accordingly, we may not be able to achieve
profitability in the future.
Also, should Twistbox
continue to incur significant losses and not become profitable, we might have to sell all or part of Twistbox, or terminate operations,
which could adversely impact our operating results and financial condition, as well as our ability to qualify for a listing on
a senior exchange, and to finance possible acquisitions that we have considered.
In addition, assets
acquired under the DT acquisition have not yet begun to generate revenues. If there are delays in the integration of DT or if we
are unable to successfully negotiate with carriers or mobile operators or if these negotiations cannot occur on a timely basis,
we may not be able to generate revenues through the DT assets in the foreseeable future or at all.
We are considering
the future status and role of Twistbox in relation to our focus on the DT platform. Although it is our only active business, Twistbox
revenues have been declining, which we expect to continue for the foreseeable future. At the same time, we intend to seek to leverage
its existing customer base for offerings by DT. While we believe the offering of DT's platform to Twistbox customers is an
attractive strategy, it entails significant risks, some of which are described in "Risk Factors", and include the possibility
that Twistbox may operate at a deficit while we need to make investments to effectively launch DT, which, in turn, entails business
and financial risks and the possibility of needing additional capital and the associate dilution.
We have a limited
operating history in an emerging market, which may make it difficult to evaluate ourbusiness.
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 international and domestic markets;
·
maintain and expand our current, and develop new, relationships with compelling content owners;
7
·
retain or improve our current revenue-sharing arrangements with carriers and content owners;
·
continue to develop new high-quality products and services that achieve significant market acceptance;
·
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;
·
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.
Twistbox's revenues
are declining and are expected to continue to decline. 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. In addition, some payments from carriers that we recognize as revenue on a cash basis may be delayed unpredictably.
In addition to other
risk factors discussed in this section, factors that may contribute to the variability of our quarterly results include:
·
the number of new products and services released by us and our competitors;
·
the timing of release of new products and services by us and our competitors, particularly those that may represent a significant portion of revenues in a period;
·
the popularity of new products and services, and products and services released in prior periods;
·
changes in prominence of deck placement for our leading products and those of our competitors;
·
the expiration of existing content licenses;
·
the timing of charges related to impairments of goodwill, intangible assets, royalties and minimum guarantees;
·
changes in pricing policies by us, our competitors or our carriers and other distributors;
·
changes in the mix of original and licensed content, which have varying gross margins;
8
·
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;
·
general economic, political and market conditions and trends;
·
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. Our failure to meet market expectations would likely result in decreases in the trading price of our common stock.
We currently rely on wireless
carriers to market and distribute some of our products and services and thus to generate some of 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.
The future success of
our on-deck business 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
portion of our revenues through distribution relationships with a limited number of carriers for the foreseeable future. Our failure
to maintain our relationships with these carriers would materially reduce our revenues and thus harm our business, operating results
and financial condition.
We have both exclusive
and non-exclusive carrier agreements. Typically, carrier agreements have a term of one or two years with automatic renewal provisions
upon expiration of the initial term, absent a contrary notice from either party. In addition, some carrier agreements provide that
the carrier can terminate the agreement early and, in some instances, at any time without cause, which could give them the ability
to renegotiate economic or other terms. The agreements generally do not obligate the carriers to market or distribute any of our
products or services. In many of these agreements, we warrant that our products do not violate community standards, do not contain
libelous content, do not contain material defects or viruses, and do not violate third-party intellectual property rights and we
indemnify the carrier for any breach of a third party's intellectual property. In addition, many of our agreements allow
the carrier to set the retail price without adjustment to the negotiated revenue split. If one of these carriers sets the retail
price below historic pricing models, the total revenues received from these carriers will be significantly reduced.
Many other factors outside
our control could impair our ability to generate revenues through a given carrier, including the following:
·
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;
9
·
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.
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 licenses that are both 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 our licenses, and such termination 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.
10
Inferior on-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, content licensors,
and mobile publishers 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 attracts 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.
We currently rely on third-party
billing aggregators to provide end-users with access to some of our products and services through premium short message system
(Premium SMS), WAP billing and other technologies. The loss of, or a change in, any of these significant third-party relationships
or the use of mobile billing technologies could reduce the number of transactions initiated by these end-users and thus materially
reduce our revenues.
Our off-deck business
is dependent upon access to available traffic and billing aggregators that use mobile billing technologies to deliver and bill
for our products and services. If we were to lose one or more of these relationships, or if there is a material change or limitation
in the use of certain billing technologies, we would experience a significant reduction in the number of transactions initiated
by end-users and thus material reduction in our revenues.
11
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.
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.
As a result of a majority
of our revenues from on-deck distribution channels 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 attributable to
on-deck distribution could decline significantly and our financial condition will be harmed.
12
Risks Related to Our Market
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 compete for platform deployment contracts amongst other mobile platform companies. We also compete for experienced
and talented employees.
Our primary competitors
for the on-deck distribution channels as well as the provisioning of platform services include Mondia Media, Motricity, net mobile
AG, Jesta Digital, Buongiorno (acquired by NTT DOCOMO), Mobile Streams and Gameloft, and for end-users via our direct-to-consumer
off-deck services they include Zamano plc, Playphone, Inc, Jesta and Flycell Inc.  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. DT, whose principal customers
would be carriers, would face competition from any carriers who decided to distribute their own products or services. In addition,
while we are not aware of any non-carriers who are seeking to offer the equivalent scope of services as the DT platform, various
of the competitors mentioned above (and new competitors entering the mobile platform space) currently offer or could in the future
offer components of DT's platform, and may seek to expand their offerings to compete with DT on a comprehensive basis, especially
if DT's model and approach meets with success.
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. If we are unable to compete effectively or we are not as successful as our competitors in our target markets, our sales
could decline (or inhibit generation of sales, in DT's case), our margins could decline and we could lose market share (or in DT's
case, fail to penetrate the market), any of which would materially harm our business, operating results and financial condition.
13
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, are
not marketed effectively through our direct-to-consumer operations, 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, marketed effectively and initially adopted, a subsequent shift in our carriers, the entertainment preferences of end
users, or our relationship with third-party billing aggregators could cause a decline in the popularity of, or access to, our
offerings could materially reduce our revenues and harm our business, operating results and financial condition.
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 currently rely
on the current state of the law in certain territories where we operate our "off-deck" direct-to-consumer business
and any adverse change in such laws may significantly adversely impact our revenues and thus our operating results and financial
condition.
Decisions that regulators
or governing bodies make with regard to the provision and marketing of mobile content and/or billing can have a significant impact
on the revenues generated in that market. Although most of our markets are mature with regulation clearly defined and implemented,
there remains the potential for regulatory changes that would have adverse consequences on the business and subsequently our
revenue.
We rely on our current understanding
of regional regulatory requirements pertaining to the marketing, advertising and promotion of our "off-deck" direct-
to-consumer products and services and any adverse change in such regulations, or a finding that we did not properly understand
such regulations, may significantly impact our ability to market, advertise and promote our products and services thereby adversely
impact our revenues and thus our operating results and financial condition.
Our off-deck business
relies extensively on marketing, advertising and promoting its products and services requiring it to have an understanding of the
local laws and regulations governing its business.  In the event that we have relied on inaccurate information or advice,
and engage in marketing, advertising or promotional activities that are not permitted, we may be subject to penalties, restricted
from engaging in further activities or altogether prohibited from offering our products and services in a particular territory,
all or any of which will adversely impact our revenues and thus our operating results and financial condition.
14
The strategic
direction of the Digital Turbine business is not proven or certain.
The business model that
Digital Turbine is pursuing, white label storefront solutions, is not proven. There are many different types of models including,
but not limited to, up-front fees, revenue shares, per device fees, and advertising. Initial feedback from customers shows preference
for different types of models. This could lead to risk in predicting future revenues and profits by individual customers. In particular,
the 'free' download market is reliant upon mobile advertising and the mobile advertising market is still in a nascent
phase of monetization.
In addition, our strategy
for Digital Turbine entails offering its platform to Twistbox customers. There can be no assurance that we will be able to successfully
market new services and offerings to Twistbox customers. Moreover, in order to credibly offer DT's platform, we will need
to achieve additional operational and technical achievements to further develop the product. While we remain optimistic about our
ability to complete this build out, it will be subject to all of the risks attendant to development efforts as well as the need
to provide additional capital to the effort.
Risks Related to Our Industry
Wireless communications technologies
are changing rapidly, and we may not be successful in working with these new technologies.
Wireless network and
mobile handset technologies are undergoing rapid innovation. New handsets with more advanced processors and supporting advanced
programming languages continue to be introduced. In addition, networks that enable enhanced features are being developed and deployed.
We have no control over the demand for, or success of, these products or technologies. If we fail to anticipate and adapt to these
and other technological changes, the available channels for our products and services may be limited and our market share and our
operating results may suffer. Our future success will depend on our ability to adapt to rapidly changing technologies and develop
products and services to accommodate evolving industry standards with improved performance and reliability. In addition, the widespread
adoption of networking or telecommunications technologies or other technological changes could require substantial expenditures
to modify or adapt our products and services.
Technology changes in
the wireless industry require us to anticipate, sometimes years in advance, which technologies we must implement and take advantage
of in order to make our products and services, and other mobile entertainment products, competitive in the market. Therefore, we
usually start our product development with a range of technical development goals that we hope to be able to achieve. We may not
be able to achieve these goals, or our competition may be able to achieve them more quickly and effectively than we can. In either
case, our products and services may be technologically inferior to those of our competitors, less appealing to end users, or both.
If we cannot achieve our technology goals within our original development schedule, then we may delay their release until these
technology goals can be achieved, which may delay or reduce our revenues, increase our development expenses and harm our reputation.
Alternatively, we may increase the resources employed in research and development in an attempt either to preserve our product
launch schedule or to keep up with our competition, which would increase our development expenses. In either case, our business,
operating results and financial condition could be materially harmed.
The complexity of and incompatibilities
among mobile handsets may require us to use additional resources for the development of our products and services.
To reach large numbers
of wireless subscribers, mobile entertainment publishers and white label storefront providers 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.
15
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 fail 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.
16
Our business
depends on the growth and maintenance of wireless communications infrastructure.
Our success will depend
on the continued growth and maintenance of wireless communications infrastructure in the United States and internationally. This
includes deployment and maintenance of reliable next-generation digital networks with the speed, data capacity and security necessary
to provide reliable wireless communications services. Wireless communications infrastructure may be unable to support the demands
placed on it if the number of subscribers continues to increase, or if existing or future subscribers increase their bandwidth
requirements. Wireless communications have experienced a variety of outages and other delays as a result of infrastructure and
equipment failures, and could face outages and delays in the future. These outages and delays could reduce the level of wireless
communications usage as well as our ability to distribute our products and services successfully. In addition, changes by a wireless
carrier to network infrastructure may interfere with downloads and may cause end users to lose functionality. This could harm our
business, operating results and financial condition.
Future mobile
handsets may significantly reduce or eliminate wireless carriers' control over delivery of our products and services and
force us to rely further on alternative sales channels, which, if not successful, could require us to increase our sales and marketing
expenses significantly.
A growing number of
handset models currently available allow wireless subscribers to browse the Internet and, in some cases, download applications
from sources other than through a carrier's on-deck portal. In addition, the development of other application delivery mechanisms
such as premium-SMS may enable subscribers to download applications without having to access a carrier's on-deck portal.
Increased use by subscribers of open operating system handsets or premium-SMS delivery systems will enable them to bypass the carriers'
on-deck portal and could reduce the market power of carriers. This could force us to rely further on alternative sales channels
and could require us to increase our sales and marketing expenses significantly. Relying on placement of our products and services
in the menus of off-deck distributors may result in lower revenues than might otherwise be anticipated. We may be unable to develop
and promote our direct website distribution sufficiently to overcome the limitations and disadvantages of off-deck distribution
channels. This could harm our business, operating results and financial condition
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.
17
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 Related to Our Management, Employees
and Potential Acquisitions
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. We have had two people fill the position
of Chief Executive Officer in the last two years. The loss of the services of any of our executive officers or other key employees
could harm our business. Because not all of our executive officers and key employees are under employment agreements or are under
agreements with short terms, their future employment with the Company is uncertain specifically our Chief Executive Officer's and
our Executive Chairman's agreements each have short terms.
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, we conduct principal overseas operations in Germany, an area that, similar to our headquarters region, has a high cost
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. Some 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.
18
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 (except as otherwise disclosed within this
document), 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, even in instances where
acquisition negotiations are unsuccessful. 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.
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.
The acquisition
of Logia Mobile might not be successful, or accretive to long-term shareholder value.
While we believe that
targeted acquisitions such as Logia Mobile will facilitate accelerated distribution for the DT user experience, there is no assurance
that this will be the case or that we will be able to generate significant growth in revenues from Logia's mobile customers
or from other potential acquisitions. In particular, a significant portion of Logia Mobile's revenue comes from one large
mobile operator customer. and Logia Mobile is reliant upon that customer for a significant portion of its operating cash flow.
In addition, there is no assurance that mobile operators will be successful and continue to want to compete with other mobile storefronts,
and they may decide they simply want to provide network access to their customers. The solutions are complex with many different
components and there is risk in the ability to integrate all of these various components into a single solution.
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
restricted stock and stock options grants as a fundamental component of our employee compensation packages. We believe that such
grants 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 or restricted stock 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.
19
Risks Related to the Economy in the
United States and Globally
The effects of the recent
recession in the United States and general downturn in the global economy, including financial market disruptions, could have an
adverse impact on our business, operating results or financial condition.
Our operating results
also may be affected by uncertain or changing economic conditions such as the challenges that are currently affecting economic
conditions in the United States and the global economy. If global economic and market conditions, or economic conditions in the
United States or other key markets, remain uncertain or persist, spread, or deteriorate further, we may experience material impacts
on our business, operating results, and financial condition in a number of ways including negatively affecting our profitability
and causing our stock price to decline.
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, including relating to the current European sovereign debt crisis;
·
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.
20
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.
Risks Related to Potential Liability,
our Intellectual Property and our Content
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 obtained patent
protection. Consequently, we may not be able to protect our technologies from independent invention by third parties. Despite our
efforts to protect our intellectual property rights, unauthorized parties may attempt to copy or otherwise to obtain and use our
technology and software. Monitoring unauthorized use of our technology and software is difficult and costly, and we cannot be certain
that the steps we have taken will prevent piracy and other unauthorized distribution and use of our technology and software, particularly
internationally where the laws may not protect our intellectual property rights as fully as in the United States. In the future,
we may have to resort to litigation to enforce our intellectual property rights, which could result in substantial costs and diversion
of our management and resources.
In addition, although
we require third parties to sign agreements not to disclose or improperly use our intellectual property, it may still be possible
for third parties to obtain and improperly use our intellectual properties without our consent. This could harm our business, operating
results and financial condition.
Third parties may sue us
for intellectual property infringement, which, if successful, may disrupt our business and could require us to pay significant
damage awards.
Third parties may sue
us for intellectual property infringement or initiate proceedings to invalidate our intellectual property, either of which, if
successful, could disrupt the conduct of our business, cause us to pay significant damage awards or require us to pay licensing
fees. In the event of a successful claim against us, we might be enjoined from using our licensed intellectual property, we might
incur significant licensing fees and we might be forced to develop alternative technologies. Our failure or inability to develop
non-infringing technology or software or to license the infringed or similar technology or software on a timely basis could force
us to withdraw products and services from the market or prevent us from introducing new products and services. In addition, even
if we are able to license the infringed or similar technology or software, license fees could be substantial and the terms of these
licenses could be burdensome, which might adversely affect our operating results. We might also incur substantial expenses in defending
against third-party infringement claims, regardless of their merit. Successful infringement or licensing claims against us might
result in substantial monetary liabilities and might materially disrupt the conduct of our business.
Litigation may
harm our business.
Substantial, complex
or extended litigation could cause us to incur significant costs and distract our management. For example, lawsuits by employees,
stockholders, collaborators, distributors, customers, competitors or others could be very costly and substantially disrupt our
business. Disputes from time to time with such companies, organizations or individuals are not uncommon, and we cannot assure you
that we will always be able to resolve such disputes or on terms favorable to us. Unexpected results could cause us to have financial
exposure in these matters in excess of recorded reserves and insurance coverage, requiring us to provide additional reserves to
address these liabilities, therefore impacting profits.
21
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.
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.
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. Additionally,
we could continue to be exposed to these claims and potential liability even if and after we decide to sell such assets.
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.
22
Government regulation of
our marketing methods could restrict our ability to adequately advertise and promote our content and services 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 regulate the methods and manner in which
certain of our products and services may be marketed to potential end-users.  Regulation aimed at prohibiting, limiting
or restricting various forms of advertising and promotion we use to market our products and services could also increase our cost
of operations or preclude the ability to offer our products and services altogether. As a result, government regulation of our
marketing efforts 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 Common
Stock
There is a limited
trading market for our common stock.
Although prices for
our shares of common stock are quoted as of the dated of this filing on the OTC QB tier of the OTC Markets (under the symbol MNDL),
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. We were removed from the OTC Bulletin Board in April 2012 due to having
three untimely filings with the SEC in a two-year period.
There is no assurance
that we will regain OTC bulletin board quotation or a listing on any national securities exchange, whose requirements would require
a reverse split of our stock, compliance with other quantitative and qualitative requirements and a subjective evaluation by the
staffs of any such national securities exchange. Even if we attain a listing on a national securities exchange there is no guarantee
we will maintain it.
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 QB tier of the OTC Markets under the symbol MNDL. There is currently no broadly followed, established
trading market for our common stock. While we are hopeful that 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
QB tier of the OTC Markets 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 to a lower tier would likely decline. In addition, the tier of the
OTC Markets on which we are traded could change. Any change could make it harder for holders of our common stock or potential investors
to access our information and find quotes for our stock.
23
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, or the issuance of new shares related to an acquisition, could result in dilution to our existing
stockholders and have a material adverse effect on our earnings.
Any sale or issuance
of common stock by us in a future offering or acquisition 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 intangible assets if we acquire another company, and this could negatively impact our earnings
and results of operations.
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.
24
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 our business
or us. 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.
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 56% 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.
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, requires us to evaluate and report on our internal control over financial reporting. We
are in the process of strengthening and testing our system of internal controls. The process of implementing our internal controls
and complying with Section 404 is expensive and time consuming and requires 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 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 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, if we fail to comply with the
applicable portions of Section 404, we could be subject 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.
During management's annual review of our internal control over financial reporting, we determined the following processes contain material weaknesses as of March 31, 2012: our maintenance of corporate records and contracts and our financial close and reporting process. With respect to our maintenance of corporate records and contracts, we determined there were weaknesses in our record keeping of records, contracts and board minutes. With respect to our financial close and reporting process, we determined there were weaknesses based on the lack of secondary review of key accounting and financial reporting functions.  Our management is in the process of identifying steps necessary to address the material weaknesses existing as of March 31, 2012, including recruiting additional accounting personnel and improving our internal policies and guidelines.  We expect that our remediation efforts will be implemented during the fiscal year ending March 31, 2013.  These efforts may not be sufficient to fully remediate these material weakness and additional material weaknesses may arise.
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 are subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act. The requirements of these rules and
regulations has resulted in an increase in our legal, accounting and financial compliance costs, may make some activities more
difficult, time-consuming and costly and may place undue strain on our personnel, systems and resources.
25
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 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. We determined we had material weaknesses as of March 31, 2012. See "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." These efforts will also involve substantial accounting-related costs.
The Sarbanes-Oxley
Act makes it more difficult and more expensive for us to maintain directors' and officers' liability insurance, and
we may be required in the future  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.
The ownership interest of
our current stockholders will be substantially diluted if our outstanding securities convertible and/or exercisable into shares
of our common stock are converted and/or exercised.
As of June 15, 2012,
we had an aggregate of approximately $3,680,000 of Convertible Notes convertible into 18,352,381 shares of our common stock, and
warrants to purchase 18,312,987 shares of our common stock. To the extent our outstanding securities convertible and/or exercisable
into shares of our common stock are converted and/or exercised, additional shares of our common stock will be issued, which will
result in dilution to our stockholders and increase the number of shares of common stock eligible for resale into the public market.
Sales of such shares of common stock could adversely affect the market price of our common stock.
Shares eligible for future
sale
As of June 15, 2012,
51,196,077 of our total outstanding shares are restricted from immediate resale but may be sold into the market in the near future.
This could cause the market price of our common stock to drop significantly. Shares of restricted common stock are generally available
for resale following a six month holding period. As restrictions on resale end, the market price could drop significantly if the
holders of these restricted shares sell them or are perceived by the market as intending to sell them.
26
SELLING STOCKHOLDERS
This prospectus covers the resale from
time to time by the selling stockholders identified in the table below of:
·
Up to 17,989,047 issued and outstanding shares of our common stock; and
·
Up to 5,321,426 shares of our common stock issuable upon exercise of warrants.
We have filed with
the SEC a Registration Statement on Form S-1, of which this prospectus forms a part, under the Securities Act to register the
resale of shares of common stock by the selling stockholders. The selling stockholders identified in the table below may from
time to time offer and sell under this prospectus any or all of the shares of common stock described under the column "Shares
of Common Stock Being Offered in the Offering" in the table below. The Registration Statement on Form S-1 was filed pursuant
to the terms of certain registration rights obligations of the Company, including to purchasers in the June 2012 Offering and the
March 2012 Offering, and certain other stockholders as agreed by the Company.
We have been advised
that each of these selling stockholders acquired our common stock and warrants to acquire shares of our common stock referenced
in the table below in the ordinary course of business, not for resale, and that none of these selling stockholders had, at the
time of purchase, any agreements or understandings, directly or indirectly, with any person to distribute the related common stock.
We have assumed all
shares of common stock reflected on the table below will be sold from time to time in the offering covered by this prospectus,
but the selling stockholders may sell none or only a portion of the shares of common stock listed in the table below in connection
with the offering.
The following table
sets forth, based on information provided to us by the selling stockholders or known to us, the name of each selling stockholder,
the nature of any position, office or other material relationship, if any, which each selling stockholder has had, within the past
three years, with us or with any of our predecessors or affiliates, and each selling stockholder's ownership of our common
stock before this offering based on the number of shares of our common stock owned and the number of shares issuable upon exercise
of warrants, as applicable held by each such selling stockholder.  The selling stockholders identified below may have sold,
transferred or otherwise disposed of some or all of their shares since the date on which the information in the following table
is presented in transactions exempt from, or not subject to, the registration requirements of the Securities Act. Information
concerning the selling stockholders may change from time to time and, if necessary, we will amend or supplement this prospectus
accordingly. We cannot provide an estimate as to the number of shares of common stock that will be held by the selling stockholders
upon termination of the offering covered by this prospectus because the selling stockholders may offer some or all of their shares
of common stock under this prospectus. The selling stockholders may also sell, transfer or otherwise dispose of all or a portion
of their shares in transactions exempt from the registration requirements of the Securities Act or pursuant to another effective
registration statement covering those shares.
The number of shares
owned are those beneficially owned, as determined under the rules of the SEC, and the information is not necessarily indicative
of beneficial ownership for any other purpose.  Under these rules, beneficial ownership includes any shares of common stock
as to which a person has sole or shared voting power or investment power and any shares of common stock which the person has the
right to acquire within 60 days through the exercise of any option, warrant or right, through conversion of any security or pursuant
to the automatic termination of a power of attorney or revocation of a trust, discretionary account or similar arrangement.
27
Selling
    Stockholder
Shares
    of
Common Stock
Owned Before this
Offering
Shares
    of Common
Stock Underlying
Warrants Owned
Before this Offering
Shares
    of Common
Stock Being Offered in
this Offering
Shares
    of Common
Stock Owned Upon
Completion of this
Offering (1)
Percentage
    of
Common Stock
Outstanding Upon
Completion of this
Offering (2)
Adage Capital Partners, L.P. (3) (11)
10,053,333
2,500,000
12,553,333
-
-
William C. Powers & Carolyn C. Powers, Trustees of the Powers
    Trust dtd 12/18/09 (4)
1,428,571
357,142
1,785,713
-
-
William C. Powers, Trustee of the William C. Powers Trust dtd 12/18/09
    (5) (11)
2,857,143
714,285
3,571,428
-
-
Louis Addeo (6)
142,857
35,714
178,571
-
-
McKenna & Associates, LLC (7)
142,857
35,714
178,571
-
-
Scott Mather, Trustee of the Mather Family Trust dtd 8/21/08 (8)
714,286
178,571
892,857
-
-
Vivid Entertainment, LLC (9)
2,500,000
1,500,000
4,000,000
-
-
Merriman Capital, Inc. (10)
1,002,913
-
150,000
852,913
*
*
Represents less than 1.00%.
(1)
Assumes that (i) all of the shares of common stock to be registered on the registration statement of which this prospectus
is a part, including all shares of common stock underlying warrants held by the selling stockholders, are sold in the offering
and (ii) that no other shares of common stock are acquired or sold by the selling stockholder prior to the completion of the
offering. However, subject to any applicable restrictions of transfer agreed to by the selling stockholders (see "Plan of
Distribution" in this prospectus), the selling stockholders may sell all, some or none of the shares offered pursuant to
this prospectus and may sell other shares of our common stock that they may own pursuant to another registration statement under
the Securities Act or sell some or all of their shares pursuant to an exemption from the registration provisions of the Securities
Act, including under Rule 144.
(2)
Based on 85,953,136 shares of common stock as of June 23, 2012. Also, assumes the full exercise of the unexercised warrants
held by the selling stockholders as of June 23, 2012 to acquire an additional 5,321,426 shares of common stock and that no other
outstanding warrants and options are exercised nor any shares of Series A Convertible Preferred Stock are converted into shares
of common stock.
(3)
Acquired 10,053,333 shares of common stock on March 1, 2012 upon conversion of a convertible note held by the selling stockholder
originally issued by the Company in December 2011, and 2,500,000 shares of common stock underlying a warrant issued in December
2011. Adage Capital Partners GP, L.L.C ("Adage GP") is the general partner of Adage Capital Partners, L.P. The managing
member of Adage GP is Adage Capital Advisors, L.L.C, whose managing members are Robert Atchinson and Phillip Gross.
(4)
Purchased in a private placement in June 2012. William C. Powers and Carolyn C. Powers share voting and dispositive power over
the securities, as trustees. The warrants may not be exercised prior to June 7, 2013.
(5)
Purchased in a private placement in March 2012. William C. Powers has voting and dispositive power over the securities, as
trustee. The warrants may not be exercised prior to March 19, 2013.
(6)
Purchased in a private placement in March 2012. The warrants may not be exercised prior to March 19, 2013.
(7)
Purchased in a private placement in March 2012. Andrew McKenna has voting and dispositive power over the securities as managing
member of McKenna & Associates, LLC. The warrants may not be exercised prior to March 19, 2013.
(8)
Purchased in a private placement in March 2012. Scott Mather has voting and dispositive power over these shares as trustee.
The warrants may not be exercised prior to March 19, 2013.
28
(9)
Common stock acquired under a Restricted Stock Agreement, dated January 1, 2011. 1,500,000 shares of common stock underlying
a warrant issued by the Company on September 23, 2009, as amended and restated on January 1, 2011.
(10)
Common stock acquired under a Restricted Stock Agreement, as consideration for financial and capital markets
advisory services for the Company performed by Merriman Capital, Inc. Merriman Capital, Inc. is a broker-dealer. We have been advised
that Merriman Capital, Inc. acquired the shares being offered under this prospectus in the ordinary course of business, not for
resale, and did not, at the time of purchase, have any agreements or understandings, directly or indirectly, with any person to
distribute such securities other than this registration statement.
(11)
The written consents to the Reverse Stock Split and the Authorized Stock Increase included consents with respect to 15,510,476 shares (representing 18.8% of our common stock as of May 23, 2012) held by stockholders who had previously agreed to vote in favor of such proposals in separate voting agreements they entered into in connection with their purchase from the Company of the stock being registered hereby.  The shares being registered hereby of selling stockholders Adage Capital Partners, L.P. and William C Powers Trust Dtd 12/19/09 were included in such shares subject to the voting agreement.
29
DETERMINATION OF OFFERING PRICE
The selling security
holders will offer their shares of our common stock at a fixed price of $1.00 per share until the shares of our common stock are
quoted on the OTC Bulletin Board, or listed for trading or quoted on any other public market, and thereafter at prevailing market
prices or privately negotiated prices.
The initial offering
price has been determined arbitrarily and does not have any relationship to any established criteria of value, such as book value
or earning per share. Additionally, because there is no established trading market for our common stock, the price of the common
stock is not based on past earnings, nor is the price of the common stock indicative of the current market value of the assets
owned by us.
PLAN OF DISTRIBUTION
The selling stockholders
and any of their pledgees, donees, transferees, assignees and successors-in-interest may, from time to time, sell any or all of
their shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions
either at a fixed price of $1.00 per share or, once our common stock is listed for trading or quoted on the OTC Bulletin Board or
another public market, at prevailing market prices at the time of sale.  This prospectus may also be used by transferees of
the selling stockholders, including broker-dealers or other transferees who borrow or purchase the shares to settle or close out
short sales of shares of common stock. Selling stockholders will act independently of us in making decisions with respect to the
timing, manner and size of each sale or other transfer. We will not receive any of the proceeds from sales or transfers by the
selling stockholders or any of their transferees.
We expect that the
selling stockholders will sell their shares primarily through sales on the OTC QB market operated by OTC Markets Group, Inc. or
any other stock exchange, market or trading facility on which our shares are traded or in private transactions. Sales may be effected
by means of one or more of the following transactions, which may involve cross or block transactions:
·
ordinary brokerage transactions and transactions in which the broker-dealer solicits investors;
·
block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
·
purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
·
an exchange distribution in accordance with the rules of the applicable exchange;
·
privately negotiated transactions;
·
settlement of short sales made after the date that this registration statement is declared effective by the SEC;
·
transactions in which broker-dealers may agree with one or more of the selling stockholders to sell a specified number of such
shares at a stipulated price per share;
·
through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
·
through the distribution of common stock by any selling stockholder to its partners, members or stockholders;
·
any other method permitted pursuant to applicable law; and
·
a combination of any such methods of sale.
The selling stockholders
may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus. In addition, in
some states the securities may not be sold unless registered or qualified for sale or an exemption from registration or qualification
requirements is available and is complied with. The selling stockholders will have the sole discretion not to accept any purchase
offer or make any sale of their shares if they deem the purchase price to be unsatisfactory at a particular time. To the extent
required, we may amend or supplement this prospectus from time to time to describe a specific plan of distribution.
30
Broker-dealers engaged
by the selling stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser)
in amounts to be negotiated. The selling stockholders do not expect these commissions and discounts to exceed what is customary
in the types of transactions involved.
The selling stockholders
may from time to time pledge or grant a security interest in some or all of the shares of common stock owned by them and, if they
default in the performance of their secured obligations, the pledgees or secured parties may offer and sell shares of common stock
from time to time under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provision
of the Securities Act amending the list of selling stockholders to include the pledgee, transferee or other successors-in-interest
as selling stockholders under this prospectus.
In connection with
sales of common stock or interests therein, selling stockholders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of the common stock in the course of hedging the positions they
assume. Selling stockholders may also engage in short sales, puts and calls or other transactions in our securities or derivatives
of our securities and may sell and deliver shares in connection with these transactions. We have advised each selling stockholder
that it may not use shares registered on this registration statement to cover short sales of common stock made prior to the date
on which this registration statement is declared effective by the SEC.
The selling stockholders
also may transfer the shares of common stock in other circumstances, in which case the donees, assignees, transferees, pledgees
or other successors-in-interest will be the selling beneficial owners for purposes of this prospectus and may sell the shares of
common stock from time to time under this prospectus after we have filed any necessary supplements to this prospectus under Rule
424(b), or other applicable provisions of the Securities Act, supplementing or amending the list of selling stockholders to include
such donee, assignee, transferee, pledgee, or other successor-in-interest as a selling stockholder under this prospectus.
Selling stockholders
and broker-dealers or agents involved in an arrangement to sell any of the offered shares may, under certain circumstances, be
deemed to be "underwriters" within the meaning of the Securities Act. Any profit on such sales and any discount, commission,
concession or other compensation received by any such underwriter, broker-dealer or agent may be deemed an underwriting discount
and commission under the Exchange Act. No selling stockholder has informed us that they have an agreement or understanding, directly
or indirectly, with any person to distribute the common stock. If a selling stockholder should notify us that they have a material
arrangement with a broker-dealer for the resale of their shares, we would be required to amend the registration statement of which
this prospectus is a part, and file a prospectus supplement to describe the agreement between the selling stockholder and broker-dealer
or agent, provide required information regarding the plan of distribution, and otherwise revise the disclosure in this prospectus
as needed. We would also file the agreement between the selling stockholder and the broker-dealer as an exhibit to the post-effective
amendment to the registration statement. The selling stockholder and/or purchasers will pay all discounts, concessions, commissions
and similar selling expenses, if any, that can be attributed to the sale of the shares of common stock.
If a selling stockholder
uses this prospectus for any sale of the common stock, it will be subject to the prospectus delivery requirements of the Securities
Act. The selling stockholders will be responsible for complying with the applicable provisions of the Securities Act, and
the rules and regulations thereunder promulgated, as applicable to such selling stockholders in connection with resales of their
respective shares under this registration statement. These provisions and regulations may limit the timing of purchases and sales
of common stock by them and the marketability of such securities. To comply with the securities laws of certain jurisdictions,
if applicable, the common stock will be offered or sold in such jurisdictions only through registered or licensed brokers or dealers.
The Exchange Act
and the rules and regulations thereunder, including without limitation Regulation M, will apply to selling stockholders and other
persons participating in the sale or distribution of the shares offered hereby. With certain exceptions, Regulation M restricts
certain activities of, and limits the timing of purchases and sales of any of the shares by, selling stockholders, affiliated
purchasers and any broker-dealer or other person who participates in the sale or distribution. Regulation M precludes these persons
from bidding for or purchasing, or attempting to induce any person to bid for or purchase, any security subject to the distribution
until the distribution is complete. Regulation M also prohibits any bids or purchases made in order to stabilize the price of
a security in connection with the distribution of that security. All of these limitations may affect the marketability of the
shares offered by this prospectus. To our knowledge, no selling stockholder is a broker-dealer or an affiliate of a broker-dealer
except to the extent listed in the footnotes to the table contained in the "Selling Stockholders" section beginning
on page  27 of this prospectus.
31
We have agreed to
pay all costs and expenses incident to the registration of the common stock.  Each selling stockholder will be responsible
for all costs and expenses in connection with the sale of their shares, including brokerage commissions or dealer discounts. We
will not receive any proceeds from the sale of the common stock. However, we will receive proceeds from the selling stockholders
if they exercise their warrants on a cash basis.
We have agreed to
indemnify the selling stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities
Act.
USE OF PROCEEDS
We will not receive
any proceeds from the sale of common stock offered by the selling stockholders under this prospectus. However, with respect to
the 23,310,473 shares of common stock being offered by the selling stockholders under this prospectus, we will receive up to $3,049,998
in the aggregate from the selling stockholders if they exercise in full, on a cash basis, all of their unexercised warrants to
purchase 5,321,426 shares of common stock being offered under this prospectus. We will use any cash proceeds from the exercise
of the warrants for working capital and other corporate purposes.
MARKET PRICE OF AND DIVIDENDS ON COMMON
STOCK AND RELATED MATTERS
Market Information
Our common stock is
currently quoted under the symbol "MNDL" on the OTC QB market operated by OTC Markets Group, Inc.  Prior
to May 16, 2012, our stock was quoted on the OTC Bulletin Board under the symbol "MNDL."
The following table
sets forth the high and low bid quotations for our common stock for the periods indicated below, as reported by the OTC QB market
or OTC Bulletin Board, as applicable.  Such over-the-counter market quotations reflect inter-dealer prices, without retail
mark-up, mark-down, or commission and may not necessarily represent actual transactions in our common stock.
High
Low
Year Ended March 31, 2013
First Quarter (ended June 30, 2012)
$
1.05
$
0.72
Year Ended March 31, 2012
Fourth Quarter (ended March 31, 2012)
$
0.99
$
0.57
Third Quarter (ended December 31, 2011)
0.70
0.42
Second Quarter (ended September 30, 2011)
0.85
0.44
First Quarter (ended June 30, 2011)
0.64
0.30
Year Ended March 31, 2011
Fourth Quarter (ended March 31, 2011)
$
0.74
$
0.15
Third Quarter (ended December 31, 2010)
0.39
0.21
Second Quarter (ended September 30, 20)
0.64
0.20
First Quarter (ended June 30, 2010)
0.40
0.15
Our common stock
is thinly traded and any reported sale prices may not be a true market-based valuation of our common stock. On July 5,
2012, the closing price of our common stock, as reported on the OTC QB market operated by OTC Markets Group, Inc. was
$0.79 per share.
32
As of June 29, 2012,
there were 503 holders of record of our common stock. Trades in our common stock may be subject to Rule 15g-9 under the Exchange
Act, which imposes requirements on broker-dealers who sell securities subject to the rule to persons other than established customers
and accredited investors. For transactions covered by the rule, broker-dealers must make a special suitability determination
for purchasers of the securities and receive the purchaser's written agreement to the transaction before the sale.
The SEC also has rules
that regulate broker-dealer practices in connection with transactions in "penny stocks." Penny stocks generally are
equity securities with a price of less than $5.00 (other than securities listed on some national exchanges, provided that the current
price and volume information with respect to transactions in that security is provided by the applicable exchange or system). The
penny stock rules require a broker-dealer, before effecting a transaction in a penny stock not otherwise exempt from the rules,
to deliver a standardized risk disclosure document prepared by the SEC that provides information about penny stocks and the nature
and level of risks in the penny stock market. The broker-dealers also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealers and its salesperson in the transaction, and monthly account
statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations,
and the broker-dealers and salesperson compensation information, must be given to the customer orally or in writing before effecting
the transaction, and must be given to the customer in writing before or with the customer's confirmation. These disclosure
requirements may have the effect of reducing the level of trading activity in the secondary market for shares of common stock.
Dividends
We have not paid any
dividends on our common stock in the last two fiscal years and currently have no intention of paying dividends on our common stock.
Recent Sales of Unregistered Securities
The following is
a summary of transactions by us during the twelve months ended March 31, 2012, involving sales of our securities that were not
registered under the Securities Act. Each sale was exempt from registration under either Section 4(2) of the Securities Act or
Section 3(a)(9) of the Securities Act because (i) the securities were offered and sold only to accredited investors; (ii) there
was no general solicitation or general advertising related to the offerings; (iii) each investor was given the opportunity to ask
questions and receive answers concerning the terms of and conditions of the offering and to obtain additional information; (iv)
the investors represented that they were acquiring the securities for their own account and for investment; and (v) the securities
were issued with restrictive legends where required.
In
March 2012, the Company sold an aggregate of
3,857,143
shares of its common stock and
warrants to purchase an aggregate of 964,284 shares of common stock to accredited investors for an aggregate purchase price of
$2.7 million. Each warrant has an exercise price of $0.70 per share (subject to adjustment) and a five year term from the date
of issuance. Each warrant may not be exercised prior to the first anniversary of the date of issuance. The Company agreed to register
the securities purchased in this offering. The securities were issued pursuant to the exemption provided by Section 4(2) of the
Securities Act of 1933, as amended, for transactions by an issuer not involving any public offering.
In March 2012, the Company
entered into a Convertible Note Financing Binding Term Sheet (the "Adage Term Sheet") with Adage Capital Partners,
L.P. ("Adage"), pursuant to which the parties agreed to restructure certain terms of the convertible note financing
consummated on December 29, 2011. In connection with the restructuring, $7,037,333, representing the entire outstanding principal
amount and all accrued and unpaid interest thereon under the Subordinated Convertible Promissory Note in the original principal
amount of $7,000,000 issued by the Company to Adage (the "Adage Note"), was converted into 10,053,333
shares
of common stock of the Company effective as of March 1, 2012, and the exercise price of the warrant to purchase common stock of
the Company issued to Adage in connection with the purchase and sale of the Adage Note was changed to $0.70 per share, subject
to adjustment. As a result of the change to the exercise price, the warrant gives Adage the right to purchase up to 2,500,000 shares
of common stock of the Company, subject to adjustment. We relied on Section 3(a)(9) of the Securities Act of 1933, as amended,
as providing an exemption from registration for this transaction and relied on Section 4(2) of the Securities Act of 1933, as amended,
as providing for an exemption for the original issuance of the Adage Note and warrants.
33
In
March 2012, the Company issued to
TAJA, LLC
warrants to purchase  2,000,000 shares of
common stock of the Company at an exercise price of $0.70 cents per share with a term of 5 years. The warrants were issued as
consideration related to the modification of an existing note to convertible debt. In connection with the same
transaction, the Company issued 1,071,429 warrants to purchase shares of common stock of the Company at an exercise price of
$0.70 cents per share. Also in connection with the same transaction, the Company issued 2,600,000 shares of common stock of
the Company as payment of $1,820,000 of principle of a convertible note.
We relied on Section 3(a)(9) of the
Securities Act as providing an exemption from registering the issuance of these shares of common stock under the Securities
Act inasmuch as the conversion was made with our existing security holders exclusively and no commission or other
remuneration was paid or given directly or indirectly for soliciting the exchange.
In
March 2012, the Company issued 50,000 shares of common stock of the Company to Hyaden IR in consideration of investor relations
services. The shares are vested, but restricted for a one year period. The shares were valued at the closing market price on that
date of $0.85 cents per share.
We relied on Section 4(2) of the Securities Act as providing an exemption from registering
the issuance of these shares of common stock under the Securities Act inasmuch as the conversion was made with our existing security
holders exclusively and no commission or other remuneration was paid or given directly or indirectly for soliciting the exchange.
In
January 2012, the Company issued 1,375,000 shares of common stock of the Company to three employees
Lisa Higgins-Lucero,
David Mandell and David Waldman
. The shares are vested, but are restricted for a two year period. The
shares were valued at the closing market price on that date of $0.65 cents per share.
We relied on Section 4(2) of the
Securities Act, as providing an exemption from registering the sale of these shares of common stock under the Securities Act.
In January
2012, the Company entered into a consulting agreemen with Andrew Schleimer for advisory board services, pursuant to which, the
Company issued 150,000 shares of common stock of the Company under a two-year lock-up and an additional 850,000 shares of common
stock of the Company that vests upon the achievement of certain company milestons. We relied on Section 4(2) of the Securities
Act, as providing an exemption from registering the sale of these shares of common stock under the Securities Act.
In January
2012, the Company entered into a consulting agreement with Michael Lambert for advisory
board services, pursuant to which, the Company issued 150,000 shares of common stock of the Company. The shares vest over one year
and were valued at the closing market price on that date of $0.65 cents per share. We relied on Section 4(2) of the Securities
Act, as providing an exemption from registering the sale of these shares of common stock under the Securities Act.
In
December 2011, the Company issued 3,600,000 shares of common stock of the Company to a director. The shares are vested, but are
restricted for a one year period. The shares were valued at the closing market price on that date of $0.61 cents per share.
We
relied on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock
under the Securities Act.
In
December 2011, the Company issued 3,400,000 shares of common stock of the Company to a director. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.
We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.
In
December 2011, the Company issued 1,000,000 shares of common stock of the Company to a director. The shares vest over a period
of one year. The shares were valued at the closing market price on that date of $0.61 cents per share.
We relied on Section
4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under the Securities
Act.
34
In
December 2011, the Company issued 1,000,000 shares of common stock of the Company to a director. The shares vest over a period
of one year. The shares were valued at the closing market price on that date of $0.62 cents per share.
We relied on Section
4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under the Securities
Act.
In
December 2011, the Company issued 1,000,000 shares of common stock of the Company to a director. The shares vest over a period
of one year. The shares were valued at the closing market price on that date of $0.62 cents per share.
We relied on Section
4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under the Securities
Act.
In
December 2011, the Company issued 500,000 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.
We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.
In
December 2011, the Company issued 25,000 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.
We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.
In
December 2011, the Company issued 500,000 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.
We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.
In
December 2011, the Company issued 200,000 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.
We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.
In
December 2011, the Company issued 9,037,500 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.
We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.
In
December 2011, the Company issued 100,000 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.
We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.
In
December 2011, the Company issued 50,000 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.
We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.
In
December 2011, the Company issued 1,787,500 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.
We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.
In
December 2011, the Company issued 100,000 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.
We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.
35
In
December 2011, the Company issued 100,000 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.
We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.
In
December 2011, the Company issued 50,000 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.
We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.
In
December 2011, the Company issued 50,000 of common stock of the Company to Digital Turbine Group LLC for the purchase of its assets.
The shares were valued at the closing market price on that date of $0.65 cents per share.
We relied on Section 4(2) of the
Securities Act, as providing an exemption from registering the sale of these shares of common stock under the Securities Act.
On
December 29, 2011, the Company issued a convertible promissory note for $7,000,000 pursuant to which the Company issued warrants
to purchase 3,500,000 shares based on 25% coverage and a conversion rate of $0.50. The exercise price was $0.50 at the date of
issuance with a five year life. On March 1, 2012 the note was amended, changing the conversion price to $0.70 cents per share,
and the Company issued 10,053,333 shares of common stock of the Company in full payment of principle and interest of the New Convertible
Note at the new conversion price.
We relied on Section 4(2) of the Securities Act, as providing an exemption from registering
the sale of these shares of common stock under the Securities Act.
On
December 29, 2011, the Company
completed a convertible note financing with TAJA, LLC by exchanging $3,000,000 of principal
amount of an existing senior subordinated secured note with an unsecured subordinated convertible note in the same principal amount
due June 21, 2013 and extending the term of the existing senior subordinated secured note to June 21, 2015. The new subordinated
secured note was issued with 25% warrant coverage with the warrant exericsable for five years at an exercise price based on the
conversion price of the note. In addition, in connection with the exchange, TAJA, LLC was issued a warrant exercisable for 2,000,000
shares of Common Stock exericisable for a five-year term at an exercise price equal to $0.25, but is not exercisable for one year
following its issuance. We relied on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of
these shares of common stock under the Securities Act.
In
June 2011, the Company entered into a consulting agreement, pursuant to which, the Company issued warrants to purchase 150,000
shares of the Company's common stock at an exercise price of $0.47 cents per share. The warrants vest over a one year period.
We relied on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common
stock under the Securities Act.
In
June 2011, the Company entered into a consulting agreement, pursuant to which, the Company issued warrants to purchase 150,000
shares of the Company's common stock at an exercise price of $0.47 cents per share. The warrants vest over a one year period.
We
relied on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock
under the Securities Act.
In
May 2011, 150,000 shares of common stock of the Company were issued to a vendor as a settlement, at the closing market price on
that date of $0.40 cents per share.
We relied on Section 4(2) of the Securities Act, as providing an exemption from
registering the sale of these shares of common stock under the Securities Act.
On
April 6, 2011, the Company issued warrants to purchase 75,000 shares of the Company's common stock to a vendor, as compensation
for services rendered, at $0.25 cents per share. The warrants vest over a six month period.
We relied on Section 4(2)
of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under the Securities
Act.
On April
6, 2011, the Company entered into a consulting agreement. On January 3, 2012 the Company issued 150,000 shares of common stock
of the Company to the consultant. The shares vest over a one year period. The shares were valued at the closing market price on
that date of $0.58 cents per share. We relied on Section 4(2) of the Securities Act, as providing an exemption from registering
the sale of these shares of common stock under the Securities Act.
36
On April
1, 2011, 347,244 shares of common stock of the Company were issued to two former employees of the Company, as compensation, at
the closing market price on that date of $0.58 cents per share. In addition, the employees each agreed to cancel options to purchase
173,622 shares of common stock in connection with their respective termination agreements.  We relied on Section 4(2) of the
Securities Act, as providing an exemption from registering the sale of these shares of common stock under the Securities Act.
Issuer Repurchases of Equity Securities
For the year ending
(a)
Total Number of
Shares (or Units)
Purchased
(b)
Average Price Paid
per Share (or Unit)
($)
(c)
Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs
(d)
Maximum Number
(or Approximate
Dollar Value) of
Shares (or Units)
that May Yet Be
Purchased Under
the Plans or
Programs
March 31, 2012
-
0.00
37
BUSINESS
Overview
Mandalay
Digital Group, Inc. ("Mandalay" or the "Company"
or, in the first person
as "we" "us" and "our"), 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 May 11, 2010, Mandalay
Media, Inc. merged into its wholly-owned, newly formed subsidiary, NeuMedia Inc., with NeuMedia as the surviving corporation. NeuMedia
issued: (1) one new share of common stock in exchange for each share of outstanding common stock of Mandalay Media, Inc. and (2)
one new share of preferred stock in exchange for each share outstanding preferred stock of Mandalay Media, Inc. as of May 11, 2010.
The preferred and common stock of NeuMedia had the same status and par value as the respective stock of Mandalay Media, Inc. and
NeuMedia acceded to all the rights, acquired all the assets and assumed all of the liabilities of Mandalay Media, Inc.
On October 27, 2004,
and as amended on December 17, 2004, NeuMedia 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) NeuMedia's net operating assets and liabilities were transferred
to the holders of its secured notes in satisfaction of the principal and accrued interest thereon; (2) $400,000 was transferred
to a liquidation trust and used to pay administrative costs and certain preferred creditors; (3) $100,000 was retained by NeuMedia
to fund the expenses of remaining public; (4) 3.5% of the new common stock of NeuMedia (140,000 shares) was issued to the holders
of record of NeuMedia's preferred stock in settlement of their liquidation preferences; (5) 3.5% of the new common stock
of NeuMedia (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 NeuMedia (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, NeuMedia 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, NeuMedia was a public shell company with no operations, and controlled by its significant stockholder, Trinad Capital Master
Fund, L.P.
From February 12, 2008
to October 23, 2008, our sole operations were those of our wholly-owned subsidiary, Twistbox. In October 2008, we acquired AMV
Holding Limited and its subsidiaries, a mobile media and marketing company. On June 21, 2010, we sold AMV Holding Limited and its
subsidiaries.
Current Operations
Mandalay is at the convergence
of Internet media content and mobile communications. We are an established provider of mobile services enabling mobile content
distribution and transactions serving Mobile Operators, End Consumers, and Original Equipment Manufactures (OEM's) of mobile
devices and tablets. Our software as a service ("SaaS") based platform delivers a mobile services platform that works
with mobile operators and third-party publishers to provide portal management, user interface, content development and billing
technology that enables the ecosystem required for the global distribution of mobile content. Our platforms enable our customers
to implement an intuitive user experience and storefront, enabling the discovery, purchase and download of mobile content. Our
integrated solutions address the mobile ecosystem spanning mobile optimized websites, mobile applications, mobile merchandising
and content management, mobile messaging, mobile advertising, mobile billing and predictive analytics. Our solutions allow our
customers to drive loyalty, generate revenue and reengineer business processes to capture the advantages of their mobile-enabled
customer base. Our predictive analytics capabilities allow our customers to recommend the right solution to their end-customer
based upon the consumers' tastes and preferences. We are headquartered in Los Angeles and have offices in Europe to support
global sales and marketing.
38
Key Operating Divisions
Digital Turbine
On December 28, 2011,
the Company acquired the assets of Digital Turbine Group, LLC, the developer of Digital Turbine ("DT"), a technology
platform that allows media companies, mobile carriers, and their OEM handset partners to take advantage of multiple mobile operating
systems across multiple networks, and offers solutions that allow them to maintain their own branding and personalized, one-to-one
relationships with each end-user. DT's cross-platform user interface and multimedia management system for carriers and OEMs
can be integrated with different operating systems to provide a more organized and unified experience for end-users of mobile content
across search, discovery, billing, and delivery. Other aspects of the platform, such as a smart content discovery toolbar, allows
carriers and OEMs to control the data presented to their users while giving the end-user a more efficient way of finding and purchasing
the desired content.
With the acquisition
and integration of the assets of Digital Turbine, the Company will be able to provide an end-to-end, modular platform to the Company's
existing carrier customers. The combined Digital Turbine offering allows new and existing customers to choose from a fully outsourced,
smart mobile ecosystem to more efficient, modular components that can be integrated with different operating systems to provide
a more unified experience for end-users of mobile content across search, discovery, billing, and delivery.
Based upon the initial
launch data, the Company believes there is an opportunity to integrate its DT platform with new and existing mobile carriers. Mobile
carriers are facing increased competition from competing mobile application storefronts and improved user experiences from other
retailing, social networking, and operating system providers including Apple, Google, Amazon, and Facebook. As a result, operators
are looking for new, innovative solutions for how they better manage their existing user experience. The DT platform can be "white-labeled"
to allow operators to custom tailor their own unique branding experience to the customer.
In addition to improved
user experiences, many operators are looking for end-to-end solutions for their mobile storefronts that include procuring and programming
the content, managing the content experience, ingesting content into the content management system (CMS), securely installing and
de-installing applications from the device, and integrating with the back-end elements such as billing interfaces, analytics, settlement,
and reporting.
Twistbox Entertainment, Inc.
Twistbox Entertainment,
Inc. ("Twistbox") is a global publisher, developer and enabler of mobile content and data services across mobile networks.
Twistbox provides its services in over 14 countries supporting over 50 carriers. Since operations began in 2003, Twistbox has developed
an intellectual property portfolio that includes a proprietary mobile publishing platform covering: tools that automate device
management; distribution and billing technology; a mobile games development, distribution and retail platform; and a content ratings
system adopted by wireless carriers globally to assist with the deployment of age-verified content. Twistbox has leveraged its
intellectual property and carrier-class platforms to secure agreements with leading mobile operators throughout the world including,
among others, Vodafone, Telefonica, Orange, and Hutchison's 3.
We are considering
the future status and role of Twistbox in relation to our focus on the DT platform. Although it is our only active business, Twistbox
revenues have been declining, which we expect to continue for the foreseeable future. At the same time, we intend to seek to leverage
its existing customer base for offerings by DT. While we believe the offering of DT's platform to Twistbox customers is an
attractive strategy, it entails significant risks, some of which are described in "Risk Factors", and include the possibility
that Twistbox may operate at a deficit while we need to make investments to effectively launch DT, which, in turn, entails business
and financial risks and the possibility of needing additional capital and the associate dilution.
Twistbox's target
customers are the highly-mobile, digitally-aware 18 to 40 year old demographic. This group is a leading consumer of new mobile
handsets and represents more than 50% of mobile content consumption revenue globally. In addition, this group is very focused on
consumer lifestyle brands and is much sought after by advertisers.
39
On February 12, 2008,
the Company completed its acquisition of Twistbox Entertainment, Inc. pursuant to an Agreement and Plan of Merger entered into
on December 31, 2007, as subsequently amended by the Amendment to Agreement and Plan of Merger dated February 12, 2008, with Twistbox
Acquisition, Inc., a Delaware corporation and a wholly-owned subsidiary of NeuMedia ("Merger Sub"), Twistbox Entertainment,
Inc. ("Twistbox"), and Adi McAbian and Spark Capital, L.P., as representatives of the stockholders of Twistbox, as
part of which Merger Sub merged with and into Twistbox, with Twistbox as the surviving corporation (the "Merger").
Following the Merger, Twistbox became the sole operating subsidiary of NeuMedia until the acquisition of AMV Holding Limited, a
United Kingdom private limited company ("AMV") on October 23, 2008 as described below.
Revenue
Twistbox's revenue
model includes pay-per-download and a growing base of recurring subscription services. Video services include daily, weekly and
monthly subscriptions to access a specific mobile site or suite of mobile TV channels. Twistbox also earns revenue for platform
and portal management, carrier development projects, and by licensing its platform to mobile operators and other 3rd party vendors.
Since the year ended March 31, 2010 the total revenue earned by Twistbox has declined due in part to overall market conditions
and the general shift in end-user discovery of content services. These trends are likely to continue as more and more users begin
to use their mobile devices to search for content. The Company's strategy is to work with mobile carriers to try to recapture
and grow market share by offering its DT platform to new and existing customers.
Twistbox leverages its
distribution channels within carrier portals to generate revenue from subscriptions on mobile sites that Twistbox manages on an
exclusive and non-exclusive basis. Twistbox bills and receives payment directly through mobile carriers and billing aggregators
which form the majority of its revenue. Billings from mobile operators or billing aggregators comprise more than 50% of its collections.
Twistbox's cost of revenues represents license fees paid to content providers, which currently averages approximately 12%
of revenues. Other costs of revenues include customer service fees, and traffic and streaming fees.
Value Added Services
for Mobile Content and Game Development
Twistbox is focusing
its development activities on value-added services such as in-application billing technology that enables carriers and billing
aggregators to offer solutions such as try-before-you-buy, rentals, and virtual goods. Twistbox has agreements in place with some
of the world's largest mobile network operators and billing aggregators to offer its In-Application Billing solution.
Twistbox also develops
games and applications that work with a number of languages, platforms, and formats. It has been 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. Twistbox continues to develop new applications to assure that it has a steady supply of new content
and services to offer its customers. Twistbox believes it is an industry trend that the overall market for mobile entertainment
should continue to increase as new storefronts proliferate and mobile operators continue to roll out their next-generation service
offerings and advanced handsets offering improvements in billing, data handling capability, graphics resolution and other features.
Carrier-Class Publishing
Platform
Renux™ is Twistbox's
carrier-class content management and publishing platform developed for the deployment, billing and marketing of mobile content
and applications. The system has been in operation for over five years and today supports over 350 mobile sites, and more than
66 mobile TV channels. The Renux™ content management system stores image and video content formatted for a wide range of
mobile 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 across mobile operator networks globally.
40
RapidPort
™
RapidPort™ is
Twistbox's software suite that enables the development and porting of mobile games and applications to over 1,500 different
handsets from leading manufacturers including Apple, 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 RapidPort™ development platform supports a broad number of wireless device formats including iOS,
Android, J2ME, BREW, DoJa and Symbian, and provides localization in over 18 languages. Twistbox has enhanced RapidPort™ to
include new technology designed to enhance titles with value-added features, such as in-application billing, multi-player and play-for-prizes
functionality, 3D graphics and location-based services (LBS).
Nitro-CDP
™
Nitro-CDP™ is
a content download and delivery platform for mobile network operators, portals and content publishers. The Nitro-CDP™ 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-CDP™ 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 Wrapper
™
The CMX Wrapper™
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 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 Play-for-Prizes
platform enables unique in-game promotions through carrier-specific campaigns in cooperation with sponsors and advertisers.  On
July 25, 2008, Twistbox filed with the United States Patent and Trademark Office a patent application for the Improvements In Skill-Based
Electronic Gaming Tournament Play having Serial Number 12/180,405.
Distribution
Twistbox distributes
its programming and services through on-deck relationships with mobile carriers, off-deck relationships with third-party aggregators,
and through affiliates.
Twistbox's on-deck
services include the programming and provisioning of games and games aggregation, images, videos and mobile TV content and portal
management. Twistbox currently has on-deck agreements with more than 50 mobile operators including Vodafone, SFR, T-Mobile, Orange,
and Telefonica in over 14 countries. Through these on-deck agreements, Twistbox relies on the carriers for both marketing and billing.
Twistbox off-deck services
include the programming and distribution of 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 maintains an affiliate program that allows for the sales and tracking of Twistbox mobile content by 3rd party publishers,
partners and their affiliates.
Twistbox has established
an affiliate program to market and sell its content off-deck. We believe that this channel offers an attractive secondary channel
for consumers wishing to peruse and purchase content in an environment that is more niche focused than some operators' "walled
gardens."
41
Mobile Operators
(Carriers)
Twistbox currently has
a large number of distribution agreements with mobile operators and portals in Europe, North America, and Latin America. Twistbox
currently has distribution agreements with more than 50 single territory operators in 14 countries. The strength and coverage of
these relationships is of paramount importance and the ability to support and service them is a vital channel for Twistbox's
new product offerings and services.
Trademarks, Trade
names, Patent 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.
On July 25, 2008, Twistbox filed with the United States Patent and Trademark Office a patent application for the Improvements In
Skill-Based Electronic Gaming Tournament Play having Serial Number 12/180,405. We believe that these trademarks, trade names, patent
and copyrights 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.
AMV Holding Limited
On October 23, 2008,
the Company consummated the acquisition of 100% of the issued and outstanding share capital of AMV Holding Limited, a United Kingdom
private limited company ("AMV") and 80% of the issued and outstanding share capital of Fierce Media Limited, United
Kingdom private limited company (collectively the "Shares").  The acquisition of AMV is referred to herein
as the "AMV Acquisition". The aggregate purchase price (subject to adjustments as provided in the stock purchase agreement)
for the Shares consisted of (i) $5,375,000 in cash; (ii) 4,500,000 shares of common stock, par value $0.0001 per share; (iii) a
secured promissory note in the aggregate principal amount of $5,375,000 (the "AMV Note"); and (iv) additional earn-out
amounts, if any, based on certain targeted earnings as set forth in the stock purchase agreement.
On June 21, 2010, the
Company signed and closed an agreement whereby ValueAct and the AMV founders, acting through a newly formed company, acquired all
of the AMV operating subsidiaries (the "Assets") in exchange for the release of $23.2 million of secured indebtedness,
comprising of a release of all amounts due and payable under the AMV Note and all of the amounts due and payable under the ValueAct
Note (as defined below) except for $3.5 million in principal. The Company retained all assets and liabilities of Twistbox and the
Company other than the AMV operating subsidiaries
Future Plans
As a result of both
the needs of the operator and the need for the Company to scale its distribution, the Company is pursuing targeted acquisitions
that will accelerate growth. On May 1, 2012, the Company announced a letter of intent to acquire Logia Mobile ("Logia").
Logia Mobile is an Israel-based developer of applications and provider of content. It has relationships with over 500 applications
developers and content vendors, and currently operates in more than 20 countries providing services including in-app billing to
more than 50 leading mobile carriers including: Cellcom, Vodafone, Verizon, Telefonica, Turkcell, Deutsche Telekom among others
reaching over 1.5 billion mobile subscribers. In addition, Logia has existing partnerships with industry suppliers including Amdocs,
Ericsson, and Alcatel-Lucent.  Mandalay plans on leveraging Logia's distribution channels and complimentary technology
to add to the Digital Turbine user experience by leveraging devices that are powered by Logia's platform and CMS. The Company
believes that certain of the assets of Twistbox could be utilized in assets potentially acquired from the transaction. Logia has
no legal obligation to enter or consummate any transaction with us.  Our letter of intent is non-binding and each side has the
right to terminate discussions at any time. There is no assurance we will consummate any transaction with Logia. The Logia transaction
would, if consummated, also present certain risks, as described below in "Risk Factors".
42
Competition
Twistbox is an established
enabler of content management services designed for the complex needs and requirements of mobile carriers. The industry trend has
been for carriers to focus on fewer partners and outsource their content retailing and infrastructure requirements. We believe
that Twistbox's reputation and existing integration with carriers globally enhances the Company's overall position
allowing it to continue to manage, evolve and offer new services for operators globally, principally the offering of the DT platform
to Twistbox customers.
Twistbox competes with
a number of other companies in the mobile content services industry, including Mondia Media, Net-M, Jesta, Buongiorno (recently
acquired by NTT DoCoMo), Mobile Streams, and ZED Group. To the extent that such firms continue to focus on enabling services, they
will compete directly with Twistbox. While Twistbox competes with many of the leading publishers, its core business is enabling
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-application billing, Twistbox has become
a strategic value added partner to both the mobile operator and publishing communities.
Our direct-to-consumer
(D2C) products may have an adverse impact on Twistbox's business, as these are products that require the acquisition of mobile
traffic from 3rd party publishers that may not price their traffic at rates favorable to scale the business in certain countries.
We believe that the
principal competitive factors in the market for mobile content and services 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.
Employees
As of March 31, 2012,
the Company, including its subsidiaries, had 33 employees, 30 of whom were full-time and 3 of whom were part-time. We consider
our relationships with our employees to be satisfactory. None of our employees is covered by a collective bargaining agreement.
43
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read
the following discussion and analysis of financial condition and results of operation together with the financial statements and
the related notes appearing in pages F-1 through F-38 of this prospectus. The various sections of this discussion contain a number
of forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and
risk factors described throughout this prospectus. See "Risk Factors" at page 7 of this prospectus. Any of these
risks may have a material adverse effect on our business, financial condition, results of operations and cash flows and our prospects
could be harmed. In that event, the price of our common stock could decline and you could lose part or all of your investment.
Overview
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 prospectus, 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 7 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" "us" or the "Company" refer to the
business and operations of Mandalay Digital Group, Inc. ("Mandalay Digital") and its operating and wholly-owned subsidiary,
Twistbox Entertainment, Inc. ("Twistbox").
Historical Operations of Mandalay Digital Group, Inc.
Mandalay Digital 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. DynamicWeb Enterprises, Inc was the resulting entity,
but it 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
May 12, 2010, the Company changed its name to NeuMedia, Inc.
On February 6, 2012,
the Company merged with a wholly-owned, newly-formed subsidiary, changing its name to Mandalay Digital Group, Inc.
On October 27, 2004,
and as amended on December 17, 2004, the Company 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) the Company'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 was
transferred to a liquidation trust and used to pay administrative costs and certain preferred creditors; (3) $100,000 was retained
by the Company to fund the expenses of remaining public; (4) 3.5% of the new common stock of the Company (140,000 shares) was issued
to the holders of record of Mandalay Digital's preferred stock in settlement of their liquidation preferences; (5) 3.5% of
the new common stock of the Company (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 the Company (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, the
Company 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, the Company was a public shell company with no operations, and controlled by its significant stockholder, Trinad Capital
Master Fund, L.P.
44
From February 12, 2008
to October 23, 2008, our sole operations were those of our wholly-owned subsidiary, Twistbox. In October 2008, we acquired AMV
Holding Limited and its subsidiaries, a mobile media and marketing company. On June 21, 2010, we sold AMV Holding Limited and its
subsidiaries.
SUMMARY OF THE TWISTBOX MERGER
The Company 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 the Company ("Merger Sub"), Twistbox Entertainment, Inc. ("Twistbox"), and Adi McAbian and
Spark Capital, 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, $0.01 par value per share (the "Twistbox
Preferred Stock"), converted automatically into and became exchangeable for Company 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 (the "Plan") was assumed by the Company,
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 Company 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
Digital 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, the Company also assumed all unvested Twistbox
options. The Merger consideration consisted of an aggregate of up to 12,325,000 shares of Company common stock, which included
the conversion of all shares of Twistbox capital stock and the reservation of 2,144,700 shares of Company common stock required
for assumption of the vested Twistbox options. The Company reserved an additional 318,772 shares of Company 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, the Company or any subsidiary of Twistbox or the Company 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,
the Company agreed to guarantee up to $8,250,000 of Twistbox's outstanding debt to ValueAct SmallCap Master Fund L.P. ("ValueAct"
or "VAC"), 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 "ValueAct Note" or the "VAC 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"). Twistbox
and ValueAct 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 ValueAct Note
would be secured by substantially all of the assets of Twistbox and its subsidiaries (the "VAC Note Security Agreement").
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 entitled 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 entitled 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, would have
been permanently increased to an exercise price of $7.55 per share. Both warrants were scheduled to expire on July 30, 2011. The
warrants were subsequently modified on October 23, 2008 and cancelled on June 21, 2010, as set forth below. We also entered into
a Guaranty (the "ValueAct Note Guaranty") with ValueAct whereby the Company agreed to guarantee Twistbox's payment
to ValueAct of up to $8,250,000 of principal under the ValueAct Note in accordance with the terms, conditions and limitations contained
in the ValueAct Note, which was subsequently amended as set forth below. The financial covenants of the ValueAct Note were also
amended, pursuant to which Twistbox was required to maintain a cash balance of not less than $2,500,000 at all times and the Company
is required to maintain a cash balance of not less than $4,000,000 at all times. The ValueAct Note was subsequently amended and
restated as set forth below.
45
SUMMARY OF THE AMV ACQUISITION
On October 23, 2008,
the Company consummated the acquisition of 100% of the issued and outstanding share capital of AMV Holding Limited, a United Kingdom
private limited company ("AMV") and 80% of the issued and outstanding share capital of Fierce Media Limited, United
Kingdom private limited company (collectively the "Shares"). The acquisition of AMV is referred to herein as the "AMV
Acquisition". The aggregate purchase price (subject to adjustments as provided in the stock purchase agreement) for the Shares
consisted of (i) $5,375,000 in cash; (ii) 4,500,000 shares of Company common stock, par value $0.0001 per share; (iii) a secured
promissory note in the aggregate principal amount of $5,375,000 (the "AMV Note"); and (iv) additional earn-out amounts,
if any, based on certain targeted earnings as set forth in the stock purchase agreement. The AMV Note was scheduled to mature on
July 31, 2010, and bore interest at an initial rate of 5% per annum, subject to adjustment as provided therein.
In addition, also on
October 23, 2008, in connection with the AMV Acquisition, the Company, Twistbox and ValueAct entered into a Second Amendment to
the ValueAct Note, which among other things, provided for a payment-in-kind election at the option of Twistbox, modified the financial
covenants set forth in the ValueAct Note to require that the Company and Twistbox maintain certain minimum combined cash balances
and provided for certain covenants with respect to the indebtedness of the Company and its subsidiaries. Also on October 23, 2008,
AMV granted to ValueAct a security interest in its assets to secure the obligations under the ValueAct Note. In addition, the Company
and ValueAct entered into an allonge to each of those certain warrants issued to ValueAct in connection with the Merger, which,
among other things, amended the exercise price of each of the warrants to $4.00 per share.
In addition, also on
October 23, 2008, the Company entered into a Securities Purchase Agreement with certain investors identified therein (the "Investors"),
pursuant to which the Company agreed to sell to the Investors in a private offering an aggregate of 1,685,394 shares of common
stock and warrants to purchase 842,697 shares of common stock for gross proceeds to the Company of $4,500,000. The warrants have
a five year term and an exercise price of $2.67 per share. The funds were held in an escrow account pursuant to an Escrow Agreement,
dated October 23, 2008 and were released to the Company on or about November 8, 2008.
On August 14, 2009,
the Company and ValueAct entered into a Second Allonge to Warrant to Purchase 1,092,621 shares of the Company's common stock
(the "Second Allonge"), which amended that certain warrant to purchase 1,092,621 shares of the Company's common
stock, issued to ValueAct on February 12, 2008, as amended (the "ValueAct Warrant"). Pursuant to the Second Allonge,
the exercise price of the ValueAct Warrant decreased from $4.00 per share to the lesser of $1.25 per share, or the exercise price
per share for any warrant to purchase shares of the Company's common stock issued by the Company to certain other parties.
In addition, also on August 14, 2009, the Company, Twistbox and ValueAct entered into a Third Amendment to the ValueAct Note. Pursuant
to the Third Amendment, the maturity date was changed to July 31, 2010 and the interest rate of the ValueAct Note increased from
10% to 12.5%.
46
On January 25, 2010,
Mandalay Digital, Twistbox and ValueAct entered into a Waiver to Senior Secured Note (the "Waiver"), pursuant to which
ValueAct agreed to waive certain provisions of the ValueAct Note. Pursuant to the Waiver, subject to Twistbox's compliance
with certain conditions set forth in the Waiver, certain rights to prepay the ValueAct Note were extended from January 31, 2010
to March 1, 2010. In addition, subject to Twistbox's compliance with certain conditions set forth in the Waiver, the timing
obligation of the Company and Twistbox to comply with the cash covenant set forth in the ValueAct Note was extended to March 1,
2010 and the minimum cash balance by which Twistbox and Mandalay Digital must maintain was increased to $1,600,000.
On February 25, 2010,
Twistbox received a letter (the "Letter") from ValueAct alleging certain events of default with respect to the ValueAct
Note. The Letter claimed that an event of default had occurred and was continuing under the ValueAct Note as result of certain
alleged defaults, including the failure to provide weekly evidence of compliance with certain of Twistbox's and the Company's
covenants under the ValueAct Note, the failure to comply with limitations on certain payments by the Company and each of its subsidiaries,
and the failure of Twistbox and the Company to maintain minimum cash balances in deposit accounts of each of Twistbox and the Company.
The Letter also claimed that the Waiver had ceased to be effective as a result of the alleged failure of Mandalay Digital to comply
with the conditions set forth in the Waiver. On May 10, 2010, Twistbox received from ValueAct a Notice of Event of Default and
Acceleration ("Notice") in which ValueAct stated that an event of default had occurred under the ValueAct Note as a
result of Twistbox's and Mandalay Digital's failure to comply with the cash balance covenant under the ValueAct Note
and, therefore, ValueAct accelerated all outstanding amounts payable by Twistbox under the ValueAct Note. In connection with the
Notice, ValueAct instituted an administration proceeding in the United Kingdom against AMV.
On June 21, 2010, the
Company sold all of the operating subsidiaries of AMV to an entity controlled by ValueAct and certain of AMV's founders in
exchange for the release of $23,231,000 of secured indebtedness, comprising of a release of all amounts due and payable under the
AMV Note and all amounts due and payable under the VAC Note except for $3,500,000 in principal (the "Restructure").
In connection with the Restructure, the ValueAct Note (as amended and restated, the "Amended ValueAct Note"), the Value
Act Security Agreement and the Value Act Guaranty were amended and restated in their entirety. In addition, all warrants and common
stock of the Company held by ValueAct were cancelled and all warrants and common stock of the Company held by AMV founders Nate
MacLeitch and Jonathan Cresswell were repurchased by the Company for a price of $0.02 per share.
The Amended ValueAct
Note matures on June 21, 2013 and bears interest at 10% payable in cash semi-annually in arrears on each January 1 and July 1 that
the Amended ValueAct Note is outstanding. Twistbox may prepay the Amended ValueAct Note in whole or in part at any time without
penalty. Notwithstanding the foregoing, at any time on or prior to January 1, 2012, Twistbox may, at its option, in lieu of making
any cash payment of interest, elect that the amount of any interest due and payable on any interest payment date on or prior to
January 1, 2012 be added to the principal due under the Amended ValueAct Note. In the event of a Fundamental Change (as defined
therein) of Twistbox, the holder of the Amended ValueAct Note will have the right for a period of thirty days to require Twistbox
to repurchase the Amended ValueAct Note at a price equal to 100% of the outstanding principal and all accrued and unpaid interest.
Also on June 21, 2010,
for purposes of capitalizing the Company, the Company sold and issued $2,500,000 of Senior Secured Convertible Notes due June 21,
2013 (the "New Senior Secured Notes" or the "Senior Debt") to certain significant stockholders. The New
Senior Secured Notes have a three year term and bear interest at a rate of 10% per annum payable in arrears semi-annually. Notwithstanding
the foregoing, at any time on or prior to the 18th month following the original issue date of the New Senior Secured Notes, the
Company may, at its option, in lieu of making any cash payment of interest, elect that the amount of any interest due and payable
on any interest payment date on or prior to the 18th month following the original issue date of the New Senior Secured Notes be
added to the principal due under the New Senior Secured Notes. The accrued and unpaid principal and interest due on the New Senior
Secured Notes are convertible at any time at the election of the holder into shares of Company common stock at a conversion price
of US $0.15 per share, subject to adjustment. The New Senior Secured Notes are secured by a first lien on substantially all of
the assets of the Company and its subsidiaries. The Amended ValueAct Note is subordinated to the New Senior Secured Notes.
Each purchaser of a
New Senior Secured Note also received a warrant ("Warrant") to purchase shares of common stock of the Company at an
exercise price of $0.25 per share, subject to adjustment. For each $1.00 of New Senior Secured Notes purchased, the purchaser received
a Warrant to purchase 3.33 shares of common stock of the Company. Each Warrant has a five year term.
47
The Merger and the AMV
Acquisition both included the issuance of common stock as all or part of the consideration. Based on the trading price of the common
stock as of the acquisition dates, the total consideration was approximately $67.5 million for the Merger and approximately $22.2
million for the AMV Acquisition.
On December 16, 2011
the Amended ValueAct Note was purchased by Taja, LLC ("Taja") and immediately amended to remove certain negative covenants
(as amended, the "Taja Note").
Company Overview
From February 12, 2008
to October 23, 2008, our sole operations were those of our wholly-owned subsidiary, Twistbox. In October 2008, we acquired AMV
Holding Limited and its subsidiaries, a mobile media and marketing company. On June 21, 2010, we sold AMV Holding Limited and its
subsidiaries.
Twistbox is a global,
mobile data services company primarily focused on enabling and optimizing the development, distribution and billing of content
and applications across mobile networks. Operating since 2003, Twistbox publishes content in over 28 countries with distribution
representing more than five hundred million subscribers. Twistbox has developed an intellectual property portfolio that includes
worldwide or territory exclusive mobile rights to content, a proprietary publishing platform that includes tools to automate device
management and billing of content and applications; a mobile games development and distribution platform that automates the porting
of mobile games and applications to over 1,500 handset models; a content ratings system adopted by certain major wireless carriers
to assist with the responsible deployment of age-verified programming and services; a suite of value added billing technologies
that allow for in-application billing, and Digital Rights Management (DRM) solutions. Twistbox has leveraged its intellectual property
and carrier-class technology to secure direct distribution and/or enabling agreements with leading mobile operators throughout
Europe, North America and Latin America, including, among others, Vodafone, Telefonica, Orange, and SFR.
Twistbox maintains a
global distribution agreement with Vodafone. Through this relationship, in certain markets Twistbox serves as one of Vodafone's
exclusive category portal managers. Twistbox has similar exclusive agreements with other operators in selected territories.
In addition to its carrier
publishing and enabling business, Twistbox operates a mobile ad network and suite of direct to consumer services that are promoted
through advertising, as well as from other mobile publishers. Payments for the Company's direct to consumer services are
processed through integration with the Company's own mobile billing solutions, third party mobile billing aggregators, and
credit card processing companies.
Twistbox's target
customers are the lucrative, tech-savvy 18 to 40 year old demographic. This group is a leading consumer group of new mobile handsets
and represents more than 50% of mobile content consumption revenue globally. In addition, this group is very focused on consumer
lifestyle brands and is much sought after by advertisers.
In December 2011, the
Company purchased the assets of Digital Turbine. With the acquisition and integration of the assets of Digital Turbine, the Company
will be able to provide an end-to-end, modular platform to the Company's existing carrier customers. The combined DT offering
allows new and existing customers to choose from a fully outsourced, smart mobile ecosystem to more efficient, modular components
that can be integrated with different operating systems to provide to the end user a more unified experience of mobile content
across search, discovery, billing, and delivery. Innovative aspects of the Digital Turbine platform include the ability for carriers
and OEMs to analyze and control the data presented to their end-users while giving them a more efficient way of finding and purchasing
content.
48
RESULTS OF OPERATIONS
Twelve Months ended
Twelve Months ended
March 31,
March 31,
% of
2012
2011
Change
(in thousands)
Revenues
$
7,230
$
9,186
-21
%
Cost of revenues
2,873
3,210
-10
%
Gross profit
4,357
5,976
-27
%
SG&A
16,040
11,368
41
%
Amortization of intangible assets
-
54
-100
%
Impairment of intangibles
2,319
4,482
-48
%
Impairment of goodwill
2,969
1,546
92
%
Operating loss
(16,971
)
(11,474
)
48
%
Interest expense, net
(12,497
)
(1,761
)
610
%
Foreign exchange transaction gain / (loss)
(94
)
(83
)
13
%
Change in fair value of accrued derivative liabilities gain / (loss)
(4,447
)
-
0
%
Loss on extinguishment of debt
2,004
-
0
%
Gain / (loss) on settlement of debt
1,393
(864
)
-261
%
Other income / (expenses)
15
(2
)
-850
%
Loss before income taxes
(30,597
)
(14,184
)
116
%
Income tax provision
(110
)
(224
)
-51
%
Loss from continuing operations
(30,707
)
(14,408
)
113
%
Profit from discontinued operations, net of taxes
-
809
-100
%
Gain on disposal of discontinued operations, net of taxes
-
4,215
-100
%
Net (loss) income
$
(30,707
)
$
(9,384
)
-227
%
Basic and Diluted net income / (loss) per common share:
Continuing operations
$
(0.62
)
$
(0.38
)
63
%
Discontinued operations
$
-
$
0.13
-100
%
Net loss
$
(0.62
)
$
(0.25
)
148
%
Basic and Diluted weighted average shares outstanding
49,418
37,664
31
%
Comparison of the Year Ended March 31, 2012 and the Year
Ended March 31, 2011
Revenues
Twelve Months Ended March 31,
% of
2012
2011
Change
(In thousands)
Revenues by type:
Services
$
1,214
$
1,270
-4
%
Content - Games
434
1,107
-61
%
Content - Other
3,824
5,546
-31
%
Advertising
1,758
1,263
39
%
Total
$
7,230
$
9,186
-21
%
Games revenue –
the decline in revenue largely reflects a strategic decision to curtail investment in development of new games for carrier sales,
along with the loss of on-deck placement with US carriers. In addition, we have wound down our development work on behalf of third
parties. This was partly offset by higher platform and services fees, particularly in Germany.   Games revenue includes
both licensed and internally developed games for use on mobile phones.
49
The revenue
decline for Content - Other is the result of multiple factors. Revenues were impacted by a very challenging European sales
environment for our carrier partners and consequently for us. This resulted in lower sales in major territories including the
UK, Germany and Spain. Revenues were also affected by the increase in the use of smart phones over feature phones, which
hinder the carriers' ability to monetize content revenues effectively. Other content includes a broad range of licensed
and internally developed products delivered in the form of WAP, Video, Wallpaper and Mobile.
Cost of Revenues
Twelve Months Ended March 31,
% of
2012
2011
Change
(In thousands)
Cost of revenues:
License fees
$
2,643
$
2,915
-9
%
Other direct cost of revenues
230
295
-22
%
Total cost of revenues
$
2,873
$
3,210
-10
%
Revenues
$
7,230
$
9,186
-21
%
Gross margin
60.3
%
65.1
%
License fees represent
costs payable to content providers for use of their intellectual property in products sold. Our licensing agreements are predominantly
on a revenue-share basis, and have therefore decreased relative to the decrease in revenue. We experienced slightly higher fees
in the area of traffic and advertising costs that affected our sales mix, as well as our gross margin.
Operating Expenses
Twelve Months Ended March 31,
% of
2012
2011
Change
(In thousands)
Product development expenses
$
2,154
$
3,528
-39
%
Sales and marketing expenses
873
2,142
-59
%
General and administrative expenses
13,013
5,698
128
%
Amortization of intangible assets
-
54
-100
%
Impairment of intangible assets
2,319
4,482
-48
%
Impairment of goodwill
2,969
1,546
75
%
Product development
expenses include the costs to build, edit and optimize content formats for consumption on a mobile phone. Expenses in this area
are primarily driven by personnel costs. Due to strategic changes in the focus of the development business as well as the consolidation
of the device operating systems within the marketplace, our headcount has been reduced from period to period.
50
Sales and marketing
expenses represent the costs of sales and marketing personnel, and advertising and marketing campaigns. Selling costs, including
our headcount have been reduced from period to period in an effort to streamline the business. The decrease year-over-year is the
result of cost savings made by headcount reductions, as well as reduced travel and entertainment expenses, offset by relocation
costs relative to our UK operations from late fiscal year 2010 through most of fiscal year 2011.
General and administrative
expenses represent management and support personnel costs in each of the subsidiary companies and related expenses, as well as
professional and consulting costs, and other costs such as stock based compensation, rent, depreciation and bad debt expenses.
The increase during fiscal year 2012 is mostly due to an increase in stock compensation to management. Significant savings were
made during fiscal year 2011 mostly due to a decrease in stock compensation to management, but also through headcount reductions
and related overheads, as well as lower bad debt expense and legal fees.
Amortization of intangibles
represents amortization of the intangibles identified as part of the purchase price accounting related to both acquisitions and
attributed to operating expenses.
Impairment of goodwill
and intangible assets represents the write down in value of goodwill and intangible assets associated with the acquisition of Twistbox.
The consideration in the Twistbox acquisition was entirely stock-based, and generated significant goodwill since Twistbox was not
a capital intensive company. Subsequent to the acquisition, the Company experienced a significant and continued decline in the
market value of its common stock, which resulted in the Company's market capitalization falling below its net book value.
The Company recorded an impairment charge in the value of goodwill and intangible assets in the third quarter of fiscal year 2011
and the last quarter of fiscal year 2012. At December 31, 2010 the Company recorded an impairment charge of $1,546,000 to write
down goodwill and $4,482,000 to write down intangible assets. At March 31, 2012, due to a decline in revenues, the Company performed
an impairment review for goodwill and intangible assets. As a result of the assessment, the Company determined that its net book
value exceeded the implied fair value; therefore, the Company recorded an additional impairment charge of $2,969,000 to write down
goodwill and $2,319,000 to write down intangibles assets. The intangible assets impaired were the valuation associated with the
Twistbox trademark/trade name.
Other Income and Expenses
Twelve Months Ended March 31,
% of
2012
2011
Change
(In thousands)
Interest and other (expense)
$
(13,626
)
$
(2,710
)
403
%
Profit from discontinued operations, net of taxes
$
-
$
809
-100
%
Gain on disposal of discontinued operations, net of taxes
$
-
$
4,215
-100
%
Interest and other
income/(expense) includes interest income on invested funds, interest expense related to the Senior Secured Note, the ValueAct
Note, the Taja Note, the Adage Note, financing costs including loan modification costs, changes in the fair market value of derivatives,
foreign exchange transaction gains, and other income/expense. The increase in net expense compared to the prior period is comprised
mostly of financing costs, loss on extinguishment of debt, and change in fair value of derivative liabilities offset by settlement
of debt with a provider.
51
Financial Condition
Assets
Our current assets
totaled $10.1 million and $3.8 million at March 31, 2012 and March 31, 2011, respectively. Total assets were $14.8 million and
$14.2 million at March 31, 2012 and March 31, 2011, respectively. The increase in current assets is primarily due to an increase
in cash due to the sale of shares of the Company's common stock, and the sale of convertible debt offset by lower accounts
receivable balances due to a decrease in revenues. The increase in total assets is primarily due to the increase in cash offset
by the impairment charge recorded against goodwill and intangibles assets, as well as the lower accounts receivable and depreciation
of fixed assets.
Liabilities and
Working Capital
At March 31, 2012,
our current and total liabilities were $9.1 million, compared to $11.6 million at March 31, 2011. The change in liabilities was
related to a significant reduction in accounts payable and accrued license fees due to settlements with certain suppliers, offset
by an increase in accrued compensation due to deferred payroll compensation and an increase in the fair market value of warrant
derivative liabilities. Additionally, debt was reduced due to the restructuring of the Value Act Note, and the equity conversion
of $1.8 million of that note. The Company had positive working capital of $4.1 million at March 31, 2012 as opposed to negative
working capital of $3.3 million at March 31, 2011.
Liquidity and Capital Resources
Twelve Months Ended March 31,
2012
2011
(In thousands)
Consolidated Statement of Cash Flows Data:
Capital expenditures
$
(17
)
$
(88
)
Cash flows used in operating activities
(1,829
)
(1,909
)
Cash flows used in investing activities
-
(1,547
)
Proceeds from new convertible debt
7,000
2,500
Issuance of shares for cash
2,700
-
Effect of exchange rate changes on cash and cash equivalents
100
(2
)
The Company has incurred
losses and negative annual cash flows since inception, although the operating loss increased from $11.5 million in fiscal year
2011 to $16.9 million as of March 31, 2012. A significant portion of the loss is represented by one-time non-cash charges to stock
compensation.
The consolidated financial
statements included in this prospectus include the accounts of the Company. The primary sources of liquidity have historically
been issuance of common and preferred stock and borrowings under credit facilities. In fiscal year 2012, the Company raised $9.7
million through issuance of convertible debt and equity financings and through restructuring existing debt to convertible debt.
Until we become cash flow positive, we anticipate that our primary sources of liquidity will be our existing cash balances together
with cash generated by our operating activities, cash on hand, as well as further borrowings or further capital raises. Assuming
there are no further changes in expected sales and expense trends subsequent to March 31, 2012, the Company believes that its cash
position will be sufficient to continue operations for the next twelve months.
52
Operating Activities
In the year ended
March 31, 2012, we used $1.8 million of net cash in operating activities. Net cash used represents an increase in
accounts payable and accrued compensation of $0.8 million, decreases in accounts receivable and prepaid expense of $1.7
million, offset by decreases in accrued license fees and other liabilities of $0.6 million. These changes flow from the loss
for the period, but exclude impairment charge of $5.2 million, depreciation and amortization of $0.4 million, as well as
interest, finance charges, debt extinguishment and debt discount costs of $10.7 million incurred to restructure liabilities,
derivative liability costs of $4.4 million, and $7.5 million for stock and warrants issued for services, offset by supplier
settlements of $1.4 million. In the year ended March 31, 2011, we used $1.9 million of net cash in operating activities, including an
increase in accounts payable and other liabilities of $1.3 million , flowing from the loss excluding impairment charge of
$6.0 million , offset by non-cash stock based compensation and depreciation and amortization.
As of March 31, 2012,
the Company had approximately $8.8 million of cash for use in continuing operations.
The Company's
cash requirements in the future will be dependent on actions taken to improve cash flow, including operational restructuring. We
may require additional cash resources due to changed business conditions or other future developments, including any investments
or acquisitions we may decide to pursue. If cash resources 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 debt or equity financing will be available
on acceptable terms, if at all.
Debt obligations
include interest payments under the Senior Debt facility, and also under the Amended Taja Note. Under the Senior Debt facility
the Company may elect to add interest to the principal, until 18 months following June 21, 2010, with the full amount of the principle
and interest payable at the end of the term. Under the Amended Taja Note the Company may elect to add interest to the principal.
The full amount is payable two years from March 1, 2012, if it has not already been converted into shares of common stock of the
Company. The Company's operating lease obligations include non-cancelable operating leases for the Company's office
facilities in several locations, expiring at various dates through 2013.
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 believe, therefore, that we are not materially exposed to any financing, liquidity, market or credit risk that could
arise if we had engaged in such relationships.
Stock Sales and
Liquidity
In April 2011, the
Company issued an aggregate of 497,244 shares of the Company's common stock in private placements (1) to two former employees
of a subsidiary of the Company as a severance payment, and (2) to a consultant for services.
In April 2011, the
Company issued warrants to purchase 75,000 shares of the Company's common stock at an exercise price of $0.25 per share to
a service provider of the Company as payment for past services to the Company.
In May 2011, the Company
issued 150,000 shares of the Company's common stock to a service provider to the Company as payment for past services to
the Company.
In June 2011, the Company
issued warrants to purchase an aggregate of 300,000 shares of the Company's common stock at an exercise price of $0.47 per
share to two advisory board members for consulting services.
53
In December 2011, the
Company issued 50,000 shares of the Company's common stock as part of the consideration for the assets of Digital Turbine
Group, LLC.
In December 2011, in
connection with the acquisition of assets from Digital Turbine Group, LLC, the Company issued 12,450,000 shares of the Company's
common stock to consultants as payment for services. The shares vest based on certain conditions. As of March 2012, 9,037,500 of
such shares have vested and 3,412,500 of such shares were unvested.
In December 2011, the
Company issued an aggregate of 10,000,000 shares of the Company's common stock with vesting conditions to directors of the
Company. As of March 2012, 3,000,000 of such shares have vested.
In January 2012, the
Company issued 300,000 shares of common stock of the Company to two advisory board members for consulting services. As of March
2012, 150,000 shares have vested.
In January 2012, the
Company issued 1,375,000 shares of common stock of the Company with vesting provisions to three employees. As of March 2012, 875,000
of such shares have vested.
In March 2012, the
Company issued warrants to purchase 500,000 shares of the Company's common stock at an exercise price of  $0.70 per
share to a service provider of the Company.
In March 2012, the
Company issued 10,053,333 shares of common stock of the Company in full payment of principle and interest of the New Convertible
Note.
In March 2012, the
Company issued 200,000 shares of common stock of the Company to two vendors for services. As of March 2012, 50,000 of such shares
have vested.
In March 2012, the
Company sold 3,857,143 shares of common stock of the Company to certain investors.
In March 2012, the
Company issued to certain investors warrants to purchase 964,286 shares of common stock of the Company at an exercise price of
$0.70 cents per share.
In March 2012, the
Company issued warrants to purchase 3,071,429 shares of common stock of the Company at an exercise price of $0.70 cents per share
related to modification of an existing note to convertible debt.
In March 2012, the
Company issued 2,600,000 shares of common stock of the Company as payment of $1,820,000 of principle of a convertible note.
In May 2012, the Company
issued 150,000 shares of common stock of the Company to an advisory board member for consulting services.
In May 2012, the
Company issued 433,333 shares of common stock of the Company to a director of the Company.
In June 2012, the Company
issued 1,428,571 shares of common stock of the Company to certain investors.
In June 2012, the Company
issued warrants to purchase 357,143 shares of common stock of the Company at an exercise price of $0.70 cents per share.
54
Revenues
The discussion herein
regarding our future operations pertain to the results and operations of Twistbox. Assets from the Digital Turbine acquisition
have yet to generate revenues due to the development cycle of the Digital Turbine products. The Company expects to begin earning
revenue from the Digital Turbine assets by the end of fiscal year ending March 31, 2013. Twistbox has historically generated and
expects to continue to generate the vast majority of its revenues from mobile phone carriers that market, distribute and/or bill
for 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 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 transaction. 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 through other delivery mechanisms, with carriers or third parties being responsible for billing, collecting and remitting
to Twistbox a portion of their fees. To date, Twistbox's international revenues have been much more significant than its
domestic revenues.
We believe that the
improving quality and greater availability of smartphones 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 enablers
that have the ability to provide high-quality mobile content services consistently and cost-effectively with the ability to enable
mobile billing across a wide variety of handsets and countries. Additionally, publishers and content owners are seeking enablers
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, distribution and billing technology and has achieved the scale to operate at a level that
provides it with competitive advantages. We also believe that leveraging existing carrier and publisher 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, our ability to leverage our distribution and content
relationships, as well as our ability to continue to expand billing for content in new regional markets. 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 should continue to grow in absolute dollars, assuming our revenues continue to grow. As a percentage of
revenues, we expect these expenses to decrease.
Because many new mobile
handset models are released in the fourth calendar quarter to coincide with the holiday shopping season, and 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 the March quarter end. For a variety of reasons, we may experience seasonal sales decreases during the summer, particularly
in Europe, which is predominantly reflected in our second fiscal quarter. In addition to these possible seasonal patterns, our
revenues may be impacted by declines in users visiting carrier portals, 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.
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 platform and third
party delivery charges 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 product sold 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.
55
Gross Margin
Our gross margin going
forward will be determined principally by the mix of content that we deliver, and the costs of distribution. Our games based on
licensed intellectual property require us to pay royalties to the licensor and the royalty rates in our licenses vary significantly.
Our own in-house developed games, which are based on our own intellectual property, require no royalty payments to licensors. For
late night business, branded content requires royalty payment to the licensors, generally on a revenue share basis, while for acquired
content we amortize the cost against revenues, and this will generally result in a lower cost associated with it. There are multiple
internal and external factors that affect the mix of revenues between games and late night content, and among licensed, developed
and acquired content within those categories, including the overall number of licensed games and developed games available for
sale during a particular period, the extent of our and our carriers' marketing efforts for each type of content, and the
deck placement of content on our carriers' mobile handsets. We believe the success of any individual game during a particular
period is affected by the recognizability of the title, its quality, its marketing and media exposure, its overall acceptance by
end users and the availability of competitive games. 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 content 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 platform and 3
rd
party delivery charges, 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. For acquired content, typically we will receive content from our licensors which must be
edited for use on mobile phones, combined with other appropriate content, and packaged for end-users. 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
.   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 business.
General and Administrative
.
Our
general and administrative expenses, historically, and 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, capital raises 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 operations and, in the near term, additional accounting costs related to our operation as
a public company.
Amortization
of Intangible Assets
.
We will record amortization of acquired intangible assets that are directly related to revenue-generating
activities as part of our cost of revenues and amortization of the remaining acquired intangible assets, such as customer lists
and platform, as part of our operating expenses. We will record intangible assets on our balance sheet based upon their fair value
at the time they are acquired. We will determine the fair value of the intangible assets using a contribution approach. We will
amortize the amortizable intangible assets using the straight-line method over their estimated useful lives of three to five years.
56
Estimates and Assumptions
The preparation of
our financial statements in conformity with accounting principles generally accepted in the United States of America requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Income Taxes
We provide for deferred
income taxes using the liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable
to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases
and the tax effect of net operating loss carry-forwards. A valuation allowance has been provided as it is more likely than not
that the deferred assets will not be realized.
Recent Accounting Pronouncements
Adopted Accounting Pronouncements
In December 2010,
the FASB issued updated guidance on when and how to perform certain steps of the periodic goodwill impairment test for public entities
that may have reporting units with zero or negative carrying amounts. This guidance is effective for fiscal years, and interim
periods within those years, beginning after December 15, 2010, with early adoption prohibited. It is applicable to the Company's
fiscal year beginning April 1, 2011. The Company evaluated this guidance, and determined it doesn't have a material effect
on its consolidated financial statements.
In December 2010,
the FASB also issued guidance to clarify the reporting of pro forma financial information related to business combinations of public
entities and to expand certain supplemental pro forma disclosures. This guidance is effective prospectively for business combinations
that occur on or after the beginning of the fiscal year beginning on or after December 15, 2010, with early adoption permitted.
It is applicable to the Company's fiscal year beginning April 1, 2011. The Company evaluated this guidance, and determined
it doesn't have a material effect on its consolidated financial statements.
In May 2011, the FASB
issued guidance to amend certain measurement and disclosure requirements related to fair value measurements to improve consistency
with international reporting standards. This guidance is effective prospectively for public entities for interim and annual reporting
periods beginning after December 15, 2011, with early adoption by public entities prohibited, and is applicable to the Company's
fiscal quarter beginning January 1, 2012. The Company evaluated this guidance, and determined it doesn't have a material
effect on its consolidated financial statements.
In September 2011,
the Financial Accounting Standards Board (FASB) issued amended accounting guidance related to goodwill impairment testing. The
new guidance provides the option to perform a qualitative assessment by applying a more likely than not scenario to determine whether
the fair value of a reporting unit is less than its carrying amount, which may then allow a company to skip the annual two-step
quantitative goodwill impairment test depending on the determination. The amended guidance is effective for annual and interim
goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Earlier adoption is permitted. Management
does not expect the adoption of the amended guidance to have a material impact on the Company's consolidated financial statements.
The Company evaluated this guidance, and determined it doesn't have a material effect on its consolidated financial statements.
Recently Issued Accounting Pronouncements
In June 2011, the
FASB issued new guidance on the presentation of comprehensive income that will require a company to present components of net income
and other comprehensive income in one continuous statement or in two separate, but consecutive statements. There are no changes
to the components that are recognized in net income or other comprehensive income under current GAAP. This guidance is effective
for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011, with early adoption permitted.
It is applicable to the Company's fiscal year beginning April 1, 2012. The Company is currently evaluating this guidance,
but does not expect its adoption will have a material effect on its consolidated financial statements.
57
Other recent authoritative
guidance issued by the FASB (including technical corrections to the FASB Accounting Standards Codification), the American Institute
of Certified Public Accountants, and the Securities and Exchange Commission ("SEC") did not, or are not expected to
have a material effect on the Company's consolidated financial statements.
Critical 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.
Principles of Consolidation
The consolidated financial
statements include the accounts of the Company and our wholly-owned subsidiaries. All material intercompany balances and transactions
have been eliminated in consolidation. Discontinued operations have been treated in accordance with Financial Accounting Standards
Board ("FASB") Accounting Standards Codification ("ASC")  205-20,
Discontinued Operations.
Revenue Recognition
The Company's
revenues are derived primarily by licensing material and software in the form of products (Image Galleries, Wallpapers, video,
WAP Site access, Mobile TV), developing and maintaining carrier platforms, mobile advertising, mobile billing 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.
The Company either
markets and distributes its products directly to consumers, or distributes products through mobile telecommunications service providers
("carriers"), in which case the carrier markets the product, images or games to end users. License fees for perpetual
and subscription licenses are usually billed upon download of the product, image or game by the end user. In the case of subscription
licenses, many subscriber agreements provide for automatic renewal until the subscriber opts-out, while others provide opt-in renewal.
In either case, subsequent billings for subscription licenses are generally billed monthly. The Company applies the provisions
of FASB ASC 985-605,
Software Revenue Recognition
, to all transactions.
Revenues are recognized
from the Company's 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 license agreement to be evidence of an arrangement with a carrier or aggregator
and a "clickwrap" agreement to be evidence of an arrangement with an end user. For these licenses, the Company defines
delivery as the download of the product, image or game by the end user.
58
The Company 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 the Company 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 the Company believes are reasonable,
but it is possible that actual results may differ from the Company's estimates. The Company'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 newer and more advanced handsets, promotions during the period and economic
trends. When the Company receives the final carrier reports, to the extent not received within a reasonable time frame following
the end of each month, the Company records any differences between estimated revenues and actual revenues in the reporting period
when the Company determines the actual amounts. Revenues earned from certain carriers may not be reasonably estimated. If the Company
is unable to reasonably estimate the amount of revenues to be recognized in the current period, the Company recognizes revenues
upon the receipt of a carrier revenue report and when the Company's portion of licensed revenues are fixed or determinable
and collection is probable. To monitor the reliability of the Company'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 the Company deems a carrier not to be creditworthy, the Company defers
all revenues from the arrangement until the Company receives payment and all other revenue recognition criteria have been met.
In accordance with
FASB ASC 605-45,
Reporting Revenue Gross as a Principal Versus Net as an Agent
, the Company recognizes as revenues the amount
the carrier reports as payable upon the sale of the Company's products, images or games. The Company 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 the Company a fixed percentage of their revenues or a fixed fee for each game;
—
carriers generally must approve the price of the Company's content in advance of their sale to subscribers, and the Company's more significant carriers generally have the ability to set the ultimate price charged to their subscribers; and
—
the Company has limited risks, including no inventory risk and limited credit risk.
For direct to consumer
business, revenue is earned by delivering a product or service directly to the end user of that product or service. In those cases,
the Company 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. Substantially all of our discontinued operations represents direct to consumer business.
Net (Loss) per Common Share
Basic loss per common
share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding
for the period. Diluted net loss per share is computed by dividing net 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 were as follows:
59
Year Ended
Year Ended
March 31,
March 31,
2012
2011
Potentially dilutive shares
21,943
11,992
Comprehensive Loss
Comprehensive loss
consists of two components, net loss and other comprehensive income. Other comprehensive income 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. The Company's other comprehensive income 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.
Accounts Receivable
The Company maintains
reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes
historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment
patterns to evaluate the adequacy of these reserves.
Content Provider Licenses
Content Provider License Fees
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 content acquisitions, paid in advance and capitalized
on our balance sheet as prepaid license fees. 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 content acquired. Minimum guarantee 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.
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 content acquired.
Software Development Costs
The Company applies
the principles of FASB ASC 985-20,
Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed
("ASC
985-20"). ASC 985-20 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.
60
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.
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 costs of advertising, including direct response advertising, the first time the advertising takes place. Advertising expense
for continuing operations was $7 and $116 in the years ended March 31, 2012 and 2011, respectively. Advertising expense for discontinued
operations was $0 and $956 in the years ended March 31, 2012 and 2011, respectively.
Restructuring
The Company accounts
for costs associated with employee terminations and other exit activities in accordance with FASB ASC 420-10
, 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.
Presentation
In order to facilitate
the comparison of financial information, certain amounts reported in the prior year have been reclassified to conform to the current
year presentation.
Fair Value of Financial Instruments
As of March 31, 2012
and 2011, the carrying value of cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts
payable, accrued license fees, accrued compensation, derivative liabilities and other current liabilities approximates fair value
due to the short-term nature of such instruments. The carrying value of long-term debt approximates fair value as the related interest
rates approximate rates currently available to the Company.
Derivative Liabilities
The Company applies
ASC Topic 815, "Derivatives and Hedging," which provides a two-step model to determine whether a financial instrument
or an embedded feature is indexed to an issuer's own stock and thus able to qualify for the scope exception in ASC 815-10-15-74.
Using the criteria in ASC 815, the Company determines which instruments or embedded features that require liability accounting
and records the fair values as a derivative liability. The changes in the values of the derivative liabilities are shown in the
accompanying consolidated statements of operations as "change in fair value of accrued derivative liabilities gain / (loss)."
61
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 gains of $97 in the year ended March 31, 2012 and $128 in
the year ended March 31, 2011 has been reported as a component of comprehensive loss in the consolidated statements of stockholders'
equity and comprehensive income.
Concentrations of Credit Risk
Financial instruments
which potentially subject us to concentration of credit risk consist principally of cash and cash equivalents, and accounts receivable.
We have placed cash and cash equivalents with a single high credit-quality institution. 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, 2012, one major
customer represented approximately 43% of our gross accounts receivable outstanding, and 39% of gross accounts receivable outstanding
as of March 31, 2011. This customer accounted for 41% of our gross revenues in the year ended March 31, 2012; and 49% in the year
ended March 31, 2011.
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 the lesser of 8 to 10 years or the term of the lease for leasehold improvements
and 5 years for other assets.
Goodwill and Indefinite Life Intangible
Assets
Goodwill represents
the excess of cost over fair value of net assets of businesses acquired. In accordance with FASB ASC 350-20
Goodwill and Other
Intangible Assets
, the value assigned to goodwill and indefinite lived intangible assets, including trademarks and tradenames,
is not amortized to expense, but rather they are evaluated at least on an annual basis to determine if there are potential impairments.
If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded to the extent that the
implied fair value of the reporting unit goodwill is less than the carrying value. If the fair value of an indefinite lived intangible
(such as trademarks and trade names) is less than its carrying amount, an impairment loss is recorded. Fair value is determined
based on discounted cash flows, market multiples or appraised values, as appropriate. Discounted cash flow analysis requires assumptions
about the timing and amount of future cash inflows and outflows, risk, the cost of capital, and terminal values. Each of these
factors can significantly affect the value of the intangible asset. The estimates of future cash flows, based on reasonable and
supportable assumptions and projections, require management's judgment. Any changes in key assumptions about the Company's
businesses and their prospects, or changes in market conditions, could result in an impairment charge. Some of the more significant
estimates and assumptions inherent in the intangible asset valuation process include: the timing and amount of projected future
cash flows; the discount rate selected to measure the risks inherent in the future cash flows; and the assessment of the asset's
life cycle and the competitive trends impacting the asset, including consideration of any technical, legal or regulatory trends.
In the year ended March
31, 2012, the Company determined that there was an impairment of goodwill, amounting to $2,969.  In the year ended March
31, 2011, the Company determined that there was an impairment of goodwill, amounting to $1,546. In performing the related valuation
analysis, the Company used various valuation methodologies including probability weighted discounted cash flows, comparable transaction
analysis, and market capitalization and comparable company multiple comparison. The impairment is detailed in Note 9 below.
62
Impairment of Long-Lived Assets and
Finite Life Intangibles
Long-lived assets,
including, intangible assets subject to amortization primarily consist of customer lists, license agreements and software that
have been acquired are amortized using the straight-line method over their useful life ranging from five to eight years and
are reviewed for impairment in accordance with FASB ASC 360-10,
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.
In the year ended March
31, 2012, the Company determined that there was an impairment of intangible assets amounting to $2,319. In the year ended March
31, 2011, the Company determined that there was an impairment of intangible assets, amounting to $4,482. In performing the related
valuation analysis the Company used various valuation methodologies including probability weighted discounted cash flows, comparable
transaction analysis, and market capitalization and comparable company multiple comparison. The impairment is detailed in Note
9 below.
Income Taxes
The Company accounts
for income taxes in accordance with FASB ASC 740-10,
Accounting for Income Taxes
("ASC 740-10"), 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 ASC 740-10, 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.
ASC 740-10 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 FASB
ASC 718
Share-Based Payment
("ASC 718") and accordingly, we record stock-based compensation expense for all
of our stock-based awards.
Under ASC 718, 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, interest rates, dividend rates 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.
The Company grants
restricted stock subject to market or performance conditions that vest based on the satisfaction of the conditions of the award.
Unvested restricted stock entitles the grantees to dividends, if any, with voting rights determined in each agreement. The fair
market values of market condition-based awards are determined using the Monte Carlo simulation method. The Monte Carlo simulation
method is subject to variability as several factors utilized must be estimated, including the derived service period, which is
estimated based on the Company's judgment of likely future performance and the Company's stock price volatility. The
fair value of performance-based awards is determined using the market closing price on the grant date. Derived service periods
and the periods charged with compensation expense for performance-based awards are estimated based on the Company's judgment
of likely future performance and may be adjusted in future periods depending on actual performance.
63
Preferred Stock
The Company applies
the guidance enumerated in FASB ASC 480-10,
Accounting for Certain Financial Instruments with Characteristics of both Liabilities
and Equity
("ASC 480-10") 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
ASC 480-10. All other issuances of preferred stock are subject to the classification and measurement principles of ASC 480-10.
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.
64
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
Board of Directors
The following table sets forth the names,
ages and positions of our directors and executive officers as of June 15, 2012. Each director serves until removed or resigns,
or a successor is elected. Officers serve at the discretion of the Board and subject to any employment agreements as set forth
below.
Name
Age
Position(s)
Peter Adderton
45
Chief Executive Officer and Director
Lisa Higgins-Lucero
46
Principal Financial Officer and CFO of Twistbox Entertainment Inc.
Peter Guber
70
Chairman
Robert S. Ellin
47
Executive Chairman
Paul Schaeffer
65
Vice-Chairman
Chris Rogers
54
Director
Biographical information for our directors
and executive officers are as follows:
Peter Adderton.
Peter Adderton
has served as our Chief Executive Officer and as a Director on the Board since December 2011. Mr. Adderton founded Boost Mobile
in 2000 and remains a Director and the largest shareholder of Boost Mobile Australia. Boost Mobile USA is one of the fastest growing
mobile brands in its category with annual revenues over $1 billion and over five million subscribers. Boost Mobile USA was purchased
by Nextel in 2004, and remains a wholly-owned subsidiary of Sprint Nextel. In 2005 Mr. Adderton also founded Amp'd Mobile, creating
the first integrated mobile entertainment company targeted for youth, young professionals and early adopters. Amp'd Mobile filed
for Chapter 11 bankruptcy in 2007.
Lisa Higgins-Lucero.
Lisa Higgins-Lucero is the Chief Financial Officer of Twistbox Entertainment, Inc. Mrs. Higgins-Lucero joined Twistbox Entertainment
Inc. in August 2007. She is responsible for all financial reporting and for the strategic planning and reporting of the Company's
operations. She works closely with all areas of the business to insure profitability and success for each of the Company's vertical
revenue strategies. Her prior experience is with publicly traded manufacturing and engineering companies, including 12 years with
Odetics, Inc., (now Iteris, Inc. NYSE Amex: ITI).
Peter Guber
.  Mr.
Guber has served as Co-Chairman of our Board of Directors from August 2007 and currently serves as a Chairman of the Board. 
Mr. Guber is Chairman and CEO of the multimedia Mandalay Entertainment Group. Prior to Mandalay, Mr. Guber was Chairman and CEO
of Sony Pictures Entertainment, Chairman and CEO of Polygram Entertainment, Co-Founder of Casablanca Record & Filmworks and
President of Columbia Pictures. Mr. Guber produced or executive produced (personally or through his companies) films that garnered
five Best Picture Academy Award nominations (winning for Rain Man) and box office hits that include The Color Purple, Midnight
Express, Batman, Flashdance and The Kids Are All Right. Mr.Guber is the Owner and Co-executive Chairman of the NBA franchise, the
Golden State Warriors. He is as a weekly entertainment and media analyst for Fox Business News and a full professor at UCLA. Mr.
Guber serves on the board of directors of Demand Media, an online media publishing company (NYSE: DMD), and is Co-Founder of Geek
Chic Daily, a daily email newsletter with inside information on technology & apps, video games, comics, TV & film. Mr.
Guber is a noted author with works including "Inside The Deep" and "Shootout: Surviving Fame and (Mis)Fortune
in Hollywood." Mr. Guber wrote the cover article for the Harvard Business Review titled, "The Four Truths of the Storyteller"
and has also authored op-ed pieces for the New York Times and the San Francisco Chronicle. Mr. Guber recently released his third
book, "Tell To Win - Connect, Persuade, and Triumph with the Hidden Power of Story", which became a #1 New York Times
bestseller.
65
Robert S. Ellin.
In December 2011, Mr. Ellin was appointed Executive Chairman of the Board of Directors. Prior to that, Mr. Ellin
served as Co-Chairman of our Board of Directors since 2005. Mr. Ellin has more than twenty years of investment and turnaround experience.
Since 2004, he has served as Managing Director and Portfolio Manager of Trinad Capital, an activist hedge fund investing primarily
in micro-cap and small-cap publicly traded companies. Prior to founding Trinad, Mr. Ellin was Founder and President of Atlantis
Equities Inc., a private 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 played an active role in its investee companies including
board representation, management selection, corporate finance and other advisory services. He spearheaded world-class investments
in ThQ, Inc. (THQI), Grand Toys (GRIN), Forward Industries, Inc. (FORD), Majesco Entertainment (COOL), and iWon.com. Mr. Ellin
also acquired S&S Industries, Inc. the largest manufacturer in the world of underwires which had strong partnerships with leading
companies including Bally's, Maidenform, and Sara Lee. Prior to Atlantis, he worked in Institutional Sales at LF Rothschild
and was Manager of Retail Operations at Lombard Securities. Mr. Ellin is the Chief Executive Officer, Chief Financial Officer,
Chairman of the Board of Directors and holds certain other positions of Loton Corporation (LTNR.QB), a company specializing in
3D rendering, animation and architectural visualization services. Mr. Ellin is also a director of Infosearch Media, Inc. (ISHM.PK),
a provider of search-targeted text and video content for the Internet. Mr. Ellin
currently also sits on the Board of Directors of Atrinsic, Inc. (ATRN), as well as the Board of Governors at Cedars-Sinai
Hospital in Los Angeles, California. Mr. Ellin holds a Bachelor of Arts degree from Pace University.
Paul Schaeffer.
Mr. Schaeffer is a member of our Board of Directors and served as Vice-Chairman or Co-Chairman on our Board of Directors since
August 2007 and is currently Vice-Chairman.  He is the Vice Chairman, Chief Operating Officer and Co-Founder of Mandalay
Entertainment Group. 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 ("SPE"), overseeing the worldwide corporate
operations for SPE including Worldwide Administration, Financial Affairs, Human Resources, Corporate Affairs, Legal Affairs and
Corporate Communications. 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 time 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. The Company considered
Mr. Schaeffer to be a valuable resource when it selected him as a director based on having served for more than 5 years as the
Chairman of the Finance Committee, and a member of the Board of Trustees of Children's Hospital Los Angeles, where he also
served as a chairman of its Audit Committee, and member of its Compensation Committee and Executive Committee for more than five
years.
Chris Rogers.
Mr.
Rogers has been a member of our Board of Directors since May 2012. Mr. Rogers served as a Senior Vice President, Corporate Development
and Spectrum, of Sprint Nextel Corporation, where he evaluated and executed strategic initiatives, including mergers, acquisitions,
divestitures, equity investments and joint ventures within the mobile communication and e-commerce sectors. He also was responsible
for management and oversight of wireless spectrum licenses and Sprint Nextel's investment portfolio of emerging technology
start-ups. Prior to its merger with Sprint in 2005, Mr. Rogers was Co-Founder and Senior Vice President of Nextel Communications,
Inc. as well as Co-Founder of FleetCall Communications, the predecessor to Nextel Communications, and Founder and Chairman of Dispatch
Communications, Inc., which was sold to Fleet Call/Nextel in 1993. Rogers holds a JD in Communications Law and has served as a
Director on multiple public and private company Boards and as a Director for several Washington, DC-based philanthropic organizations.
Except as noted below,
none of our directors has, during the past ten years, been involved in any legal proceedings described in subparagraph (f) of Item
401 of Regulation S-K.
Audit Committee
Our audit committee
was established during the fiscal year ended March 31, 2010 and consists of Paul Schaeffer and Robert Ellin. Mr. Schaeffer has
been designated as the Chairman of the committee and the financial expert within the rules and regulations of the SEC. The committee
met regularly during the course of the year, including regular meetings with our auditors, and monitors our compliance with our
obligations under the assessment of internal control over financial reporting.
Nominating Committee
The entire Board of
Directors currently operates as our Nominating Committee.
66
Code of Ethics
We intend to establish a code of ethics
during the fiscal year ended March 31, 2013.
Section 16 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. 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
the fiscal year ended March 31, 2012, all Section 16(a) filing requirements applicable to our officers, directors, and ten percent
stockholders were met except for the following: (i) one Form 4 report was not timely filed by Peter Adderton with respect to two
transactions; (ii) one Form 3 report was not timely filed by Peter Adderton with respect to one transaction; (iii) one Form 4 report
was not timely filed by Lisa Higgins-Lucero with respect to one transaction; (iv) one Form 3 report was not timely filed by Lisa
Higgins-Lucero with respect to two transactions, (v) one Form 3 report and one Form 4 report was not timely filed by Chris Rogers
with respect to one transaction, and (v) one Form 4 report was not filed by Robert Ellin with respect to three transactions.
67
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table
sets forth information concerning the total compensation paid during our fiscal year ended March 31, 2011, and our fiscal year
ended March 31, 2012, for (i) our Chief Executive Officer, (ii) our other three most highly compensated executive officers who
were serving as executive officers as of March 31, 2012, and (iii) two additional individuals who are former executive officers
but were not serving as an executive officer at the end of the fiscal year ended March 31, 2012 (collectively, our "named
executive officers").
Position
Fiscal
Year
Ended
Salary
($)
Bonus
($)
Stock (1)
($)
Option (1)
($)
All Other
($)
Total
($)
Peter Adderton (2)
March
                                                                                                                                       31, 201
2
112,500
125,000
2,025,504
-
26,741
2,289,745
Chief Executive Officer
March
                                                                                  31,
2011
-
-
-
-
25,751
25,751
Robert Ellin (3)
March
                                                                                  31, 201
2
112,500
-
3,110,515
-
20,000
3,243,015
Executive Chairman
March
                                                                                  31,
2011
-
-
-
-
360,000
360,000
Lisa Higgins-Lucero (4)
March
                                                                                  31, 201
2
120,000
34,000
162,475
-
10,999
327,474
Principal Financial Officer and CFO of Twistbox
    Entertainment Inc.
March
                                                                                  31,
2011
120,000
-
-
-
-
120,000
David Mandell (5)
March
                                                                                  31, 201
2
253,828
24,000
243,713
-
19,991
541,532
Former Executive Vice President and General
    Counsel
March
                                                                                  31,
2011
332,600
-
-
49,916
16,251
398,767
James Lefkowitz (6)
March
                                                                                  31, 201
2
50,000
-
-
-
17,773
67,773
Former Chief Operating Officer
March
                                                                                  31,
2011
226,403
-
-
26,137
28,856
281,396
Ray Schaaf (7)
March
                                                                                  31, 201
2
19,950
-
-
-
-
19,950
Former President and Chief Executive Officer
March
                                                                                  31,
2011
285,960
125,000
75,000
-
30,268
516,228
(1)
The amounts in the "Stock" column reflect the aggregate grant date fair value of each restricted stock award computed in accordance with FASB ASC Topic 718. Under ASC 718, for Messer's. Adderton and Ellin we estimated the fair value of the restricted stock granted using the Monte Carlo pricing method model that values the restricted stock awards using various random hypothecations of stock price; securities issuances for services; securities issuances for capital raises and acquisitions. The primary assumptions used in this analysis are: Stock price ($0.61 as of December 28, 2011) is projected to fluctuate based on a future annual volatility of 100%; Average monthly stock issuances for services is projected at 100,000 shares with a standard deviation of 50,000 shares; Average monthly stock issuances for capital is projected at 200,000 shares with a standard deviation of 100,000 shares; Average monthly stock issuances for acquisitions is projected at 200,000 with a standard deviation of 100,000 shares; Acquisition share issuances were not assumed for the first 3 months; Market cap hurdles of $100 million and $200 million are based on maintaining those levels for 30 trading days; Dilutive share analysis included warrants, options, restricted stock grants and convertible debt with only fixed price conversion and exercise prices; and restricted stock discount of 36.1%, risk-free rate of 0.1% and dividend yield of 0%. Forfeiture rate was assumed to be 0% due to the lack of any service requirement related to these awards.
68
For the amounts for other recipients
in the "Stock" and "Options" columns were also computed under ASC 718. We estimated the fair value of restricted
stock and stock options granted using the Black-Scholes 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 vesting term. The amount
of expense recognized represents the expense associated with the restricted stock or 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 restricted stock or options that actually vest or are forfeited are recorded. Vesting schedules for unvested
stock grants or option grants for each officer are described below under "Narrative Disclosure to Summary Compensation Table".
(2)
Mr. Adderton was appointed as our Chief Executive Officer on December 28, 2011 following a period of service as our interim Chief Executive Officer that began on July 15, 2011. Mr. Adderton was previously serving as an advisor to us and received a warrant to purchase 150,000 shares of our common stock at a per share price of $0.39 on September 27, 2010. In the fiscal year ended March 31, 2012, Mr. Adderton was reimbursed $20,000 for his personal assistant, through payment to Skycrest Ventures, LLC, and such amounts are disclosed under "All Other".
(3)
Mr. Ellin was appointed Executive Chairman of the Board of Directors on December 28, 2011. Mr. Ellin also received $20,000 in 'Other Compensation' that consists of salary for a personal assistant that is reimbursed to Trinad Management, LLC. Prior to his appointment as Executive Chairman, we were a party to a Management Agreement, dated September 14, 2006 with Trinad Management, LLC, the manager of Trinad Capital Master Fund, which is one of our principal stockholders. Mr. Ellin is the managing director of and portfolio manager for Trinad Management, LLC. Pursuant to the terms of the Management Agreement, Trinad Management, LLC provides certain management services, including, without limitation, relating to the sourcing, structuring and negotiation of a potential business combination involving the Company, for a fee of $90,000 per quarter.
(4)
Ms. Higgins-Lucero was appointed as our Principal Financial Officer on July 26, 2011.
(5)
On April 12, 2012, Mr. Mandell resigned from his positions with us.
In February 2011, while an officer of the Company, Mr. Mandell agreed to cancel 400,000 shares underlying an option to purchase 450,000 shares of common stock of the Company, and the Company granted an option to purchase 400,000 shares of the Company's common stock at an exercise price of $0.25 per share. The Company determined the incremental fair value of the options issued to be $49,916, using the Black-Scholes option pricing model and the following assumptions: expected life of 6.98 years, a risk free interest rate of 2.99%, a dividend yield of 0% and volatility of 75%.
(6)
On January 31, 2012, James Lefkowitz resigned as our Chief Operating Officer.
In February 2011, while an officer of the Company, Lefkowitz agreed to cancel an option to purchase 500,000 shares of common stock of the Company, and the Company granted Lefkowitz an option to purchase 500,000 shares of the Company's common stock at an exercise price of $0.25 per share. The Company determined the incremental fair value of the options issued to be $26,137, using the Black-Scholes option pricing model and the following assumptions: expected life of 3.00 years, a risk free interest rate of 1.02%, a dividend yield of 0% and volatility of 75%.
(7)
On May 9, 2011, Ray Schaaf resigned as our President and Chief Executive Officer. Amounts disclosed as salary represent salary paid to Mr. Schaaf in his capacity as President and CEO, while amounts disclosed as "All Other" include fees prior to his appointment as President and other benefits paid.
69
NARRATIVE DISCLOSURE TO SUMMARY COMPENSATION
TABLE
Employment Agreement
with Peter Adderton.
On December 28, 2011, we entered into an employment agreement with Mr. Adderton as the Company's
Chief Executive Officer. Mr. Adderton's employment agreement provides for a one-year term and an annual salary of $450,000,
half of which was deferred until certain debt and/or equity financings were consummated. Such financings were consummated and Mr.
Adderton has received his full salary since April 1, 2012 and received a lump sum payment for the portion of his salary that was
deferred from December 28, 2011 to March 31, 2012 on April 9, 2012. Mr. Adderton is eligible to receive a special incentive bonus
if certain debt and/or equity financings are consummated, and is also eligible to receive an annual cash bonus in the amount of
100% of his base salary, upon on the satisfaction of performance-related milestones to be agreed upon between Mr. Adderton and
our board of directors.
Mr. Adderton also received
a grant of 9,037,500 shares of our restricted common stock that vest in three equal tranches upon the occurrence of the following
events: (i) one or more debt or equity financings during the two years following the date of the agreement (the "Measurement
Period") with gross proceeds of at least $5 million; (ii) our achievement on any date during the Measurement Period of a
total enterprise value (computed by multiplying the number of outstanding shares of common stock on a fully diluted (taking into
account only those stock options that are in-the-money on such date), as-converted basis by the average daily trading price for
common stock for the 30-trading day period immediately preceding the date of determination) of $100 million or more; and (iii)
our achievement on any date during the Measurement Period of a total enterprise value (calculated as set forth in clause (ii) above)
of $200 million or more; provided, however, that all unvested shares of restricted common stock will vest immediately upon the
sale of all or substantially all of our assets, upon the merger or reorganization of our Company following which the equity holders
immediately prior to the consummation of such merger or reorganization collectively own less than 50% of the voting power of the
resulting entity, or upon the sale of our equity securities representing 50% or more of our voting power or 50% or more of the
economic interest in us in a single transaction or in a series of related transactions. The first tranche of the grant of restricted
common stock described above vested as of December 29, 2011 upon the funding of the $7 million financing from Adage Capital Partners,
L.P. Mr. Adderton will also be reimbursed for the annual fee of a personal assistant of up to $80,000 during the term of his employment.
Mr. Adderton is also
entitled to receive additional performance bonuses, in cash or shares of common stock at Mr. Adderton's election, upon our
achievement of certain higher total enterprise values. All of Mr. Adderton's shares of restricted common stock are subject
to a one-year prohibition on transfer from the applicable vesting date.
During the fiscal year
ended March 31, 2012, we did not grant Mr. Adderton any stock options. Mr. Adderton also received a warrant to purchase 150,000
shares of our common stock at a per share price of $0.39.
Executive Chairman
Agreement with Robert Ellin
. On December 28, 2011, we entered into an executive chairman agreement with Mr. Ellin. Mr. Ellin's
executive chairman agreement provides for a one-year term and an annual fee of $450,000, half of which was deferred until certain
debt and/or equity financings were consummated. Such financings were consummated, and Mr. Ellin has received his full fee since
April 1, 2012 and received a lump sum payment for the portion of his fee that was deferred from December 28, 2011 to March 31,
2012 on April 6, 2012. Mr. Ellin shall be entitled to be paid an annual incentive bonus in cash in an amount of up to one hundred
percent (100%) of the annual fee based upon satisfaction of performance-related milestones to be agreed upon between Mr. Ellin
and the other members of our board of directors. Mr. Ellin shall also be reimbursed for the annual fee of a personal assistant
of up to $80,000 during the term of this executive chairman agreement.
Mr. Ellin also received
three grants totaling 8,000,000 shares of our restricted common stock and vests as follows:
•
The first grant of 3,400,000 was granted under the executive
chairman agreement and vests as follows: (i) one third vested upon the completion our most recent equity financing; (ii) one third
shall vest if on any date during the term or within 12 months following the term, our total enterprise value equals or exceeds
$100,000,000; and (iii) one third shall vest immediately if on any date during the term or within 12 months following the term
our total enterprise value equals or exceeds $200,000,000; provided, however, that all unvested shares of restricted common stock
shall vest immediately change of control. These shares may not be transferred for a period of one year from the vesting date.
•
The second grant of 3,600,000 shares was granted on December
28, 2011 and vested fully on the date of the grant. These shares may not be transferred for a period of two years from the date
of grant.
70
•
The third grant of 1,000,000 shares was granted on December
28, 2011 and vest one year from the date of grant. These shares may not be transferred for a period of one year from the vesting
date.
Mr. Ellin is also entitled
to receive additional performance bonuses, in cash or shares of common stock at Mr. Ellin's election, upon our achievement
of certain higher total enterprise values.
During the fiscal year
ended March 31, 2012, we did not grant Mr. Ellin any additional stock options or warrants.
Employment Agreement
with Lisa Higgins-Lucero.
Ms. Higgins-Lucero joined us on August 27, 2007. Ms. Higgins-Lucero has a written employment contract
with our wholly owned subsidiary Twistbox which provides for a bonus of up to 10% of her then base salary, at the discretion of
management. She receives a base salary of $120,000 per year, payable in accordance with our payroll guidelines. She is eligible
for a bonus at the discretion of our board of directors. During the fiscal year ended March 31, 2012, we did not grant Ms. Higgins-Lucero
any stock options. Effective January 3, 2012, we granted Ms. Higgins-Lucero 500,000 shares of restricted common stock, of which
250,000 vested immediately and 250,000 will vest upon the achievement of performance criteria at the Chief Executive Officer's
discretion and with the approval of the board of directors, however, all unvested shares will vest immediately upon the sale of
all or substantially all of our assets, upon the merger or reorganization of our Company following which the equity holders immediately
prior to the consummation of such merger or reorganization collectively own less than 50% of the voting power of the resulting
entity, or upon the sale of our equity securities representing 50% or more of our voting power or 50% or more of the economic interest
in us in a single transaction or in a series of related transactions.
Employment Agreement
with David Mandell.
On February 1, 2012, we entered into an employment agreement with Mr. Mandell, our former Executive
Vice President and General Counsel.  The agreement provides Mr. Mandell a base salary of $250,000 per year. Mr. Mandell was
entitled to be paid an annual discretionary incentive bonus in an amount not to exceed 50% of his salary, based upon satisfaction
of performance-related milestones. On January 3, 2012 we granted Mr. Mandell 750,000 shares of restricted common stock, which vested
as follows: 375,000 shares vested immediately, and 375,000 shares are scheduled to vest upon the completion of an acquisition by
us of all or substantially all of the assets of or equity interests in another entity or similar transaction which is approved
by our board of directors. During the fiscal year ended March 31, 2012, we did not grant Mr. Mandell any stock options.
On April 12, 2012,
we entered into a Separation and General Release Agreement with Mr. Mandell, under which Mr. Mandell retains ownership of the 375,000
shares of vested common stock awarded under his employment agreement and waives all rights to the non-vested common stock awards
and any other shares awarded under such agreement. We will pay Mr. Mandell a total of $125,000 over a nine-month period beginning
March 9, 2012 as compensation for performing certain transition consulting services for us. Mr. Mandell's first payment was
made on April 20, 2012 for the period March 9, 2012 to April 14, 2012. We will also pay Mr. Mandell's monthly COBRA premiums
for a nine-month period or provide certain reimbursement payments in the event Mr. Mandell's current health plan ceases to
be available before the end of such nine-month period. The agreement provides mutual releases from claims, reasonable cooperation
covenants (and reimbursements obligations for extended consultation), and continuation of non-disclosure obligations and various
attorney-client privilege, confidentiality, cooperation and non-solicitation clause of Mr. Mandell's employment agreement.
Employment Agreement
with James Lefkowitz.
On February 21, 2011, we entered into an employment agreement with Mr. Lefkowitz.  The agreement
provided Mr. Lefkowitz a base salary of $5,000 per month. We also granted Mr. Lefkowitz options to purchase 500,000 shares of common
stock at an exercise price of $0.25 per share upon the cancellation of options to purchase 500,000 shares of common stock previously
granted to him. During the fiscal year ended March 31, 2012, we did not grant Mr. Lefkowitz any stock options. On January
31, 2012, James Lefkowitz resigned as our Chief Operating Officer.
71
Employment Agreement
with Ray Schaaf
. Mr. Schaaf was appointed as President of the Company on October 27, 2009 following a period of acting as a
consultant to us. On February 22, 2011 Mandalay entered into a Confidential Separation, Transition and Release Agreement and a
Restricted Stock Agreement with Mr. Schaaf (together, the "Schaaf Agreements"). Pursuant to the Schaaf Agreements,
Mr. Schaaf entered into a transition period in his role with the Company that ended on May 9, 2011.  At the end of the
transition period, Mr. Schaaf ceased to be our President and resigned as a member of its Board of Directors.  We paid
Mr. Schaaf $45,000 in 3 installments, and we issued 300,000 shares of the Company's common stock to Mr. Schaaf as compensation
for his services during the transition period.  The Schaaf Agreements included a mutual, general release, and if Mr. Schaaf
had not reaffirmed the general release within 21 days of the transition period, then we would have had the right to repurchase
the 300,000 shares of the Company's common stock issued to him.
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 Period Ended March 31, 2012
The following table presents information
regarding outstanding options and unvested stock awards held by our named executive officers as of March 31, 2012.
Option Awards
Stock Awards
Name
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
Option
Exercise
Price $
Option
expiration
date
Number
of shares
or units
of stock
that have
not
vested (#)
Market
value of
shares or
units of
stock
that  have
not
vested ($)
Equity
incentive
plan
awards:
Number
of
unearned
shares,
units or
other
rights
that have
not
vested (#)
Equity
incentive
plan awards:
Market or
payout value
of unearned
shares, units
or other
rights that
have not
vested ($)
Peter Adderton
Chief
Executive
Officer
(1)
-
-
-
-
-
6,175,000
1,519,563
-
-
Robert Ellin Executive Chairman (2)
500,000
-
-
2.75
6/18/18
1,000,000
155,880
-
-
-
-
-
-
-
2,266,667
555,333
-
-
Lisa Higgins- Lucero
Principal Financial Officer and CFO of Twistbox
Entertainment Inc.
(3)
9,759
-
-
0.81
10/9/17
250,000
232,500
-
-
David Mandell
Former Executive Vice President and General Counsel
(4)
400,000
-
-
0.25
2/12/2018
375,000
348,750
-
-
50,000
-
-
4.75
2/12/2018
-
-
-
-
James Lefkowitz Former Chief Operating Officer (5)
500,000
-
-
0.25
2/21/2014
-
-
-
-
Ray Schaaf Former President and Chief Executive Officer
-
-
-
-
-
-
-
-
-
72
(1) Effective December
28, 2011, we granted Mr. Adderton 9,037,500 shares of restricted common stock, one third of which vested as of December 29, 2011.
The remaining 6,025,000 shares vest as described above under –"Narrative Disclosure to Summary Compensation Table—Employment
Agreement with Peter Adderton." Mr. Adderton also received a warrant to purchase 150,000 shares of our common stock at a
per share price of $0.39 on September 27, 2010.
(2) Effective June 18, 2008, we granted
Mr. Ellin 500,000 stock options. The stock options are exercisable at the exercise price of $2.75 per share until June 18, 2018.
Effective December 28, 2011, we granted Mr. Ellin 8,000,000 shares of restricted stock, of which 4,733,333 shares have vested.
The remaining 3,266,667 shares vest as described above under –"Narrative Disclosure to Summary Compensation Table—Executive
Chairman Agreement with Robert Ellin."
(3) Effective January
31, 2008, we granted Ms. Higgins-Lucero 9,759 stock options. The stock options are exercisable at the exercise price of $0.81 per
share until October 9, 2017. Effective January 3, 2012, we also granted Ms. Higgins-Lucero 500,000 shares of restricted common
stock, half of which were vested as of January 3, 2012. The remaining 250,000 shares vest as described above under –"Narrative
Disclosure to Summary Compensation Table—Employment Agreement with Lisa Higgins-Lucero."
(4) Mr. Mandell resigned
from his positions with us on April 12, 2012. Effective February 12, 2008, we granted Mr. Mandell 400,000 stock options. These
stock options are exercisable at the exercise price of $0.25 per share until February 12, 2018. Effective February 12, 2008, we
also granted Mr. Mandell 50,000 stock options, which are exercisable at the exercise price of $4.75 per share until February 12,
2018. Effective January 3, 2012, we granted Mr. Mandell 750,000 shares of restricted common stock, half of which shares vested
immediately. The remaining 375,000 shares vest as described above under –"Narrative Disclosure to Summary Compensation
Table—Employment Agreement with David Mandell."
(5) Effective February 21, 2011, we granted
Ms. Lefkowitz 500,000 stock options. The stock options are exercisable at the exercise price of $0.25 per share until February
21, 2014.
DIRECTOR COMPENSATION
The following table presents information
regarding compensation paid to our directors during the fiscal year ended March 31, 2012.
Name
Fees Earned or
Paid in Cash
($)
Stock Awards
($)(1)
Option Awards
($)(1)
All Other
Compensation
($)
Total
($)
Peter Guber (2)
-
620,000
-
-
620,000
Robert S. Ellin (3)
-
-
-
-
-
Paul Schaeffer (4)
19,950
620,000
-
-
639,950
Peter Adderton (5)
-
-
-
-
-
Ray Schaaf (6)
-
-
-
-
-
Adi McAbian (7)
-
-
-
-
-
(1) The amounts in
this column reflect the aggregate grant date fair value of each restricted stock award computed in accordance with FASB ASC Topic
718. 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 stock vesting term. The amount of expense recognized represents the expense associated
with the stock 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 stock that actually vest or are forfeited are recorded.
(2) As of March 31,
2012, Mr. Guber held 500,000 options with an exercise price of $ 2.75 per share, and 1,000,000 shares of unvested restricted common
stock.
73
(3) Mr. Ellin was appointed
Executive Chairman of the Board of Directors on December 28, 2011. His compensation for fiscal year 2011 is fully reflected in
the "Summary Compensation Table" above. Mr. Ellin received no additional compensation for his service as a director.
(4) As of March 31,
2012, Mr. Schaeffer held 300,000 options with an exercise price of $2.75 per share, and 1,000,000 shares of unvested restricted
common stock.
(5)
Mr. Adderton
was appointed as our interim Chief Executive Officer on July 15, 2011 and was appointed as our Chief Executive Officer on December
28, 2011. His compensation for fiscal year 2011 is fully reflected in the "Summary Compensation Table" above. Mr. Adderton
received no additional compensation for his service as a director.
(6) Mr. Schaaf resigned
as a member of our board of directors on May 9, 2011. As of March 31, 2012, Mr. Schaaf held no options and no shares of unvested
restricted common stock.
(7) Mr. McAbian resigned
as a member of our board of directors on April 27, 2011. As of March 31, 2012, Mr. McAbian held 54,725 options and no shares of
unvested restricted common stock.
NARRATIVE TO DIRECTOR COMPENSATION TABLE
Non-employee director
compensation for a new director is determined on an ad hoc basis by the existing members of the board of directors at the time
a director is elected.
NARRATIVE DISCLOSURE OF COMPENSATION
POLICIES AND PRACTICES AS THEY RELATE TO THE COMPANY'S RISK MANAGEMENT
We believe that our
compensation policies and practices for all employees, including executive officers, do not create risks that are reasonably likely
to have a material adverse effect on us.
74
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Reference is made to
the information contained in the equity compensation plan tables contained in this prospectus.
The following table
presents information regarding the beneficial ownership of all shares of our common stock and preferred stock as of June 23, 2012
by:
·
Each person who beneficially owns more
than five percent of the outstanding shares of our common stock;
·
Each person who beneficially owns outstanding
shares of our preferred stock;
·
Each director;
·
Each named executive officer; and
·
All directors and officers as a group.
Name of
Beneficial Owner
(1)
Number of Shares
Beneficially Owned
(2)
Percentage
Owned (%)
Robert S. Ellin (3)
30,201,385
25.9
%
Peter Guber (4)
18,786,293
16.1
%
Adage Capital Partners LP (5)
12,553,333
10.8
%
Peter Adderton (6)
9,187,500
7.9
%
Paul Schaeffer (7)
2,300,000
2.0
%
Lisa Higgins-Lucero (8)
509,759
0.4
%
All directors and named executive officers as a group (5 individuals)
60,984,937
52.3
%
(1) Except as otherwise
indicated, the address of each of the following persons is c/o Mandalay Digital Group, Inc., 4751 Wilshire Boulevard, Third Floor,
Los Angeles, CA 90010.
(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 Securities and Exchange 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 convertible or exercisable, convertible or issuable within 60 days
of May 20, 2012, are deemed outstanding. Such shares, however, are not deemed outstanding for the purpose of computing the percentage
ownership of any other person.
(3)
Trinad Capital Master Fund, Ltd. is the beneficial owner of 21,701,385 shares of common stock, which includes (a) 4,262,233
issued and outstanding shares of common stock, (b) 280,899 shares of common stock issuable upon exercise of warrants held by
Trinad Capital Master Fund, Ltd., at an exercise price of $2.67 per share, (c) 12,058,253 (10,000,000 principal, 2,058,253
accrued interest) shares of common stock issuable upon conversion of a convertible note issued by us with an aggregate
principal amount of $1,500,000 held by Trinad Capital Master Fund, Ltd. (at the time of conversion accrued interest will also
be converted and increase total number of shares issued) and which is convertible at a price per share of $0.15, and
(d) 5,000,000 shares of common stock issuable upon exercise of warrants held by Trinad Capital Master Fund, Ltd. at an
exercise price of $0.25 per share. Trinad Management, LLC (as the manager of the Trinad Capital Master Fund, Ltd. and Trinad
Capital LP) is deemed the beneficial owner of 21,701,385 shares of common stock which includes 21,601,385 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 LLC, assuming conversion price $1.00 per
share.  Trinad Management, LLC disclaims beneficial ownership of the shares of common stock directly and
beneficially owned by Trinad Capital Master Fund, Ltd. Robert S. Ellin, the managing director of and portfolio manager for
Trinad Management, LLC and the managing director of Trinad Advisors II LLC is deemed the beneficial owner of 30,201,385
shares of common stock, which includes (i) 21,701,385 shares of common stock held by Trinad Capital Master Fund, Ltd., (ii)
100,000 shares of common stock issuable upon conversion of 100,000 shares of series A convertible preferred stock held by
Trinad Management LLC, (iii) 8,000,000 issued and outstanding shares of common stock owned by Mr. Ellin, and (iv) options to
purchase 500,000 shares of common stock owned by Mr. Ellin. Mr. Ellin disclaims beneficial ownership of the shares of common
stock directly and beneficially owned by Trinad Capital Master Fund, Ltd. except to the extent of his pecuniary interests
therein. Trinad Capital LP (as the owner of 70.20% of the shares of Trinad Capital Master Fund, Ltd. as of March 31, 2012)
and Trinad Advisors II, LLC (as the general partner of Trinad Capital LP), are each deemed the beneficial owner of (a)
3,866,452 shares of common stock (representing 84.53% of the shares of the 4,293,160 shares of common stock held directly,
and not through a derivative security, by Trinad Capital Master Fund, Ltd.), (b) 280,899 shares of common stock issuable upon
exercise of warrants held by Trinad Capital Master Fund, Ltd., at an exercise price of $2.67 per share, (c) 10,000,000 shares
of common stock issuable upon conversion of a convertible note issued by us with an aggregate principal amount of $1,500,000
held by Trinad Capital Master Fund, Ltd., and (d) 5,000,000 shares of common stock issuable upon exercise of warrants held by
Trinad Capital Master Fund, Ltd. at an exercise price of $0.25 per share. Trinad Advisors II, LLC disclaims beneficial
ownership of the shares of common stock beneficially owned by Trinad Capital LP, except to the extent of its pecuniary
interest therein.
75
Each of the beneficial
owners share the power to vote or to direct the vote and to dispose or to direct the disposition of common stock it or he may be
deemed to beneficially own, except that Mr. Ellin has the sole power to vote or to direct the vote of 8,000,000 shares of vested
and unvested stock owned by him and to dispose or to direct the disposition of 4,733,333 shares of fully vested common stock owned
by him, and will have the power to vote or to direct the vote and to dispose or to direct the disposition of 500,000 shares of
common stock underlying the options granted to Mr. Ellin on June 18, 2008 at an exercise price of $2.75 per share, upon their exercise.
The address of each of the beneficial owners is 4751 Wilshire Boulevard, Third Floor, Los Angeles, CA 90010.
(4) The Guber Family
Trust (the "Trust"), of which Peter Guber serves as a trustee, is the beneficial owner of 17,286,293 shares of common
stock, which consists of: (a) 5,633,225 issued and outstanding shares of common stock, (b) 280,899 shares of common stock issuable
upon exercise of warrants at an exercise price of $2.67 per share, (c) 8,038,836 (6,666,667 principal, 1,372,169 accrued interest)
shares of common stock issuable upon conversion of a convertible note issued by us with an aggregate principal amount of $1,000,000
(at the time of conversion accrued interest will also be converted and increase total number of shares issued) and which is convertible
at a price per share of $0.15, and (d) 3,333,333 shares of common stock issuable upon exercise of warrants at an exercise price
of $0.25 per share. Peter Guber disclaims beneficial ownership of the shares of common stock directly and beneficially owned by
the Trust, except to the extent of his pecuniary interest therein. Mr. Guber directly owns 1,500,000 shares of common stock, which
consists of 1,000,000 unvested shares of common stock, and options to purchase 500,000 shares of our common stock, which options
are fully vested. Mr. Guber, as trustee of the Trust, has the sole power to vote or to direct the vote and dispose or to direct
the disposition of 16,991,822 shares of common stock. Mr. Guber shall have the sole power to vote or to direct the vote and to
dispose or to direct the disposition of 500,000 shares of common stock underlying the options granted to Mr. Guber on June 18,
2008 at an exercise price of $2.75 per share, upon their exercise. The information set forth herein is based solely on a Schedule
13D filed by the beneficial owners with the Securities and Exchange Commission on January 9, 2012.
(5) Adage Capital Partners
LP is the beneficial owner of 12,553,333 shares of common stock, which consists of 10,053,333 issued and outstanding shares of
common stock, and 2,500,000 shares of common stock issuable upon exercise of warrants at an exercise price of $0.70 per share.
Adage Capital Partners LP has the sole power to vote or to direct the vote and dispose or to direct the disposition of 12,553,333
shares of common stock. The written consents to the Reverse Stock Split and the Authorized Stock Increase included consents with respect to 15,510,476 shares (representing 18.8% of our common stock as of May 23, 2012) held by stockholders who had previously agreed to vote in favor of such proposals in separate voting agreements they entered into in connection with their purchase from the Company of the stock being registered hereby.  The shares being registered hereby of selling stockholders Adage Capital Partners, L.P. and William C Powers Trust Dtd 12/19/09 were included in such shares subject to the voting agreement.
(6) Peter A. Adderton
is the beneficial owner of 9,187,500 shares of common stock, which consists of (a) 9,037,500 issued and outstanding shares of common
stock and (b) 150,000 shares of common stock issuable upon exercise of warrants at an exercise price of $0.39 per share. Mr. Adderton
has the sole power to vote or to direct the vote of 9,037,500 shares of common stock and to dispose or to direct the disposition
of 3,012,500 shares of common stock (subject to a one-year prohibition on transfer from the applicable vesting date).
(7) Paul & Judy
Schaeffer Living Trust is the beneficial owner of 1,000,000 shares of common stock. The securities indicated are held indirectly
by Mr. Schaeffer through the Paul and Judy Schaeffer Living Trust for which he serves as a trustee. Mr. Schaeffer disclaims
beneficial ownership of these securities except to the extent of his pecuniary interest. Mr. Schaeffer directly owns options to
purchase 300,000 shares of our common stock, which options are fully vested, and 1,000,000 unvested shares of common stock Mr.
Schaeffer will have the sole power to vote or to direct the vote and to dispose or to direct the disposition of 300,000 shares
of common stock underlying the options granted to Mr. Schaeffer on June 18, 2008 at an exercise price of $2.75 per share, upon
their exercise.
(8) Lisa Higgins-Lucero
is the beneficial owner of 509,759 shares of common stock, which consists of 500,000 issued and outstanding shares, and options
to purchase 9,759 shares of common stock. Mrs. Higgins-Lucero has the sole power to vote or to direct the vote and dispose or to
direct the disposition of 250,000 shares of fully vested common stock, and will have the sole power to vote or to direct the vote
and to dispose or to direct the disposition of 9,759 shares of common stock underlying the options granted to Mrs. Higgins-Lucero
on January 31, 2008 at an exercise price of $0.81 per share, upon their exercise.
76
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
AND DIRECTOR INDEPENDENCE
Mandalay Digital Group, Inc.
Management Agreement
On September 14, 2006,
the Company entered into a five year management agreement ("Agreement") with Trinad Management, LLC the manager of
Trinad Capital Master Fund, which is one of our principal stockholders. In addition, Robert Ellin, our Executive Chairman, is the
managing director of and portfolio manager for Trinad Management. Pursuant to the terms of the Agreement, Trinad Management provided
certain management services, including, without limitation, relating to the sourcing, structuring and negotiation of a potential
business combination transaction involving the Company in exchange for a fee of $90,000 per quarter, plus reimbursements of all
related expenses reasonably incurred. The Agreement expired on September 14, 2011, but was extended to December 31, 2011. For the
years ended March 31, 2012 and 2011, the Company incurred management fees under the agreement of $270,000 and $360,000 respectively.
At March 31, 2012 and March 31, 2011, the accrued payable to Trinad Management was $135,000 and $180,000 respectively.
In March 2008, we entered
into a month-to-month lease for office space with Trinad Management for rent of $9,000 per month, which was subsequently reduced
to $5,000 per month. Rent expense in connection with this lease was $0 and $40,000 respectively for the years ended March 31, 2012
and 2011. This lease was terminated in December 2010 when the Company moved to a new location.
Senior Secured Convertible Notes
On June 21, 2010, we
sold and issued $2,500,000 of Senior Secured Convertible Notes due June 21, 2013 (the "New Senior Secured Notes") to
certain significant stockholders, comprised of a $1,500,000 New Senior Secured Note sold and issued to Trinad Capital Master Fund
and a $1,000,000 New Senior Secured Note sold and issued to the Guber Family Trust (the "Offering"). Trinad Capital
Master Fund is one of our principal stockholders and an affiliate of our Executive Chairman, Robert Ellin.  Peter Guber, our
Chairman, serves as trustee of the Guber Family Trust. The New Senior Secured Notes have a three-year term and bear interest at
a rate of 10% per annum payable in arrears semi-annually. Notwithstanding the foregoing, at any time on or prior to the 18th month
following the original issue date of the New Senior Secured Notes, we may, at our option, in lieu of making any cash payment
of interest, elect that the amount of any interest due and payable on any interest payment date on or prior to the 18th month following
the original issue date of the New Senior Secured Notes be added to the principal due under the New Senior Secured Notes. The accrued
and unpaid principal and interest due on the New Senior Secured Notes are convertible at any time at the election of the holder
into shares of our common stock at a conversion price of $0.15 per share, subject to adjustment. The New Senior Secured Notes are
secured by a first priority lien on substantially all of our and our subsidiaries' assets. The Amended ValueAct Note (described
below) is subordinated to the New Senior Secured Notes.
Each purchaser of a
New Senior Secured Note also received a warrant ("Warrant") to purchase shares of our common stock at an exercise price
of $0.25 per share, subject to adjustment.  For each $50,000 of New Senior Secured Notes purchased, the purchaser received
a Warrant to purchase 166,667 shares of common stock.  Each Warrant has a five-year term.
Twistbox
Twistbox engages in
various business relationships with its stockholders and officers and their related entities. The significant relationships are
as follows:
77
Loans
As part of the Merger,
we 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 ValueAct Note in the amount of $16,500,000
and a 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 ValueAct 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 entitled 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 entitled 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.  We also entered into a Guaranty with ValueAct
whereby we agreed to guarantee Twistbox's payment to ValueAct of up to $8,250,000 of principal under the ValueAct Note in
accordance with the terms, conditions and limitations contained in the ValueAct Note. The financial covenants of the ValueAct Note
were also amended, to provide that Twistbox was required maintain a cash balance of not less than $2,500,000 at
all times and we were required to maintain a cash balance of not less than $4,000,000 at all times.
On October 23, 2008,
in connection with the AMV Acquisition, the Company, Twistbox and ValueAct entered into a Second Amendment to the ValueAct Note
in the amount of $16,500,000, which among other things, provided for a payment in kind election at the option of Twistbox, modified
the financial covenants set forth in the ValueAct Note to require that the Company and Twistbox maintain certain minimum combined
cash balances and provided for certain covenants with respect to the indebtedness of the Company. and its subsidiaries.  Also
on October 23, 2008, AMV granted to ValueAct a security interest in its assets to secure the obligations under the ValueAct
Note. In addition, Mandalay Digital Group, Inc. and ValueAct entered into an allonge to each of those certain warrants issued
to ValueAct in connection with the Merger, which, among other things, amended the exercise price of each of the warrants to $4.00
per share.
On August 14, 2009,
for $3,500,000 in principal (the "Amended ValueAct Note"). In connection with the Restructure, the ValueAct Note, the
Value Act Security Agreement and the Value Act Guaranty were amended and restated in their entirety. In addition, all warrants
and common stock of the Company held by ValueAct were cancelled and all warrants and common stock of the Company held by AMV founders
Nate MacLeitch and Jonathan Cresswell, former directors of the Company, were repurchased by the Company for a price of $0.02 per
share.
On August 14, 2009,
the Company, Twistbox and ValueAct entered into a Third Amendment to the ValueAct Note. Pursuant to this Third Amendment,
the maturity date of the ValueAct Note was changed to July 31, 2010 and the interest rate of the ValueAct Note increased from 10%
to 12.5%.
On January 25, 2010,
the Company, Twistbox and ValueAct entered into a Waiver to Senior Secured Note (the "Waiver"), pursuant to which ValueAct
agreed to waive certain provisions of the ValueAct Note. Pursuant to the Waiver, subject to Twistbox's compliance with certain
conditions set forth in the Waiver, certain rights to prepay the ValueAct Note were extended from January 31, 2010 to March 1,
2010. In addition, subject to Twistbox's compliance with certain conditions set forth in the Waiver, the timing obligation
of the Company and Twistbox to comply with the cash covenant set forth in the ValueAct Note was extended to March 1, 2010 and the
minimum cash balance that Twistbox and the Company must maintain was increased to $1,600,000.
On February 25, 2010,
Twistbox received a letter (the "Letter") from ValueAct alleging certain events of default with respect to the ValueAct
Note. The Letter claimed that an event of default had occurred and was continuing under the ValueAct Note as a result
of certain alleged defaults, including the failure to provide weekly evidence of compliance with certain of Twistbox's and
the Company covenants under the ValueAct Note, the failure to comply with limitations on certain payments by the Company and each
of its subsidiaries, and the failure of Twistbox and the Company to maintain minimum cash balances in deposit accounts of each
of Twistbox and the Company. The Letter also claimed that the Waiver had ceased to be effective as a result of the alleged failure
of Mandalay Digital Group, Inc. to comply with the conditions set forth in the Waiver.  On May 10, 2010, Twistbox received
from ValueAct a Notice of Event of Default and Acceleration ("Notice") in which ValueAct stated that an event of default
had occurred under the ValueAct Note as a result of Twistbox's and the Company's failure to comply with the cash balance
covenant under the ValueAct Note and, therefore, ValueAct accelerated all outstanding amounts payable by Twistbox under the ValueAct
Note. In connection with the Notice, ValueAct instituted an administration proceeding in the United Kingdom against AMV.
78
On June 21, 2010,
we sold all of the operating subsidiaries of AMV to an entity controlled by ValueAct and certain of AMV's founders in exchange
for the release of $23,000,000 of secured indebtedness, comprising of a release of all amounts due and payable under the AMV Note
and all amounts due and payable under the VAC Note except") election to the note through the revised term, and (3) stripped
out $3,000,000 of principal to create the Taja Convertible Note, leaving a principal balance of $500,000 plus accrued interest
of $562,000 for a total of $1,062,000. As consideration for amending the note, Taja also received a warrant ("Incentive Warrant")
to purchase 2,000,000 shares of common stock of the Company at an exercise price of $0.25 per share, subject to adjustment. Taja
also received 25% warrant coverage ("Coverage Warrant") determined by dividing the principal amount of the Taja Convertible
Note by the conversion price multiplied by 25%. The Incentive Warrant and the Coverage Warrant have a five year term and vest one
year from issue date.
On December 16, 2011,
the Amended ValueAct Note was purchased in its entirety by Taja LLC ("Taja) and was amended to remove certain negative covenants
from the Note (the "Amended Taja Note"). On December 29, 2011, the Company and Taja entered into a binding term sheet
for convertible note financing ("Taja Convertible Note") and, effectively, a third amendment to the Second Amended
Note ("Third Amended Note"). The Third Amended Note (1) changed the maturity date of the Note from June 21, 2013 to
June 21, 2015, (2) extended the payment in kind ("PIK") and the Company and ValueAct entered into a Second Allonge
to Warrant to Purchase 1,092,621 shares of common stock (the "Second Allonge"), which amended that certain warrant
to purchase 1,092,621 shares of the Company's common stock, issued to ValueAct on February 12, 2008, as amended (the "ValueAct
Warrant").  Pursuant to the Second Allonge, the exercise price of the ValueAct Warrant decreased from $4.00 per share
to the lesser of $1.25 per share, or the exercise price per share for any warrant to purchase shares of the Company's common
stock issued by the Company to certain other parties.
On March 1, 2012, the
Company and Taja entered into a second binding term sheet ("Amended Taja Convertible Note") to amend certain provisions
of the December 29, 2011 binding term sheet. Pursuant to the Amended Taja Convertible Note, (1) the maturity date was revised to
March 1, 2014, (2) the conversion price was amended to $0.70 share, (3) conversion of the note must not cause the holder to exceed
4.9% ownership, except that on the maturity date the entire remaining amount of principle and interest shall automatically convert
into shares of common stock of the Company, (4) the Amended Taja Convertible Note becomes accelerated and immediately due and payable
upon the consummation by the Company of one or more equity sales from and after March 1, 2012 resulting in aggregate net proceeds
of at least $10,000,000, (5) the conversion date is to occur the earlier of (x) the date that the long-form documents are executed
and delivered to all parties, and (y) March 19, 2012, (6) the 2,000,000 Incentive Warrants issued as consideration for the Third
Amended Note were amended to vest and be exercisable one year from March 1, 2012, and (7) the exercise date of the Coverage Warrants
was amended to one year following the conversion date.
On March 19, 2012,
the Company issued 2,600,000 shares of its common stock to Taja for the conversion of $1,820,000 of the Amended Taja Convertible
Note.
The above description
of the Restructure does not purport to be complete and is qualified in its entirety by reference to the Current Reports on Form
8-K filed by us on June 23, 2010, January 4, 2012, and March 7, 2012, and relevant exhibits thereo, which are incorporated by reference
herein.
Director Independence
As of June 15, 2012,
the independent directors of the Board were Paul Schaeffer and Chris Rogers, based on the standards of NASDAQ.
79
DESCRIPTION OF CAPITAL STOCK
The following is a
brief description of our capital stock. This summary does not purport to be complete in all respects. This description is subject
to and qualified entirely by the terms of our certificate of incorporation and bylaws, each as amended, copies of which have been
filed with the SEC and are also available upon request from us, and by the General Corporation Law of the State of Delaware.
Authorized Capitalization
We have authorized
100,000,000 shares of common stock, par value $0.0001 per share, and 1,000,000 shares of preferred stock, par value $0.0001 per
share, of which 100,000 shares have been designated as Series A Convertible Preferred Stock, or Series A Preferred Stock. Our authorized
shares of common stock and preferred stock are available for issuance without further action by our stockholders, unless such action
is required by applicable law or the rules of any stock exchange or automated quotation system on which our securities may be listed
or traded. If the approval of our stockholders is not so required, our board of directors may determine not to seek stockholder
approval.
Our stockholders have
approved by written consent a proposal that would allow our Board of Directors, each at its option, to (i) effect a reverse stock
split of our common stock and (ii) increase the number of authorized shares of the Company's capital stock to 202,000,000
shares of stock, of which 200,000,000 shares would be common stock and 2,000,000 shares would be preferred stock.  As
proposed, our Board of Directors would have the authority, until April 26, 2013, to effect a reverse stock split ranging from one-for-two
to one-for-ten, with the exact ratio with such range and the timing of the reverse split at the sole discretion of our board of
directors.
As of June 23, 2012, there were issued
and outstanding:
·
85,953,136 shares of common stock, including 17,989,047 shares of issued and outstanding common stock being offered under this prospectus by the selling stockholders;
·
100,000 shares of Series A Preferred Stock, convertible into 100,000 shares of our common stock (based on a conversion price of $1.00 per share);
·
Warrants to purchase 18,812,987 shares of common stock with a weighted average exercise price of $0.42 per share, including warrants to purchase 5,321,426 shares of our common stock being offered under this prospectus by the selling stockholders at a weighted average exercise price of $0.57 per share; and
·
Options to purchase an aggregate of 4,798,352 shares of common stock with a
    weighted average exercise price of $1.80 per share.
Description of Common Stock
Holders of our common
stock are entitled to such dividends as may be declared by our board of directors out of funds legally available for such purpose,
subject to any preferential dividend rights of any then outstanding preferred stock. The shares of common stock are neither redeemable
or convertible. Holders of common stock have no preemptive or subscription rights to purchase any of our securities.
Each holder of our
common stock is entitled to one vote for each such share outstanding in the holder's name. No holder of common stock is entitled
to cumulate votes in voting for directors.
In the event of our
liquidation, dissolution or winding up, the holders of our common stock are entitled to receive pro rata our assets which are legally
available for distribution, after payments of all debts and other liabilities and subject to the prior rights of any holders of
preferred stock then outstanding. All of the outstanding shares of our common stock are fully paid and non-assessable. The shares
of common stock offered by this prospectus will also be fully paid and non-assessable.
Our common stock is
traded on the OTC QB market under the symbol "MNDL."
80
Description of Preferred Stock
Series
A Convertible Preferred Stock
While the Series A
Preferred Stock is outstanding, holders of the Series A Preferred Stock are entitled to receive any dividends if and when declared
by the Company's board of directors on the Company's common stock on an as converted basis.
The Series A Preferred
Stock is convertible at any time at the option of the holder into shares of our common stock based on dividing the original purchase
price plus the amount of any accumulated but unpaid dividends, by the conversion price then in effect (as may be adjusted).
The Series A Preferred
Stock is entitled to vote together with the common stock as a single class (on an as if converted basis) on any matters submitted
to the holders of the Company's common stock, together with any other voting rights provided to the Series A Preferred under
law or the General Corporation Law of the State of Delaware.
The Series A Preferred
Stock are entitled to receive, prior and in preference to our common stock or any other class designated as junior to the Series
A Preferred Stock, upon liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, or in the event
of its insolvency, an amount per share equal to the greater of (i) $10.00 per share of Series A Preferred Stock (subject to certain
adjustments) or (ii) such amount per share as would have been payable had the Series A Preferred Stock been converted into our
common stock immediately prior to such liquidation, dissolution or winding up. Each holder of Series A Preferred Stock also
has the right to a cash-out election in the event of certain transactions, including a consolidation or merger of the Company (excluding
a transaction involving a reincorporation or a merger with a wholly-owned subsidiary), a sale of all or substantially all of the
assets of the Company, the issuance by the Company in a single or integrated transaction shares of common stock (or securities
convertible into common stock) representing a majority of the shares of common stock outstanding immediately following such issuance,
or any other form of acquisition where the Company is the target and a change of control occurs such that the acquirer has the
power to elect a majority of the Company's board of directors.
Anti-Takeover Effects of Certain Provisions
of Delaware Law
The following is a
summary of certain provisions of Delaware law. This summary does not purport to be complete and is qualified in its entirety by
reference to the corporate law of Delaware and our certificate of incorporation and bylaws.
Effect of Delaware
Anti-Takeover Statute.
We may be subject to Section 203 of the Delaware General Corporation Law, an anti-takeover
law. In general, Section 203 prohibits a Delaware corporation from engaging in any business combination with any interested
stockholder for a period of three years following the date that the stockholder became an interested stockholder, unless:
·
prior to that date, the board of directors of the corporation
approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;
·
upon consummation of the transaction that resulted in
the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares of voting stock
outstanding (but not the voting stock owned by the interested stockholder) those shares owned by persons who are directors and
officers and by excluding employee stock plans in which employee participants do not have the right to determine whether shares
held subject to the plan will be tendered in a tender or exchange offer; or
·
on or subsequent to that date, the business combination
is approved by the board of directors of the corporation and authorized at an annual or special meeting of stockholders, and not
by written consent, by the affirmative vote of at least 66-2/3% of the outstanding voting stock that is not owned by the interested
stockholder.
Section 203 defines
"business combination" to include the following:
·
any merger or consolidation involving the corporation
and the interested stockholder;
81
·
any sale, transfer, pledge or other disposition of 10%
or more of the assets of the corporation involving the interested stockholder;
·
subject to certain exceptions, any transaction that results
in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder;
·
any transaction involving the corporation that has the
effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the
interested stockholder; or
·
the receipt by the interested stockholder of the benefit
of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation.
In general, Section 203
defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of the
corporation, or who beneficially owns 15% or more of the outstanding voting stock of the corporation at anytime within a three-year
period immediately prior to the date of determining whether such person is an interested stockholder, and any entity or person
affiliated with or controlling or controlled by any of these entities or persons.
Transfer Agent
Our transfer agent and registrar is American
Stock Transfer & Trust, LLC, and its telephone number is (800) 937-5449.
82
LEGAL MATTERS
The validity of the
common stock being offered hereby has been passed upon by Manatt, Phelps & Phillips, LLP, Los Angeles, California. Certain
partners of, investment entities comprised of partners, and persons associated with Manatt, Phelps & Phillips, LLP
beneficially own 2,300,000 shares of our common stock.
EXPERTS
The consolidated financial
statements appearing in this prospectus and in the registration statement have been audited by SingerLewak LLP, an independent
registered public accounting firm, as stated in their report appearing elsewhere herein, and are included in reliance upon such
report and upon the authority of such firm as experts in accounting and auditing.
83
Mandalay Digital Group, Inc. and Subsidiaries
(formerly known as NeuMedia, Inc.)
Mandalay Digital Group, Inc. and Subsidiaries
(formerly known as NeuMedia, Inc.)
Consolidated Financial Statements
March 31, 2012
Page(s)
Consolidated Balance Sheets as of March 31, 2012  and March 31, 2011
F-3
Consolidated Statements of Operations for the years ended March 31, 2012 and March 31, 2011
F-4
Consolidated Statements of Stockholders' Equity and Comprehensive Loss for the years ended March 31, 2012 and March 31, 2011
F-5
Consolidated Statements of Cash Flows for the years ended March 31, 2012 and March 31, 2011
F-6
Notes to Consolidated Financial Statements
F-7 to
    F-38
F-
1
Report of Independent Registered Public
Accounting Firm
To the Board of Directors and Stockholders
Mandalay Digital Group, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets
of Mandalay Digital Group, Inc. and Subsidiaries (collectively, the "Company") as of March 31, 2012 and 2011, and the
related consolidated statements of operation, stockholders' equity and comprehensive loss, and cash flows for the years 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 audits.
We conducted our audits in accordance with the standards of
the Public 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 audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that are appropriate in the 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 financial statements, assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits provide 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 the Company as of March 31, 2012 and 2011, and the
results of its operations and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.
/s/ SingerLewak LLP
Los Angeles, California
June 29, 2012
F-
2
Mandalay Digital Group, Inc. and Subsidiaries
(formerly known as NeuMedia, Inc.)
Consolidated Balance Sheets
(In thousands, except per share amounts)
March 31,
March 31,
2012
2011
ASSETS
Current assets
Cash and cash equivalents
$
8,799
$
845
Accounts receivable, net of allowances of $108 and $96, respectively
1,190
2,699
Prepaid expenses and other current assets
120
296
Total current assets
10,109
3,840
Property and equipment, net
230
388
Intangible assets, net
817
3,366
Goodwill
3,640
6,609
TOTAL ASSETS
$
14,796
$
14,203
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable
$
3,051
$
3,807
Accrued license fees
1,155
1,189
Accrued compensation
582
371
Current portion of long term debt
75
273
Warrant derivative liabilities
452
223
Other current liabilities
705
1,261
Total current liabilities
6,020
7,124
Long term debt and convertible debt, net of discounts of $2,147 and $1,856, respectively
3,077
4,461
Total liabilities
$
9,097
$
11,585
Stockholders' equity
Preferred stock Series A convertible preferred stock at $0.0001 par value; 100,000 shares authorized, issued and outstanding (liquidation preference of $1,000,000)
100
100
Common stock, $0.0001 par value: 100,000,000 shares authorized; 82,656,945 issued and 76,581,945 outstanding at March 31, 2012; 45,047,224 issued and 41,274,225 outstanding at March 31, 2011;
7
4
Additional paid-in capital
133,300
99,612
Treasury Stock (3,772,999 shares at March 31, 2012 and 2011)
(71
)
(71
)
Accumulated other comprehensive loss
(194
)
(291
)
Accumulated deficit
(127,443
)
(96,736
)
Total stockholders' equity
5,699
2,618
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
14,796
$
14,203
F-
3
Consolidated Statements of Operations
(In thousands, except per share amounts)
12 Months Ended
12 Months Ended
March 31,
March 31,
2012
2011
Net revenues
$
7,230
$
9,186
Cost of revenues
License fees
2,643
2,915
Other direct cost of revenues
230
295
Total cost of revenues
2,873
3,210
Gross profit
4,357
5,976
Operating expenses
Product development
2,154
3,528
Sales and marketing
873
2,142
General and administrative
13,013
5,698
Amortization of intangible assets
-
54
Impairment of intangible assets
2,319
4,482
Impairment of goodwill
2,969
1,546
Total operating expenses
21,328
17,450
Loss from operations
(16,971
)
(11,474
)
Interest and other income / (expense)
Interest income/ (expense)
(12,497
)
(1,761
)
Foreign exchange transaction gain / (loss)
(94
)
(83
)
Change in fair value of accrued derivative liabilities gain / (loss)
(4,447
)
-
Loss on extinguishment of debt
2,004
-
Gain / (loss) on settlement of debt
1,393
(864
)
Other income / (expense)
15
(2
)
Interest and other expense
(13,626
)
(2,710
)
Loss from operations before income taxes
(30,597
)
(14,184
)
Income tax provision
(110
)
(224
)
Net loss from continuing operations, net of taxes
(30,707
)
(14,408
)
Discontinued operations, net of taxes:
Income from discontinued operations, net of taxes
-
809
Gain on disposal of discontinued operations, net of taxes
-
4,215
Net income from discontinued operations, net of taxes
-
5,024
Net (loss)/profit income
$
(30,707
)
$
(9,384
)
Other comprehensive (loss) / income:
Foreign currency translation adjustment
97
128
Comprehensive (loss) / income
$
(30,610
)
$
(9,256
)
Basic and diluted net income / (loss) per common share
$
(0.62
)
$
(0.25
)
Continuing operations
$
(0.62
)
$
(0.38
)
Discontinued operations
$
-
$
0.13
Weighted average common shares outstanding, basic and diluted
49,418
37,664
Weighted average common shares outstanding, diluted
49,418
37,664
F-
4
Consolidated Statements of Stockholders' Equity and
Comprehensive Loss
(In thousands, except share amounts)
Accumulated
Additional
Other
Common
    Stock
Preferred
    Stock
Treasury
Paid-In
Comprehensive
Accumulated
Shares
Amount
Shares
Amount
Stock
Capital
Income/(Loss)
Deficit
Total
Balance at March 31,
    2010
39,776,597
$
4
100,000
$
100
$
-
$
95,741
$
(419
)
$
(87,352
)
$
8,074
Net loss
(9,384
)
(9,384
)
Foreign currency translation
    gain
128
128
Deferred stock-based
    compensation
251
251
Issuance of common stock
    as part of compensation
300,000
75
75
Stock voided as part
    of disposal of subsidiary
(561,798
)
(197
)
(197
)
Stock acquired by company
    as part of disposal of subsidiary
(3,540,574
)
(71
)
(1,168
)
(1,239
)
Issuance of convertible
    debt and associated warrants
2,500
2,500
Repricing of options
113
113
Issuance of warrants
    to vendor for services rendered
76
76
Repricing of warrants
172
172
Stock issued for services
5,300,000
2,049
2,049
Balance at March 31, 2011
41,274,225
$
4
100,000
$
100
$
(71
)
$
99,612
$
(291
)
$
(96,736
)
$
2,618
Net loss
(30,707
)
(30,707
)
Foreign currency translation
97
97
Issuance of common stock
    as part of compensation
347,244
69
69
Issuance of restricted
    stock for services
23,100,000
2
6,666
6,668
Issuance of warrants
    to vendor for services rendered
133
133
Issuance of warrants
    related to convertible debt
4,374
4,374
Issuance of restricted
    stock for acquisition of assets
50,000
31
31
Reclassification of derivative liabilities
9,034
9,034
Issuance of common stock for cash
3,857,143
2,700
2,700
Issuance of restricted
    stock as part of compensation
1,375,000
568
568
Convertible debt converted
    to stock
12,653,333
1
10,113
10,114
Balance at March 31, 2012
82,656,945
$
7
100,000
$
100
$
(71
)
$
133,300
$
(194
)
$
(127,443
)
$
5,699
F-
5
Consolidated Statements of Cash Flows
(In thousands)
Year Ended
Year Ended
March 31,
March 31,
2012
2011
Cash flows from operating activities
Net (loss)/income
$
(30,707
)
$
(9,384
)
Adjustments to reconcile net income/(loss) to net cash used in operating activities:
Gain on disposal of discontinued operations, net of taxes, net of impact of foreign currency translation
-
(4,215
)
Depreciation and amortization
429
638
Amortization of debt discount
9,709
644
Loss on extinguishment of debt
(2,004
)
-
Settled debt with supplier
(1,393
)
-
Finance costs
1,194
-
PIK interest expense
575
-
Allowance for doubtful accounts
(12
)
(307
)
Stock-based compensation
-
326
Impairment of goodwill and intangibles
5,288
6,028
Fair Value of warrants and conversion options issued for financing costs
1,255
-
Warrants issued for services
133
76
Stock issued for services
7,302
2,049
Repricing of options and compensation
-
113
Repricing of warrants
-
172
Change in fair value of derivative liabilities
4,447
-
(Increase) / decrease in assets, net of effect of disposal of subsidiary:
Accounts receivable
1,521
3,303
Prepaid expenses and other current assets
176
160
Increase / (decrease) in liabilities, net of effect of disposal of subsidiary:
Accounts payable
637
(497
)
Accrued license fees
(34
)
(625
)
Accrued compensation
211
(166
)
Other liabilities and other items
(556
)
(224
)
Net cash used in operating activities
(1,829
)
(1,909
)
Cash flows from investing activities
Purchase of property and equipment
(17
)
(88
)
Transaction costs
-
(906
)
Cash remaining with disposed subsidiary
-
(641
)
Net cash used in investing activities
(17
)
(1,635
)
Cash flows from financing activities
Proceeds from new convertible debt
7,000
2,500
Issuance of shares for cash
2,700
-
Net cash provided by financing activities
9,700
2,500
Effect of exchange rate changes on cash and cash equivalents
100
(2
)
Net change in cash and cash equivalents
7,954
(1,046
)
Cash and cash equivalents, beginning of period
845
1,891
Cash and cash equivalents, end of period
$
8,799
$
845
Supplemental disclosure of cash flow information:
Taxes paid
$
119
$
226
Interest paid
$
-
$
1,763
Supplemental disclosure of non-cash investing and financing activities:
Conversion of convertible note and interest to shares of common stock
$
8,852
$
-
Issuance of warrants with convertible debenture
$
4,636
$
-
Beneficial conversion feature associated with convertible debenture
$
8,915
$
1,496
Reclassify derivative liability to additional paid in capital
$
13,786
$
-
F-
6
Notes to Audited
Consolidated Financial Statements
(all numbers in thousands except per share amounts)
1.
Organization
Mandalay Digital Group, Inc. ("we", "us",
"our", the "Company" or "Mandalay Digital"), formerly NeuMedia, Inc. ("NeuMedia"),
formerly Mandalay Media, Inc. ("Mandalay Media") and 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.  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 until its merger with Twistbox Entertainment, Inc., February 12, 2008.  On
September 14, 2007, Mediavest was re-incorporated in the state of Delaware as Mandalay Media, Inc. On May 11, 2010 the Company
merged with a wholly-owned, newly formed subsidiary, changing its name to NeuMedia, Inc. On February 6, 2012, the Company merged
with a wholly-owned, newly formed subsidiary, changing its name to Mandalay Digital Group, Inc.
Twistbox is a global publisher and distributor of branded entertainment
content and services primarily focused on enabling the development, distribution and billing of content across 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 film, television and lifestyle
media companies. Twistbox has built a proprietary mobile publishing platform that includes: tools that automate device management
for the distribution and billing of images and video; a mobile games development and distribution platform 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 and service agreements
with many of the largest mobile operators in the world.
Twistbox is headquartered in the Los Angeles area and has offices
in Europe that provide local sales and marketing support for both mobile operators and third party distribution in their respective
regions.
On October 23, 2008 the Company completed an acquisition of
100% of the issued and outstanding share capital of AMV Holding Limited, a United Kingdom private limited company ("AMV"),
and 80% of the issued and outstanding share capital of Fierce Media Ltd ("Fierce").
AMV is a leading mobile media and marketing company delivering
games and lifestyle content directly to consumers in the United Kingdom, Australia, South Africa and various other European countries.
AMV markets its well established branded services through a unique Customer Relationship Management platform that drives revenue
through mobile internet, print and TV advertising. AMV is headquartered in Marlow, outside of London in the United Kingdom.
On May 10, 2010, an administrator was appointed over AMV Holding
Limited in the UK, at the request of the Company's senior debt holder. As from that date, AMV and its subsidiaries are
considered to be a discontinued operation. AMV and its subsidiaries were subsequently disposed, as set out in Note 8 below.
On May 11, 2010, Mandalay Media merged into its wholly-owned,
newly formed subsidiary, NeuMedia Inc. ("NeuMedia"), with NeuMedia as the surviving corporation. NeuMedia issued: (1)
one new share of common stock in exchange for each share of Mandalay Media's outstanding common stock and (2) one new
share of preferred stock in exchange for each share of Mandalay Media's outstanding preferred stock as of May 11, 2010.
NeuMedia's preferred and common stock had the same status and par value as the respective stock of Mandalay Media and
NeuMedia acceded to all the rights, acquired all the assets and assumed all of the liabilities of Mandalay Media.
F-
7
On June 21, 2010, the Company signed and closed an agreement
whereby ValueAct and the AMV Founders, acting through a newly formed company, acquired the operating subsidiaries of AMV (the "Assets")
in exchange for the release of $23,231 of secured indebtedness, comprising of a release of all amounts due and payable under the
AMV Note and all of the amounts due and payable under the ValueAct Note (as defined below) except for $3,500 in principal. The
Company retained all assets and liabilities of Twistbox and the Company other than the Assets. See Note 8 for further discussion
on the discontinued operations.
On December 28, 2011, the Company issued 50,000 shares of the
Company's common stock as part of the consideration for in exchange for the assets of Digital Turbine Group, LLC, the developer
of Digital Turbine ("DT"), a technology platform that allows media companies, mobile carriers, and their OEM handset
partners to take advantage of multiple mobile operating systems across multiple networks, and offers solutions that allow them
to maintain their own branding and personalized, one-to-one relationships with each end-user. DT's cross-platform user interface
and multimedia management system for carriers and OEMs can be integrated with different operating systems to provide a more organized
and unified experience for end-users of mobile content across search, discovery, billing, and delivery. Other aspects of the platform,
such as a smart content discovery toolbar, allows carriers and OEMs to control the data presented to their users while giving the end-user a more efficient way of finding and purchasing the desired content.
2.
Liquidity
The accompanying consolidated financial statements have been
prepared in conformity with accounting principles generally accepted in the United States of America. As reflected in the accompanying
consolidated financial statements, the Company has losses from operations and negative cash flows from operations.
The primary
sources of liquidity have historically been issuance of common and preferred stock and borrowings under credit facilities. In
fiscal year 2012, the Company raised $9.7 million through issuance of convertible debt and equity financings and through restructuring
existing debt to convertible debt. Until we become cash flow positive, we anticipate that our primary sources of liquidity will
be cash generated by our operating activities, as well as further borrowings or further capital raises. Assuming there are no
further changes in expected sales and expense trends subsequent to March 31, 2012, the Company believes that its cash position
will be sufficient to continue operations for the foreseeable next twelve months.
3.
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.
Principles of Consolidation
The consolidated financial statements include the accounts of
the Company and our wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.
Discontinued operations have been treated in accordance with Financial Accounting Standards Board ("FASB") Accounting
Standards Codification ("ASC")  205-20,
Discontinued Operations.
Revenue Recognition
The Company's revenues are derived primarily by licensing
material and software in the form of products (Image Galleries, Wallpapers, video, WAP Site access, Mobile TV), developing and
maintaining carrier platforms, mobile advertising, mobile billing and mobile games. License arrangements with the end user can
be on a perpetual or subscription basis.
F-
8
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.
The Company either markets and distributes its products directly
to consumers, or distributes products through mobile telecommunications service providers ("carriers"), in which case
the carrier markets the product, images or games to end users. License fees for perpetual and subscription licenses are usually
billed upon download of the product, image or game by the end user. In the case of subscription licenses, many subscriber agreements
provide for automatic renewal until the subscriber opts-out, while others provide opt-in renewal. In either case, subsequent billings
for subscription licenses are generally billed monthly. The Company applies the provisions of FASB ASC 985-605,
Software Revenue
Recognition
, to all transactions.
Revenues are recognized from the Company's 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 license agreement to be evidence of an arrangement with a carrier or aggregator and a "clickwrap" agreement
to be evidence of an arrangement with an end user. For these licenses, the Company defines delivery as the download of the product,
image or game by the end user.
The Company 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 the Company 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 the Company believes are reasonable, but it is possible that
actual results may differ from the Company's estimates. The Company'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 newer and more advanced handsets, promotions during the period and economic trends. When the
Company receives the final carrier reports, to the extent not received within a reasonable time frame following the end of each
month, the Company records any differences between estimated revenues and actual revenues in the reporting period when the Company
determines the actual amounts. Revenues earned from certain carriers may not be reasonably estimated. If the Company is unable
to reasonably estimate the amount of revenues to be recognized in the current period, the Company recognizes revenues upon the
receipt of a carrier revenue report and when the Company's portion of licensed revenues are fixed or determinable and collection
is probable. To monitor the reliability of the Company'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 the Company deems a carrier not to be creditworthy, the Company defers all revenues from the
arrangement until the Company receives payment and all other revenue recognition criteria have been met.
In accordance with FASB ASC 605-45,
Reporting Revenue Gross
as a Principal Versus Net as an Agent
, the Company recognizes as revenues the amount the carrier reports as payable upon the
sale of the Company's products, images or games. The Company 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;
F-
9
—
carriers generally pay the Company a fixed percentage of their revenues or a fixed fee for each game;
—
carriers generally must approve the price of the Company's content in advance of their sale to subscribers, and the Company's more significant carriers generally have the ability to set the ultimate price charged to their subscribers; and
—
the Company has limited risks, including no inventory risk and limited credit risk.
For direct to consumer business, revenue is earned by delivering
a product or service directly to the end user of that product or service. In those cases, the Company 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. Substantially
all of our discontinued operations represents direct to consumer business.
Net (Loss) per Common Share
Basic loss per common share is
computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding for
the period. Diluted net loss per share is computed by dividing net 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 were as follows:
Year Ended
Year Ended
March 31,
March 31,
2012
2011
Potentially dilutive shares
21,943
11,992
Comprehensive Loss
Comprehensive loss consists of two components, net loss
and other comprehensive income. Other comprehensive income 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. The Company's other
comprehensive income 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.
Accounts Receivable
The Company maintains reserves for potential credit losses on
accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations,
customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these
reserves.
F-
10
Content Provider Licenses
Content Provider License Fees
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 content acquisitions, paid in advance and capitalized on our balance sheet as prepaid license
fees. 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 content acquired. Minimum guarantee 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.
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 content
acquired.
Software Development Costs
The Company applies the principles of FASB ASC 985-20,
Accounting
for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed
("ASC 985-20"). ASC 985-20 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.
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 costs of advertising, including direct
response advertising, the first time the advertising takes place. Advertising expense for continuing operations was $7 and $116
in the years ended March 31, 2012 and 2011, respectively. Advertising expense for discontinued operations was $0 and $956 in the
years ended March 31, 2012 and 2011, respectively.
Restructuring
The Company accounts for costs associated with employee terminations
and other exit activities in accordance with FASB ASC 420-10
, 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.
F-
11
Presentation
In order to facilitate the comparison of financial information,
certain amounts reported in the prior year have been reclassified to conform to the current year presentation.
Fair Value of Financial Instruments
As of March 31, 2012 and 2011, the carrying value of cash and
cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued license fees, accrued
compensation, derivative liabilities and other current liabilities approximates fair value due to the short-term nature of such
instruments.
Derivative Liabilities
The Company applies ASC Topic 815, "Derivatives
and Hedging," which provides a two-step model to determine whether a financial instrument or an embedded feature is indexed
to an issuer's own stock and thus able to qualify for the scope exception in ASC 815-10-15-74. Using the criteria in ASC
815, the Company determines which instruments or embedded features that require liability accounting and records the fair values
as a derivative liability. The changes in the values of the derivative liabilities are shown in the accompanying consolidated statements
of operations as "change in fair value of accrued derivative liabilities gain / (loss)."
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
gains of $97 in the year ended March 31, 2012 and $128 in the year ended March 31, 2011 has been reported as a component of comprehensive
loss in the consolidated statements of stockholders' equity and comprehensive income.
Concentrations of Credit Risk
Financial instruments which potentially subject us
to concentration of credit risk consist principally of cash and cash equivalents, and accounts receivable. We have placed
cash and cash equivalents with a single high credit-quality institution. 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, 2012, one major customer represented approximately 39% of our gross accounts receivable outstanding, and 43% of
gross accounts receivable outstanding as of March 31, 2011. This customer accounted for 41% of our gross revenues in the year
ended March 31, 2012; and 49% in the year ended March 31, 2011.
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 the lesser of 8 to 10 years or the term of the lease for leasehold improvements and 5 years for other assets.
Goodwill and Indefinite Life Intangible Assets
Goodwill represents the excess of cost over fair value of net
assets of businesses acquired. In accordance with FASB ASC 350-20
Goodwill and Other Intangible Assets
, the value assigned
to goodwill and indefinite lived intangible assets, including trademarks and tradenames, is not amortized to expense, but rather
they are evaluated at least on an annual basis to determine if there are potential impairments. If the fair value of the reporting
unit is less than its carrying value, an impairment loss is recorded to the extent that the implied fair value of the reporting
unit goodwill is less than the carrying value. If the fair value of an indefinite lived intangible (such as trademarks and trade
names) is less than its carrying amount, an impairment loss is recorded. Fair value is determined based on discounted cash flows,
market multiples or appraised values, as appropriate. Discounted cash flow analysis requires assumptions about the timing and amount
of future cash inflows and outflows, risk, the cost of capital, and terminal values. Each of these factors can significantly affect
the value of the intangible asset. The estimates of future cash flows, based on reasonable and supportable assumptions and projections,
require management's judgment. Any changes in key assumptions about the Company's businesses and their prospects, or
changes in market conditions, could result in an impairment charge. Some of the more significant estimates and assumptions inherent
in the intangible asset valuation process include: the timing and amount of projected future cash flows; the discount rate selected
to measure the risks inherent in the future cash flows; and the assessment of the asset's life cycle and the competitive
trends impacting the asset, including consideration of any technical, legal or regulatory trends.
F-
12
In the year ended March 31, 2012, the Company determined that
there was an impairment of goodwill, amounting to $2,969.  In the year ended March 31, 2011, the Company determined that
there was an impairment of goodwill, amounting to $1,546. In performing the related valuation analysis, the Company used various
valuation methodologies including probability weighted discounted cash flows, comparable transaction analysis, and market capitalization
and comparable company multiple comparison. The impairment is detailed in Note 9 below.
Impairment of Long-Lived Assets and Finite Life Intangibles
Long-lived assets, including, intangible assets subject to amortization
primarily consist of customer lists, license agreements and software that have been acquired are amortized using the straight-line
method over their useful life ranging from five to eight years and are reviewed for impairment in accordance with FASB ASC
360-10,
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.
In the year ended March 31, 2012, the Company determined that
there was an impairment of intangible assets amounting to $2,319. In the year ended March 31, 2011, the Company determined that
there was an impairment of intangible assets, amounting to $4,482. In performing the related valuation analysis the Company used
various valuation methodologies including probability weighted discounted cash flows, comparable transaction analysis, and market
capitalization and comparable company multiple comparison. The impairment is detailed in Note 9 below.
Income Taxes
The Company accounts for income taxes in accordance with FASB
ASC 740-10,
Accounting for Income Taxes
("ASC 740-10"), 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 ASC 740-10, 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.
ASC 740-10 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 FASB ASC 718
Share-Based Payment
("ASC
718") and accordingly, we record stock-based compensation expense for all of our stock-based awards.
Under ASC 718, 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, interest
rates, dividend rates 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.
The Company grants restricted stock subject to market or performance
conditions that vest based on the satisfaction of the conditions of the award. Unvested restricted stock entitles the grantees
to dividends, if any, with voting rights determined in each agreement. The fair market values of market condition-based awards
are determined using the Monte Carlo simulation method. The Monte Carlo simulation method is subject to variability as several
factors utilized must be estimated, including the derived service period, which is estimated based on the Company's judgment
of likely future performance and the Company's stock price volatility. The fair value of performance-based awards is determined
using the market closing price on the grant date. Derived service periods and the periods charged with compensation expense for
performance-based awards are estimated based on the Company's judgment of likely future performance and may be adjusted in
future periods depending on actual performance.
Preferred Stock
The Company applies the guidance enumerated in FASB ASC 480-10,
Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity
("ASC 480-10")
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 ASC 480-10. All other issuances of preferred
stock are subject to the classification and measurement principles of ASC 480-10. 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.
Recently Adopted Accounting Pronouncements
In December 2010, the FASB issued updated guidance on when and
how to perform certain steps of the periodic goodwill impairment test for public entities that may have reporting units with zero
or negative carrying amounts. This guidance is effective for fiscal years, and interim periods within those years, beginning after
December 15, 2010, with early adoption prohibited. It is applicable to the Company's fiscal year beginning April 1, 2011.
The Company evaluated this guidance, and determined it doesn't have a material effect on its consolidated financial statements.
In December 2010, the FASB also issued guidance to clarify the
reporting of pro forma financial information related to business combinations of public entities and to expand certain supplemental
pro forma disclosures. This guidance is effective prospectively for business combinations that occur on or after the beginning
of the fiscal year beginning on or after December 15, 2010, with early adoption permitted. It is applicable to the Company's
fiscal year beginning April 1, 2011. The Company evaluated this guidance, and determined it doesn't have a material effect
on its consolidated financial statements.
F-
13
In May 2011, the FASB issued guidance to amend certain measurement
and disclosure requirements related to fair value measurements to improve consistency with international reporting standards. This
guidance is effective prospectively for public entities for interim and annual reporting periods beginning after December 15, 2011,
with early adoption by public entities prohibited, and is applicable to the Company's fiscal quarter beginning January 1,
2012. The Company evaluated this guidance, and determined it doesn't have a material effect on its consolidated financial
statements.
In September 2011, the Financial Accounting Standards Board
(FASB) issued amended accounting guidance related to goodwill impairment testing. The new guidance provides the option to perform
a qualitative assessment by applying a more likely than not scenario to determine whether the fair value of a reporting unit is
less than its carrying amount, which may then allow a company to skip the annual two-step quantitative goodwill impairment test
depending on the determination. The amended guidance is effective for annual and interim goodwill impairment tests performed for
fiscal years beginning after December 15, 2011. Earlier adoption is permitted. Management does not expect the adoption of the amended
guidance to have a material impact on the Company's consolidated financial statements. The Company evaluated this guidance,
and determined it doesn't have a material effect on its consolidated financial statements.
Recently Issued Accounting Pronouncements
In June 2011, the FASB issued new guidance on the presentation
of comprehensive income that will require a company to present components of net income and other comprehensive income in one continuous
statement or in two separate, but consecutive statements. There are no changes to the components that are recognized in net income
or other comprehensive income under current GAAP. This guidance is effective for fiscal years, and interim periods within those
fiscal years, beginning after December 15, 2011, with early adoption permitted. It is applicable to the Company's fiscal
year beginning April 1, 2012. The Company expects this guidance to have an impact on the disclosures related to comprehensive income.
Other recent authoritative guidance issued
by the FASB (including technical corrections to the FASB Accounting Standards Codification), the American Institute of Certified
Public Accountants, and the SEC did not, or are not expected to have a material effect on the Company's consolidated financial
statements.
4.
Fair Value Measurements
The Company applies the provisions of ASC 820-10,
"Fair
Value Measurements and Disclosures."
ASC 820-10 defines fair value, and establishes a three-level valuation hierarchy
for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported
in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable
estimate of their fair values because of the short period of time between the origination of such instruments and their expected
realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:
·
Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
·
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
·
Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.
F-
14
The Company analyzes all financial instruments with features
of both liabilities and equity under ASC 480,
"Distinguishing Liabilities From Equity"
and ASC 815,
"Derivatives
and Hedging."
Derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease
in the fair value being recorded in results of operations as adjustments to fair value of derivatives. The effects of interactions
between embedded derivatives are calculated and accounted for in arriving at the overall fair value of the financial instruments.
In addition, the fair values of freestanding derivative instruments such as warrant and option derivatives are valued using the
Black-Scholes model.
The Company uses Level 2 inputs for its valuation methodology
for the warrant derivatives as their fair values were determined by using the Black-Scholes option pricing model based on various
assumptions. The Company's derivative liabilities are adjusted to reflect fair value at each period end, with any increase
or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives.
At March 31, 2012, the Company determined the fair value of
the derivative warrant liability to be $452 using the Black-Scholes option pricing model with the following assumptions: 1) expected
life 4 years, 2) a risk free interest rate of .51%, 3) a dividend yield of 0% and 4) a volatility of 175%.
The Company identified the following liabilities that are required
to be presented on the balance sheet at fair value:
Measured at Fair Value on a Recurring Basis
Warrant derivative liabilities
(in thousands)
Total
Level 1
Level 2
Level 3
March 31, 2012
$
452
$
-
$
452
$
-
March 31, 2011
$
223
$
-
$
223
$
-
Balance at March 31, 2010
$
-
Total gains or losses (realized/unrealized) included in earnings
-
Purchases, issuances and settlements
223
Balance at March 31, 2011
$
223
Total gains or losses (realized/unrealized) included in earnings
4,447
Purchases, issuances and settlements
(4,218
)
Balance at March 31, 2012
$
452
Total amount of gains and losses for the period included in earnings attributable to the change in unrealized gains or losses related to liabilities still held at March 31, 2012
4,447
The warrant derivative liability is included in the accompanying
consolidated balance sheet, and is discussed further at Note 12.
The Company did not identify any other recurring assets
and liabilities that are required to be presented in the consolidated balance sheets at fair value in accordance with ASC 825.
Measured at Fair Value on A Nonrecurring Basis
Certain assets and
liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an
ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of
impairment). The following table presents the assets and liabilities carried on the balance sheet by caption and by level
within the fair value hierarchy (as described above) as of March 31, 2012 and 2011, for which a nonrecurring change in fair value
has been recorded during the years ended March 31, 2012 and 2011.
F-
15
Carrying value at March 31, 2012
Cumulative losses
(in thousands)
Total
Level 1
Level 2
Level 3
as of March 31, 2012
Goodwill and other intangible assets
4,457
4,457
74,058
Carrying value at March 31, 2011
Cumulative losses
(in thousands)
Total
Level 1
Level 2
Level 3
as of March 31, 2011
Goodwill and other intangible assets
9,975
9,975
68,770
Goodwill and other intangible assets measured
at fair value on a nonrecurring basis relate to goodwill and intangible assets that were acquired in connection with an acquisition.
Losses of $74,058 and $68,770 represent the cumulative impairment charge related to these intangible assets recorded in fiscal years
2012 and 2011, respectively. The fair value of these intangible assets was calculated based on the methods and criteria described
in Note 9 – Goodwill and Intangible Assets.
The Company performs a review of the fair value of goodwill
and intangible assets. Fair value is defined under ASC 820, Fair Value Measurements and Disclosures as, "The price that would
be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date".
5.
Accounts Receivable
March 31,
March 31,
2012
2011
Billed
$
709
$
1,523
Unbilled
589
1,272
Less: allowance for doubtful accounts
(108
)
(96
)
Net Accounts receivable
$
1,190
$
2,699
Net Accounts receivable of discontinued operations
$
-
$
-
The Company had no significant write-offs or recoveries
during the years ended March 31, 2012 and March 31, 2011.
6.
Property and Equipment
March 31,
March 31,
2012
2011
Equipment
$
1,310
$
1,298
Furniture & fixtures
484
479
Leasehold improvements
184
184
1,978
1,961
Accumulated depreciation
(1,748
)
(1,573
)
Net Property and Equipment
$
230
$
388
Net Property and Equipment of discontinued operations
$
-
$
-
F-
16
Depreciation expense for the years ended March 31, 2012
and 2011 was $199 and $291, respectively for continuing operations and $0 and $27 for discontinued operations.
7.
Description of Stock Plans
On May 26, 2011, our board of directors adopted the 2011 Equity
Incentive Plan of NeuMedia, Inc. and on April 27, 2012, our board of directors amended and restated the plan and the related plan
documents to change references to the name of our company from the "NeuMedia, Inc." to "Mandalay Digital Group,
Inc." and further directed that they be submitted to stockholders for their consideration and approval. On May 23, 2012,
our stockholders approved and adopted by written consent the Amended and Restated 2011 Equity Incentive Plan of Mandalay Digital
Group, Inc. (the "Plan") and the Mandalay Digital Group, Inc. Amended and Restated 2011 Equity Incentive Plan Notice
of Grant and Restricted Stock Agreement and the Mandalay Digital Group, Inc. Amended and Restated 2011 Equity Incentive Plan Notice
of Grant and Stock Option Agreement (collectively, the "Related Documents").
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.
Option Plans
The following table summarizes options granted under the Company's
2007 Employee, Director and Consultant Stock Plan equity compensation plan for the years ended March 31, 2012 and 2011:
(in thousands)
Number of
Weighted Average
Shares
Exercise Price
Outstanding at March 31, 2010
6,187
$
2.49
Granted
-
$
-
Canceled
-
$
-
Exercised
-
$
-
Outstanding at March 31, 2011
6,187
$
1.79
Granted
-
$
-
Canceled
(572
)
$
0.60
Forfeited
(817
)
$
2.55
Exercised
-
$
-
Outstanding at March 31, 2012
4,531
$
1.80
Exercisable at March 31, 2012
4,798
$
1.80
In April 2011, two former employees each agreed to cancel options
to purchase 173,622 shares of common stock in connection with their respective termination agreements.
In December 2011, the Company recorded the cancellation of 9,122
shares of common stock relating to three former employees.
In March 2012, the Company recorded the cancellation of 215,841
shares of common stock.
In March 2012, the Company recorded the forfeiture of 816,667
shares of common stock.
F-
17
The exercise price for options outstanding and options exercisable
at March 31, 2012 was as follows:
Weighted
Average
Weighted
Remaining
Number
Average
Aggregate
Range of
Contractual Life
Outstanding
Exercise
Intrinsic
Exercise Price
(Years)
March 31, 2012
Price
Value
$0 - $1.00
4.27
2,698
$
0.47
$
1,303,500
$2.00 - $3.00
6.22
1,300
$
2.75
$
-
$4.00 - $5.00
5.87
800
$
4.75
$
-
5.06
4,798
$
1.80
$
1,303,500
Stock Plans
A summary of the status of the Company's 2007 Employee,
Director and Consultant Stock Plan equity compensation plan, nonvested options as of March 31, 2012 and 2011 pursuant to the Plan,
and changes during the years ended March 31, 2012 and 2011 is presented below:
(in thousands)
Weighted Average
Number of
Grant Date
Shares
Fair Value
Nonvested at March 31, 2010
-
$
-
Granted
1,200
$
0.25
Vested
1,200
$
0.25
Exercised
-
$
-
Nonvested at March 31, 2011
-
$
-
Granted
-
$
-
Vested
-
$
-
Exercised
-
$
-
Nonvested at March 31, 2012
-
$
-
Cumulative forfeited, March 31, 2011
(218
)
$
0.61
Cumulative forfeited, March 31, 2012
(1,035
)
$
2.55
Cumulative canceled, March 31, 2012
(572
)
$
0.60
As of March 31, 2012, under the Company's 2007 Employee,
Director and Consultant Stock Plan equity compensation plan, there was $0 of total unrecognized compensation cost related to nonvested
share-based compensation arrangements granted under the Plan. The total fair value of shares vested during the year ended March
31, 2012 was $0, and $0 was forfeited to cover individual tax withholdings. The total fair value of shares vested during the year
ended March 31, 2011 was $2,100, and $0 was forfeited to cover individual tax withholdings.
Option Plans and Stock Plans
Total stock compensation expense for the Company's 2007
Employee, Director and Consultant Stock Plan equity compensation plan and Amended and Restated 2011 Equity Incentive Plan is included
in the following statements of operations components:
Twelve Months Ended
Twelve Months Ended
March 31,
March 31,
2012
2011
Product development
$
69
$
7
Sales and marketing
-
19
General and administrative
7,233
413
$
7,302
$
439
F-
18
8.
Discontinued Operations
The Company had been negotiating a restructuring of debt
with its senior debt holder for some time.  These negotiations were finalized on June 21, 2010.  On that date,
the Company signed and closed a number of transactions, which included the sale of AMV. Pursuant to the Agreement, ValueAct Small
Cap Master Fund, L.P. ("ValueAct") and Nate MacLeitch and Jonathan Cresswell (the "AMV Founders"),
acting through a newly formed company, acquired the operating subsidiaries of AMV in exchange for the release of $23,231 of secured
indebtedness, which included a release of all amounts due and payable under the secured promissory note in the aggregate principal
amount of $5,375 (the "AMV Note") and all of the amounts due and payable under the Senior Secured Note, issued
by Twistbox, due July 31, 2010, as amended on February 12, 2008 (the "ValueAct Note") except for $3,500 in principal,
which is due in one lump sum principal payment on June 21, 2013. In addition, all intercompany balances at that date were cancelled,
and all shares of common stock and warrants of the Company held by ValueAct were cancelled. In addition, approximately 3,541 shares
of common stock of the Company held by two of the founders of AMV were acquired by the Company.  As of June 30, 2010
the Company accrued $300 to a related party pertaining to the sale of AMV.
In accordance with FASB ASC 205-20,
Discontinued Operations
,
the operating results and net assets and liabilities related to AMV were reclassified as of June 21, 2010 and reported as discontinued
operations in the accompanying consolidated financial statements.
In accordance with FASB ASC 360, Property, Plant and Equipment,
the Company recorded a gain of $4,200 on the sale of AMV.
The following is a summary of assets and liabilities of
the discontinued operations as of March 31, 2010 and as of the disposal date of June 21, 2010 and the resulting gain on sale:
June 21,
March 31,
2010
2010
Assets
Cash
$
641
$
1,251
Working Capital, net of cash
1,536
1,501
Property and Equipment, net
591
668
Goodwill and intangibles
15,948
15,955
Net Assets Sold
$
18,716
$
19,375
Direct costs associated with the sale
1,173
Currency translation adjustment
234
Other
5
$
20,128
Consideration
24,343
Gain on sale, net of taxes
$
4,215
F-
19
9.
Goodwill and Intangible Assets
Goodwill
A reconciliation of the changes to the Company's carrying amount
of goodwill for the years ended March 31, 2012 and 2011 was as follows:
Balance at March 31, 2010
$
8,155
Goodwill impairment
(1,546
)
Balance at March 31, 2011
$
6,609
Goodwill impairment
(2,969
)
Balance at March 31, 2012
$
3,640
Fair value is defined under ASC 820, Fair Value Measurements
and Disclosures as, "The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date". The Company considered the income and market approaches to derive an
opinion of value. Under the income approach, the Company utilized the discounted cash flow method, and under the market approach,
consideration was given to the guideline public company method, the merger and acquisition method, and the market capitalization
method.
As a result of the assessment, the Company determined that its
net book value exceeded the implied fair value; and recorded an impairment charge of $2,969 for the year ended March 31, 2012 and $1,546 for the year ended March 31, 2011 to write down goodwill. The impairment
charge is included "Impairment of goodwill and intangible assets" within operating expenses in the statements of operations.
Intangible Assets
A reconciliation of the changes to the Company's carrying amount
of intangible assets for the years ended March 31, 2012 and 2011 was as follows:
Amortizable
Unamortizable
Total
Intangible Assets
Intangible Assets
Intangible Assets
Balance at March 31, 2010
1,704
6,491
8,195
Amortization
(347
)
-
(347
)
Impairment of intangibles
(464
)
(4,018
)
(4,482
)
Balance at March 31, 2011
893
2,473
3,366
Amortization
(230
)
-
(230
)
Impairment of intangibles
-
(2,319
)
(2,319
)
Balance at March 31, 2012
$
663
$
154
$
817
The Company performed its annual review of the fair value of
intangible assets in the fourth quarter of fiscal 2012. The Company considered the income and market approaches to derive an opinion
of value. As a result of the assessment, the Company determined that its net book value exceeded the implied fair value; and recorded
an impairment charge of $2,319 for the year ended March 31, 2012 and $4,018 for the year ended March 31, 2011 to write down intangible assets. The impairment charge is included "Impairment of goodwill
and intangible assets" within operating expenses in the statements of operations.
The components of intangible assets as at March 31, 2011 and
2012 were as follows:
As of March 31, 2012
Accumulated
Cost
Amortization
Net
Software
$
1,611
$
(948
)
$
663
Trade name / Trademark
154
-
$
154
Customer list
1,220
(1,220
)
$
(0
)
License agreements
443
(443
)
$
(0
)
$
3,428
$
(2,611
)
$
817
F-
20
As of March 31, 2011
Accumulated
Cost
Amortization
Net
Software
$
1,611
$
(718
)
$
893
Trade name / Trademark
2,473
-
$
2,473
Customer list
1,220
(1,220
)
$
(0
)
License agreements
443
(443
)
$
(0
)
$
5,747
$
(2,381
)
$
3,366
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 years ended March
31, 2012 and 2011, the Company recorded amortization expense for continuing operations in the amount of $230 and $295, respectively,
in cost of revenues; and amortization expense in the amount of $0 and $54 respectively, in operating expenses. During the years
ended March 31, 2012 and 2011 the Company recorded amortization expense for discontinued operations in the amount of $0 and $26,
respectively, in cost of revenues; and amortization expense in the amount of $0 and $40, respectively, in operating expenses.
Based on the amortizable intangible assets as of March 31, 2012,
we estimate amortization expense for the next five years to be as follows:
Amortization
Year Ending March 31,
Expense
(in thousands)
2013
$
232
2014
232
2015
199
$
663
Below is a summary impairment of Goodwill and Intangible
assets:
Intangible
Assets
Goodwill
Balance as of March 31, 2010
$
9,676
$
53,066
Impairment
4,482
1,546
Balance as of March 31, 2011
$
14,158
$
54,612
Impairment
2,319
2,969
Balance as of March 31, 2012
$
16,477
$
57,581
10.
Debt
March 31,
March 31,
2012
2011
Short Term Debt
Note Payable
$
-
$
100
Equipment Leases and accrued interest on debt
2
15
Senior secured note, short term accrued interest
73
66
Secured Note, short term accrued interest
-
92
$
75
$
273
F-
21
March 31,
March 31,
2012
2011
Long Term Debt
Senior secured note, including PIK interest, net of discount, of $1,020 and $1,856, respectively
$
1,881
$
776
Convertible note, including accrued interest, net of discount, of $1,132 and $0, respectively
60
-
Secured note, including PIK interest
1,136
3,685
$
3,077
$
4,461
Convertible Debt
On December 29, 2011, the Company sold and issued $7,000 of
subordinated short term convertible notes (the "New Convertible Note"). The New Convertible Note is subordinated to
the New Senior Secured Notes. The New Convertible Note bears interest at a rate of 3% per annum payable at the time of conversion.
The term of the New Convertible Note is the earlier of (i) the date of the Company's next equity financing round or (ii)
the date that is one year following the date of the New Convertible Note. The New Convertible Note will automatically convert into
shares of the Company's common stock one year from the date of the New Convertible Note at a conversion price equal to (x)
if in connection with a next equity financing round, a 25% discount to the actual or implied stock price in such financing or (y)
if the Company does not complete the next equity financing round within one year of the date of the New Convertible Note, at 75%
of the average trading price of the Company's common stock for the 30-day period immediately prior to conversion. In no event
shall the conversion price be less than $0.50.
The purchaser of the New Convertible Note also received a warrant
("Convertible Note Warrant") to purchase shares of common stock of the Company. The number of shares which may be purchased
under the Convertible Note Warrant is equal to an amount calculated by multiplying 25% by the quotient obtained by dividing the
amount of the principal under the New Convertible Note outstanding immediately prior to conversion by the conversion price. The
conversion price is to be determined based on a qualified event or one year with an exercise price of no less than $0.50 per share.
The Convertible Note Warrant has a five year term and the issuer can require conversion of the Convertible Note Warrant if (i)
the common stock of issuer is traded on NASDAQ (or other national stock exchange); (ii) for at least (60) consecutive days at a
price equal to or greater than 150% of the Conversion Price, and (iii) the common stock has traded with an average daily volume
of at least 200,000 shares. The Convertible Note Warrant was initially recorded as a derivative liability upon issuance. As discussed in Note 12, the
Company received a waiver from the Senior Secured Convertible note holders on March 26, 2012 which allowed the Company to
reclassify the Convertible Note Warrant from a derivative liability to additional paid-in capital.
The Company determined that the New Convertible Note has an
embedded conversion feature that is required to be bifurcated and measured at fair value at each reporting. At the date of issuance,
the fair value of the embedded conversion feature and the Convertible Note Warrant of the New Convertible Note was $6,078 using
the Black-Scholes option pricing model with the following assumptions:
·
Expected life of 1 year
·
Risk free interest rate of .12%
·
Dividend yield of 0%
·
Volatility of 175%
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The Company determined the fair value of the Convertible
Note Warrants to be $2,177, using the Black-Scholes option pricing model with the following assumptions:
·
Expected life of 5 years
·
Risk free interest rate of .88%
·
Dividend yield of 0%
·
Volatility of 175%
The combined total discount pertaining to the
conversion feature of the New Convertible Note and the Convertible Note Warrant was originally limited to the face value of
the New Convertible Note of $7,000 and is being amortized over the term of the New Convertible Note, with the $1,255 fair
value that exceeded the face value being charged to operations as interest expense.
On March 1, 2012, the Company amended the
New Convertible Note including the following amendments:
·
The conversion price was amended to $0.70 for the entire principal and all accrued and unpaid interest.
·
The warrants to become exercisable as of March 1, 2012. Previously the warrants
                                                                                                               could only be exercised by the holder on or after the date on which the common stock had traded on NASDAQ (or any other
                                                                                                               nationally recognized securities exchange) at a price equal to or greater than the conversion price for a period of 60
                                                                                                               consecutive trading days with an average daily volume of at least 200,000 shares.
·
The warrant exercise price was amended to $0.70.
On March 1, 2012, the entire amount of the New
Convertible Note of $7,000 including accrued interest of $37 was converted into 10,053 shares based on an agreed upon
conversion rate of $0.70. The Company assessed the debt modification for the New Convertible Note and determined that it met
the requirements for extinguishment accounting per FASB ASC 470 and accordingly, recorded a gain on extinguishment of debt of
$2,117 for the year ended March 31, 2012.
The Company had recorded a debt discount based on the fair value
of the Convertible Note Warrant and the embedded conversion feature. Due to the conversion of the New Convertible Note, the Company
expensed the $7,000 debt discount to interest expense.
ValueAct Note
As described in Note 8, in connection with the disposal of AMV
on June 21, 2010, all amounts due and payable under the AMV Note were released, and the ValueAct Note was amended and restated
in its entirety and reduced to $3,500 of principal (the "Amended ValueAct Note").
On December 16, 2011, the ValueAct Note was purchased in its
entirety by Taja LLC ("Taja) and was amended to remove certain negative covenants from the Note (the "Amended Taja
Note"). The Purchase of the ValueAct Note was independent of the Company, and the Company did not receive or pay out any
cash related to this transaction.
On December 29, 2011, the Company and Taja entered into a
binding term sheet for convertible note financing ("Taja Convertible Note") and effectively a third amendment to
the Second Amended Note ("Third Amended Note"). The Taja Convertible Note became effective on February 27, 2012.
The Third Amended Note (1) changed the maturity date from June 21, 2013 to June 21, 2015, (2) extended the payment in kind
("PIK") election to the note through the revised term, and (3) stripped out $3,000 of principal to create the
Taja Convertible Note, leaving a principal balance of $500 plus accrued interest of $562 for a total of $1,062. As
consideration for amending the note, Taja also received a warrant ("Incentive Warrant") to purchase 2,000 shares
of common stock of the Company at an exercise price of $0.25 per share, subject to adjustment. Taja also received 25% warrant
coverage ("Coverage Warrant") determined by dividing the principal amount of the Taja Convertible Note by the
conversion price multiplied by 25%. The Incentive Warrant and the Coverage Warrant have a five year term and vest one year
from issue date. The Coverage Warrant was initially recorded as a derivative liability upon issuance. As discussed in Note
12, the Company received a waiver from the Senior Secured Convertible note holders on March 26, 2012 which allowed the Company
to reclassify the Convertible Note Warrant from a derivative liability to additional paid-in capital. The Company assessed the
debt modification for the Third Amended Note and determined that it met the requirements for extinguishment accounting per FASB
ASC 470 and accordingly, recorded a loss on extinguishment of debt of $1,459 for the year ended March 31, 2012.
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On March 1, 2012, the Company and Taja entered into a second
binding term sheet ("Amended Taja Convertible Note") to amend certain provisions of the December 29, 2011 binding term
sheet (1) the maturity date was revised to March 1, 2014, (2) the conversion price was amended to $0.70 share, (3) conversion of
the note must not cause the holder to exceed 4.9% ownership, except that on the maturity date the entire remaining amount of principle
and interest shall automatically convert into shares of common stock of the Company (4) the Amended Taja Convertible Note becomes
accelerated and immediately due and payable upon the consummation by the Company of one or more equity sales from and after March
1, 2012 resulting in aggregate net proceeds of at least $10,000, (5) the conversion date is to occur the earlier of (x) the date
that the long-form documents are executed and delivered to all parties, and (y) March 19, 2012, (6) the 2,000 Incentive Warrants
issued as consideration for the Third Amended Note were amended to vest and be exercisable one year from March 1, 2012, (7) the
exercise date of the Coverage Warrants was amended to one year following the conversion date, and (8) the term sheet was binding
on the parties and their respective successors and assigns regardless of whether the parties execute long form agreements, as opposed
to the previous term sheet that contemplated going to long form agreements.
The Company determined that the Amended Taja Convertible Note
has an embedded conversion feature that is required to be bifurcated and measured at fair value at each reporting. At the date
of issuance, the fair value of the embedded conversion feature was $2,250 using the Black-Scholes option pricing model with the
following assumptions:
·
Expected life of 1 years
·
Risk free interest rate of .17%
·
Dividend yield of 0%
·
Volatility of 175%.
The Company determined the fair value of the Coverage Warrant
and the Incentive Warrant to be $750 and $1,459, respectively, using the Black-Scholes option pricing model with the following
assumptions:
·
Expected life of 5 years
·
Risk free interest rate of .84%
·
Dividend yield of 0%
·
Volatility of 175%.
The combined total discount pertaining to the conversion factor
of the Taja Convertible Note and the Coverage warrant was originally limited to the face value of the Taja Convertible Note of
$3,000 and is being amortized over the term, with the $837 fair value of the embedded conversion feature that exceeded the face
value being charged to operations as interest expense.
On March 19, 2012, the Company issued 2,600 shares of its common
stock to Taja for the conversion of $1,820 of the Amended Taja Convertible Note. The Company expensed to interest expense the
debt discount on a pro rata basis of the amount converted to the original debt amount to reflect the conversion of the $1,820.
During the year ended March 31, 2012, the Company recorded interest expense of $1,873 related to the amortization of the debt
discount. The remaining discount of $1,127 will be amortized over the period ending March 1, 2014. The Company assessed the conversion
of $1,820 and determined that it met the requirements for extinguishment accounting per FASB ASC 470 and accordingly, recorded
a gain on extinguishment of debt of $1,346 for the year ended March 31, 2012.
As of March 31, 2012, the $1,180 outstanding principal balance
is convertible into approximately 1,686,000 shares of common stock at a conversion price of $0.70. At March 31, 2012, the if-converted
value exceeds the principal by approximately $405.
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Senior Secured Convertible Notes
On June 21, 2010, for purposes of capitalizing the Company,
the Company sold and issued $2,500 of Senior Secured Convertible Notes due June 21, 2013 of the Company (the "New Senior
Secured Notes") to certain of the Company's significant stockholders.  The New Senior Secured Notes have
a three year term and bear interest at a rate of 10% per annum payable in arrears semi-annually. The entire principal balance is
due in one lump sum payment on June 21, 2013. Notwithstanding the foregoing, at any time on or prior to the 18th month following
the original issue date of the New Senior Secured Notes, the Company may, at its option, in lieu of making any cash payment of
interest, elect that the amount of any interest due and payable on any interest payment date on or prior to the 18th month following
the original issue date of the New Senior Secured Notes be added to the principal due under the New Senior Secured Notes. The accrued
and unpaid principal and interest due on the New Senior Secured Notes are convertible at any time at the election of the holder
into shares of common stock of the Company at a conversion price of $0.15 per share, subject to adjustment. The New Senior Secured
Notes are secured by a first lien on substantially all of the assets of the Company and its subsidiaries pursuant to the terms
of that certain Guarantee and Security Agreement, dated as of June 21, 2010, among Twistbox, the Company, each of the subsidiaries
thereof party thereto, the investors party thereto and Trinad Management. The Amended ValueAct Note is subordinated to the New
Senior Secured Notes pursuant to the terms of that certain Subordination Agreement, dated as of June 21, 2010, by and between Trinad
Capital Master Fund, and ValueAct, and each of the Company and Twistbox.
Each purchaser of a New Senior Secured Note also received a
warrant ("Warrant") to purchase shares of common stock of the Company at an exercise price of $0.25 per share, subject
to adjustment.  For each $1 of New Senior Secured Notes purchased, the purchaser received a Warrant to purchase 3.33
shares of common stock of the Company.  Each Warrant has a five year term.
The Warrants granted to the New Senior Secured Note holders
on June 21, 2010 and conversion feature in the New Senior Secured Notes are not considered derivative instruments since the Warrants
and the New Senior Secured Notes have a set conversion price and all of the requirements for equity classification were met. The
Company determined the fair value of the detachable warrants issued in connection with the New Senior Secured Notes to be $1,678,
using the Black-Scholes option pricing model and the following assumptions:  expected life of 5 years, a risk free
interest rate of 2.05%, a dividend yield of 0% and volatility of 54.62%. In addition, the Company determined the value
of the beneficial conversion feature to be $5,833. The combined total discount for the New Senior Secured Notes is limited
to the face value of the New Senior Secured Notes of $2,500 and is being amortized over the term of the New Senior Secured
Notes. For the year ended March 31, 2012, the Company amortized $835 of the aforesaid discounts as interest and financing costs
in the accompanying consolidated statements of operations. The remaining discount of $1,020 will be amortized over the period ending
June 21, 2013.
As of March 31, 2012, the $2,974 outstanding principal and accrued
interest is convertible into approximately 19,827 shares of common stock at a conversion price of $0.15. At March 31, 2012, the
if-converted value exceeds the principal and accrued interest by approximately $15,663.
11.
Related Party Transactions
The Company engages in various business relationships with shareholders
and officers and their related entities. The significant relationships are disclosed below.
On September 14, 2006, the Company entered into a five year
management agreement ("Agreement") with Trinad Management, the manager of Trinad Capital Master Fund, which is one
of our principal stockholders. In addition, Robert Ellin, our director, is the managing director of and portfolio manager for Trinad
Management. Pursuant to the terms of the Agreement, Trinad Management provides certain management services, including, without
limitation, relating to 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 related expenses reasonably incurred. The Agreement
expired on September 14, 2011, but was extended to December 31, 2011. During the years ended March 31, 2012 and 2011, the Company
incurred management fees under the agreement of $270 and $360, respectively. At March 31, 2012 and March 31, 2011, the accrued
payable to Trinad Management was $135 and $180, respectively.
12.
Capital Stock Transactions
Preferred Stock
There are 100 shares of Series A Convertible Preferred Stock
("Series A") authorized, issued and outstanding. The Series A has a par value of $0.0001 per share. The Series A holders
are entitled to: (1) vote on an equal per share basis as common stock, (2) dividends paid to the common stock holders on an as
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 to the common stock holders on an as if-converted basis.
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Common Stock and Warrants
In addition, in connection with the New Senior Secured Notes
described in Note 10, on June 21, 2010, each purchaser of a New Senior Secured Note also received a warrant ("Warrant")
to purchase shares of common stock of the Company at an exercise price of $0.25 per share, subject to adjustment. For each $1 of
New Senior Secured Notes purchased, the purchaser received a Warrant to purchase 3.33 shares of common stock of the Company. Each
Warrant has a five year term. The warrants were valued at $1,678 using the Black Scholes pricing model (see Note 10) and were originally
recorded as equity.
In February 2011, a former officer of the Company, agreed to
cancel 300,000 shares underlying an option to purchase 350,000 shares of common stock of the Company, and the Company granted
an option to purchase 300,000 shares of the Company's common stock at an exercise price of $0.25 per share. The Company
determined the incremental fair value of the options issued to be $37, using the Black-Scholes option pricing model and the following
assumptions: expected life of 6.98 years, a risk free interest rate of 2.99%, a dividend yield of 0% and volatility of 75%.
In February 2011, an officer of the Company, agreed to cancel 400,000
shares underlying an option to purchase 450,000 shares of common stock of the Company, and the Company granted an option to purchase
400,000 shares of the Company's common stock at an exercise price of $0.25 per share. The Company determined the incremental
fair value of the options issued to be $50, using the Black-Scholes option pricing model and the following assumptions: expected
life of 6.98 years, a risk free interest rate of 2.99%, a dividend yield of 0% and volatility of 75%.
In September 2010, the Company entered
into a consulting agreement, pursuant to which, the Company issued warrants to purchase 150,000 shares of the Company's
common stock at an exercise price of $0.39 per share. The Company determined the fair value of the warrants issued to be $26,
using the Black-Scholes option pricing model and the following assumptions: expected life of 3.00 years, a risk free interest
rate of 0.70%, a dividend yield of 0% and volatility of 75%. In February 2011, an officer of the Company, agreed to cancel an
option to purchase 500,000 shares of common stock of the Company, and the Company granted an option to purchase 500,000 shares
of the Company's common stock at an exercise price of $0.25 per share. The Company determined the incremental fair value
of the options issued to be $26, using the Black-Scholes option pricing model and the following assumptions: expected life of
3.00 years, a risk free interest rate of 1.02%, a dividend yield of 0% and volatility of 75%.
On April 1, 2011, 347,244 shares of common stock of the Company
were issued to two former employees of the Company, as compensation, at the closing market price on that date of $0.58 cents per
share, resulting in a total value of $201. In addition, the employees each agreed to cancel options to purchase 173,622 shares
of common stock in connection with their respective termination agreements which were valued at $132. The Company determined the
fair value of the cancelled options using the Black-Scholes option pricing model and the following assumptions: expected life of
5.11 years, a risk free interest rate of 1.76%, a dividend yield of 0% and volatility of 75%. The net value of the termination
was $69.
On April 6, 2011, the Company entered into a consulting agreement.
On January 3, 2012 the Company issued 150,000 shares of common stock of the Company to the consultant. The shares vest over a one
year period. The shares were valued at the closing market price on that date of $0.58 cents per share. The overall value was determined
to be $87, of which $87 was recorded through the period ended March 31, 2012.
On April 6, 2011, the Company issued warrants to purchase 75,000
shares of the Company's common stock to a vendor, as compensation for services rendered, at $0.25 cents per share. The Company
determined the fair value of the warrants issued to be a $34, using the Black-Scholes option pricing model and the following assumptions:  expected
life of 3.00 years, a risk free interest rate of .81%, a dividend yield of 0% and volatility of 75%. The warrants
vest over a six month period and $34 of expense has been recorded through the period ended March 31, 2012.
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26
In May 2011, 150,000 shares of common stock of the Company were
issued to a vendor as a settlement, at the closing market price on that date of $0.40 cents per share, resulting in a total value
of $60.
In June 2011, the Company entered into a consulting agreement,
pursuant to which, the Company issued warrants to purchase 150,000 shares of the Company's common stock at an exercise price
of $0.47 cents per share. At June 30, 2011, the Company determined the fair value of the warrants issued to be $53, using the Black-Scholes
option pricing model and the following assumptions:  expected life of 3.00 years, a risk free interest rate of 0.81%,
a dividend yield of 0% and volatility of 75%. The warrants vest over a one year period and $53 of expense has been recorded
through the period ended March 31, 2012.
In June 2011, the Company entered into a consulting agreement,
pursuant to which, the Company issued warrants to purchase 150,000 shares of the Company's common stock at an exercise price
of $0.47 cents per share. At June 30, 2011, the Company determined the fair value of the warrants issued to be $92, using the Black-Scholes
option pricing model and the following assumptions:  expected life of 3.00 years, a risk free interest rate of 0.83%,
a dividend yield of 0% and volatility of 75%. The warrants vest over a one year period and $48 of expense has been recorded
in the period ended March 31, 2012.
On December 29, 2011, the Company issued a convertible promissory
note for $7,000, pursuant to which the Company issued warrants to purchase 3,500,000 shares based on 25% coverage and a conversion
rate of $0.50. The exercise price was $0.50 at the date of issuance with a five year life. At December 29, 2011, the Company determined
the fair value of the warrants to be $2,177 using the Black-Scholes option pricing model and the following assumptions:  expected
life of 5 years, a risk free interest rate of 0.88%, a dividend yield of 0% and volatility of 175%. The fair value
of the warrants was recorded as a debt discount. On March 1, 2012 the note was amended, changing the conversion price to $0.70
cents per share, and the Company issued 10,053,333 shares of common stock of the Company in full payment of principle and interest
of the New Convertible Note at the new conversion price, and recognized the full expense of the warrants and debt discount in interest
expense as of March 31, 2012.
In December 2011, the Company issued 50,000 shares of
common stock of the Company to Digital Turbine Group LLC for the purchase of its assets. The shares were valued at the
closing market price on that date of $0.65 cents per share. The overall value was determined to be $31, and was recorded as
production expense as of December 31, 2011.
In December 2011, the Company issued 50,000 shares of common
stock of the Company to a consultant. The shares are partially vested, but are restricted for a one year period. The vesting of
the shares is both performance and market based, and as such, the Company performed a valuation under ASC 718 and determined overall
value to be $39, and $11 was recorded as an expense through March 31, 2012.
In December 2011, the Company issued 100,000 shares of common
stock of the Company to a consultant. The shares are partially vested, but are restricted for a one year period. The vesting of
the shares is both performance and market based, and as such, the Company performed a valuation under ASC 718 and determined the
overall value to be $77, and $22 was recorded as an expense through March 31, 2012.
In December 2011, the Company issued 100,000 shares of common
stock of the Company to a consultant. The shares are partially vested, but are restricted for a one year period. The vesting of
the shares is both performance and market based, and as such, the Company performed a valuation under ASC 718 and determined the
overall value to be $77, and $22 was recorded as an expense through March 31, 2012.
In December 2011, the Company issued 1,787,500 shares of common
stock of the Company to a consultant. The shares are partially vested, but are restricted for a one year period. The vesting of
the shares is both performance and market based, and as such, the Company performed a valuation under ASC 718 and determined the
overall value to be $1,379, and $400 was recorded as an expense through March 31, 2012.
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27
In December 2011, the Company issued 50,000 shares of common
stock of the Company to a consultant. The shares are partially vested, but are restricted for a one year period. The vesting of
the shares is both performance and market based, and as such, the Company performed a valuation under ASC 718 and determined the
overall value to be $39, and $11 was recorded as an expense through March 31, 2012.
In December 2011, the Company issued 100,000 shares of common
stock of the Company to a consultant. The shares are partially vested, but are restricted for a one year period. The vesting of
the shares is both performance and market based, and as such, the Company performed a valuation under ASC 718 and determined the
overall value to be $77, and $22 was recorded as an expense through March 31, 2012.
In December 2011, the Company issued 9,037,500 shares of common
stock of the Company to a consultant. The shares are partially vested, but are restricted for a one year period. The vesting of
the shares is both performance and market based, and as such, the Company performed a valuation under ASC 718 and determined the
overall value to be $6,974, and $2,025 was recorded as an expense through March 31, 2012.
In December 2011, the Company issued 200,000 shares of common
stock of the Company to a consultant. The shares are partially vested, but are restricted for a one year period. The vesting of
the shares is both performance and market based, and as such, the Company performed a valuation under ASC 718 and determined the
overall value to be $154, and $44 was recorded as an expense through March 31, 2012.
In December 2011, the Company issued 500,000 shares of common
stock of the Company to a consultant. The shares are partially vested, but are restricted for a one year period. The vesting of
the shares is both performance and market based, and as such, the Company performed a valuation under ASC 718 and determined the
overall value to be $386, and $112 was recorded as an expense through March 31, 2012.
In December 2011, the Company issued 25,000 shares of common
stock of the Company to a consultant. The shares are partially vested, but are restricted for a one year period. The vesting of
the shares is both performance and market based, and as such, the Company performed a valuation under ASC 718 and determined the
overall value to be $19, and $6 was recorded as an expense through March 31, 2012.
In December 2011, the Company issued 500,000 shares of common
stock of the Company to a consultant. The shares are partially vested, but are restricted for a one year period. The vesting of
the shares is both performance and market based, and as such, the Company performed a valuation under ASC 718 and determined the
overall value to be $386, and $112 was recorded as an expense through March 31, 2012.
In December 2011, the Company issued 1,000,000 shares of common
stock of the Company to a director. The shares vest over a period of one year. The shares were valued at the closing market price
on that date of $0.62 cents per share. The overall value was determined to be $620, and $207 of expense was recorded through the
period ended March 31, 2012.
In December 2011, the Company issued 1,000,000 shares of common
stock of the Company to a director. The shares vest over a period of one year. The shares were valued at the closing market price
on that date of $0.62 cents per share. The overall value was determined to be $620, and $207 of expense was recorded through the
period ended March 31, 2012.
In December 2011, the Company issued 1,000,000 shares of common
stock of the Company to a director. The shares vest over a period of one year. The shares were valued at the closing market price
on that date of $0.61 cents per share. The overall value was determined to be $610, and $158 of expense was recorded through the
period ended March 31, 2012.
In December 2011, the Company issued 3,400,000 shares of common
stock of the Company to a director. The shares are partially vested, but are restricted for a one year period. The vesting of the
shares is both performance and market based, and as such, the Company performed a valuation under ASC 718 and determined the overall
value to be $2,624, and $1,454 of expense was recorded through the period ended March 31, 2012.
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In December 2011, the Company issued 3,600,000 shares of common
stock of the Company to a director. The shares are vested, but are restricted for a one year period. The shares were valued at
the closing market price on that date of $0.61 cents per share. The overall value was determined to be $2,196, and $2,196 of expense
was recorded in the period ended December 31, 2011.
In January 2012, the Company entered into a consulting agreement,
pursuant to which, the Company issued 150,000 shares of common stock of the Company. The shares are vested and were valued at the
closing market price on that date of $0.65 cents per share. The overall value was determined to be $98, and $98 of expense was
recorded in the period ended January 31, 2012.
In January 2012, the Company entered into a consulting agreement,
pursuant to which, the Company issued 150,000 shares of common stock of the Company. The shares vest over one year and were valued
at the closing market price on that date of $0.65 cents per share. The overall value was determined to be $98, and $59 of expense
was recorded through the period ended March 31, 2012.
In January 2012, the Company issued 1,375,000 shares of common
stock of the Company to three employees. 875,000 of the shares are vested, but are restricted for a two year period. The shares
were valued at the closing market price on that date of $0.65 cents per share. The overall value was determined to be $894, and
$569 of expense was recorded through the period ended March 31, 2012.
In March 2012, the Company issued 50,000 shares of common stock
of the Company to a vendor. The shares are vested, but restricted for a one year period. The shares were valued at the closing
market price on that date of $0.85 cents per share. The overall value was determined to be $42, of which $42 was recorded in the
period ended March 31, 2012.
In March 2012, the Company issued 150,000 shares of common stock
of the Company to a vendor. The shares vest over one year and were valued at the closing market price on that date of $0.90 cents
per share. The overall value was determined to be $135, of which $2 was recorded through the period ended March 31, 2012.
In March 2012, the Company sold 3,857,143 shares of common stock
of the Company to investors for $0.70 cents per share. In connection with this sale of common stock, the Company issued warrants
to purchase 964,286 shares of common stock of the Company at an exercise price of $0.70 cents per share with a term of 5 years.
In March 2012, the Company issued warrants to purchase 2,000,000
shares of common stock of the Company at an exercise price of $0.70 cents per share with a term of 5 years. The warrants were issued
as consideration related to the modification of an existing note to convertible debt and treated as debt modification expense of
$1,459 as of March 31, 2012.
In March 2012, the Company issued 1,071,429 warrants to purchase
shares of common stock of the Company at an exercise price of $0.70 cents per share. The Company recorded expense of $610 through
the period ended March 31, 2012.
Derivative liabilities
As of March 31, 2012, the Company determined that certain warrants
were considered derivatives because they did not meet the scope exception in ASC 815-10-15-74. The fair value of these warrants
was $452 and $223 at March 31, 2012 and 2011, respectively.
On December 29, 2011, the Company issued a $7,000 New Convertible
Note with conversion rate at 75% of the average trading price of the Company's common stock for the 30-day period immediately
prior to conversion with a floor of $0.50. Pursuant to the agreement, the Company issued a Coverage Warrant equal to multiplying
25% by the quotient obtained by dividing the amount of the principal under the convertible note outstanding immediately prior to
conversion by the conversion price.
Previously issued warrants and embedded conversion features
had met the scope exception in ASC 815-10-15-74; however, due to the increased number of potential common shares that would need
to be issued upon conversion of the note, the Company did not have sufficient authorized and unissued shares as required by
ASC 815-40-25-10 (b) causing all outstanding derivatives and
embedded conversion features to not meet the scope exception in ASC 815-10-15-74. As a result, the Company was required to separately
account for the outstanding warrants and embedded conversion options as derivative liabilities, carried at fair value and marked-to-market
each reporting period, with changes in the fair value each period being charged or credited to operations.
F-
29
On December 29, 2011, the Company valued all previously
outstanding warrants and embedded conversion features using the Black-Scholes model and reclassified $17,549 from additional paid-in
capital to derivative liabilities. The Company also recorded a derivative liability of $8,255 representing the fair value of the
embedded conversion option and the Coverage Warrant issued with the New Convertible Note. The Company determined the fair value
using the Black-Scholes option pricing model with the following assumptions:
Previously Outstanding Instruments
New Convertible Note
Embedded
Embedded
Conversion
Conversion
Coverage
Warrants
Options
Option
Warrant
Estimated Life (years)
1.82 – 4.5
1.48
1
5
Risk Free Interest Rate
.28 - .88
%
0.12
%
0.12
%
0.88
%
Dividend Yield
0
%
0
%
0
%
0
%
Volatility
175
%
175
%
175
%
175
%
On March 26, 2012, the Senior Secured Convertible Note holders
issued a waiver to the Company stating that they would not convert their notes until the Company has notified them in writing that
the Company has increased its authorized capital sufficiently so that the conversion, exchange or exercise of all convertible securities
can be effectuated without the Company exceeding its authorized capital.
With the issuance of the waiver, the Company determined that
the outstanding warrants and embedded conversion options met the scope exception of ASC 815-10-15-74 as it had sufficient authorized
and unissued shares as required by ASC 815-40-25-10 (b). Therefore, the Company valued all outstanding warrants and embedded conversion
options on March 26, 2011 and reclassified $28,733 from derivative liability to additional paid-in capital. The Company determined
the fair value using the Black-Scholes option pricing model with the following assumptions:
Embedded
Conversion
Warrants
Options
Estimated Life (years)
1.60 - 4.93
1.24
Risk Free Interest Rate
0.36% - 1.04
%
0.12
%
Dividend Yield
0
%
0
%
Volatility
175
%
175
%
Restricted Stock Agreements
During the year ended March 31, 2012, the Company entered into
restrictive stock agreements ("RSAs") with certain employees and consultants. The RSAs have performance conditions,
market conditions, time conditions or a combination. Once the stock vests, the individual is restricted from selling the shares
of stock for a certain defined period from three months to two years depending on the RSA. Certain RSA are granted voting rights
while other RSAs are not granted voting rights.
F-
30
Performance and Market Condition RSAs
On December 28, 2011, the Company issued 15,850 restricted shares
with vesting criteria based on both performance and market conditions. The vesting is as follows: (i) one third (1/3) shall vest
immediately upon the completion of one or more debt or equity financings during the period ending two (2) years from the date hereof
(the "Measurement Period") in favor of the Company of gross proceeds of at least $5 million; (ii) one third (1/3) shall
vest immediately if on any date during the Measurement Period the Company's total enterprise value (computed by multiplying
the number of outstanding shares of Common Stock on a fully diluted (taking into account only those stock options that are in-the-money
on such date), as-converted basis by the average daily trading price for Common Stock for the thirty (30) trading day period immediately
preceding the date of determination) equals or exceeds $100 million; and (iii) one third (1/3) shall vest immediately if on any
date during the Measurement Period the Company's total enterprise value (calculated as set forth in clause (ii) above) equals
or exceeds $200 million; provided, however, that all unvested shares of restricted common stock shall vest immediately upon the
sale of all or substantially all of the assets of the Company, upon the merger or reorganization of the Company following which
the equity holders of the Company immediately prior to the consummation of such merger or reorganization collectively own less
than 50% of the voting power of the resulting entity, or upon the sale of equity securities of the Company representing 50% or
more of the voting power of the Company or 50% or more of the economic interest in the Company in a single transaction or in a
series of related transactions.
Each share is restricted from the individual selling the stock
for a period of one year from the date of vesting.
Of the 15,850 restricted shares, the 5,283 vested shares and
8,292 unvested shares were granted voting rights and have been included in the outstanding shares as of March 31, 2012. The remaining
unvested shares do not have voting rights and have been excluded from the outstanding shares as of March 31, 2012.
On December 28, 2011, one third of the restricted shares vested
due to the $7,000 financing agreement entered into by the Company. The Company valued the 5,283 vested RSAs at $3,223 using the
Company's ending share price at December 28, 2011 of $0.61.
For accounting purposes, the one third unvested shares related
to the $100,000 enterprise value and the one third unvested shares related to the $200,000 enterprise value are considered to have
a market condition. The effect of the market condition is reflected in the grant date fair value of the award and, thus compensation
expense is recognized on this type of award provided that the requisite service is rendered (regardless of whether the market condition
is achieved). The Company estimated the grant date fair value to be $0.279 per share and $0.206 per share for the $100,000 enterprise
value and $200,000 enterprise value, respectively, using a Monte Carlo simulation that uses the following assumptions:
·
Volatility – 100%
·
Restricted stock discount – 36.1%
·
Risk free interest rate of 0.1%
·
Dividend yield of 0%
The Company expensed $3,552 related to the 15,850 RSAs issued
on December 28, 2011 and will expense the remaining $2,233 over the period ended December 28, 2013.
Time and Performance Condition RSAs
On January 3, 2012, the Company issued 2,375 restricted shares
with vesting criteria based on both time and performance conditions. At January 3, 2012, 1,025 restricted shares vested immediately
and the remaining 1,375 unvested shares must meet certain performance criteria which has either not been defined by the Board of
Directors or the Company has determined that the probability of meeting the performance criteria is 0%.
Each share is restricted from the individual selling the stock
for a period from one year up to two years from the date of vesting.
Of the 2,375 restricted shares, the 1,025 vested shares are
determined to have voting rights and have been included in the outstanding shares as of March 31, 2012. The remaining 1,350 unvested
shares do not have voting rights and have been excluded from the outstanding shares as of March 31, 2012.
For accounting purposes, the Company
determined the grant date fair value to be $0.65 per share which is the closing price of the Company's stock price on January
3, 2012.
The Company expensed $662, related to the 2,375 RSAs issued on January 3, 2012. No further expense will be taken
until the Board of Directors details the performance criteria.
F-
31
Time Condition RSAs
On various dates during the year ended March 31, 2012, the Company
issued 7,100 restricted shares with vesting criteria based on time conditions. As of March 31, 2012, 3,650 restricted shares were
vested with each share being restricted from the individual selling the stock for a period from three months up to two years from
the date of vesting.
Of the 7,100 restricted shares, the 3,650 vested shares are
determined to have voting rights and have been included in the outstanding shares as of March 31, 2012. The remaining 3,450 unvested
shares do not have voting rights and have been excluded from the outstanding shares as of March 31, 2012.
For accounting purposes, the Company
determined the weighted average grant date fair value to be $0.62 per share based on the closing price of the Company's stock
price on the various issue dates.
The Company expensed $2,957 related to the 7,100 RSAs and will expense the remaining $2,142
grant date fair value over the year ended March 31, 2013.
The following table summarizes the RSA activity:
Weighted
(in thousands, except grant date fair value)
Average
Number of
Grant Date
Shares
Fair Value
Unvested at March 31, 2010
-
-
Granted
300
0.250
Canceled
-
-
Vested
300
-
Unvested at March 31, 2011
-
$
0.25
Granted
25,325
0.463
Canceled
-
-
Vested
(9,958
)
0.618
Unvested at March 31, 2012
15,667
$
0.36
13.
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.
Mandalay Digital Group, Inc. and Subsidiaries
(formerly known as NeuMedia, Inc.)
14.
Income Taxes
The difference between taxes at actual rates and the federal
statutory rate was as follows:
Year Ended
Year Ended
March 31
March 31
2012
2011
Statutory Federal Income Taxes
(10,086
)
(2,528
)
State income taxes, net of federal benefit
(1,447
)
(440
)
Write down of goodwill and other perm diff
1,790
535
Foreign Expense
88
(809
)
Increase in Valuation Allowance
9,765
2,680
Income tax provision (benefit)
110
(562
)
Less discontinued Operations
-
809
Income tax provision (benefit) for Continuing Ops
110
247
F-
32
Deferred tax assets and liabilities consist of the following:
Year Ended
Year Ended
March 31,
March 31,
2012
2011
Net Operating Loss Carryforward
24,188
22,891
Amortization of Intangible Asset
(1,404
)
(1,404
)
Stock-based compensation
11,735
3,358
Credit Carryforwards
(248
)
-
Other
54
(15
)
Deferred Tax
34,326
24,830
Valuation Allowance
(34,326
)
(24,830
)
Net Deferred Tax Asset
-
-
In accordance with ASC 740 and based on all available evidence
on a jurisdictional basis, the Company believes that, it is more likely than not that its deferred tax assets will not be utilized,
and has recorded a full valuation allowance against its net deferred tax assets in each jurisdiction.
As of March 31, 2012, the Company had net operating loss (NOL)
carry-forwards to reduce future Federal income taxes of approximately $60,355, expiring in various years ranging through 2031.
Utilization of the NOLs may be subject to a substantial annual limitation due to ownership change limitations that may have occurred
or that could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"),
as well as similar state limitations.  These ownership changes may limit the amount of NOLs that can be utilized annually
to offset future taxable income and tax, respectively.  In general, an "ownership change" as defined by Section
382 of the Code, results from a transaction of series of transactions over a three-year period resulting in an ownership change
of more than 50 percentage points of the outstanding stock by a company by certain stockholders or public groups.
As of March 31, 2012, realization of the Company's net deferred
tax asset of approximately $34,326 was not considered more likely than not and, accordingly, a valuation allowance of $34,326 has
been provided. During the year ended March 31, 2012, the valuation allowance increased by $9,496.
ASC 740 requires the consideration of a valuation allowance
to reflect the likelihood of realization of deferred tax assets.  Significant management judgment is required in determining
any valuation allowance recorded against deferred tax assets.
The Company adopted the provisions of ASC 740 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 ASC 740 and those after the adoption of ASC 740. There were no unrecognized tax benefits not subject to valuation allowance
as at March 31, 2012 and March 31, 2011. The Company recognized no interest and penalties on income taxes in its statement of operations
for the year ended March 31, 2012; or the year ended March 31, 2011.  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, 2012.
The Company's Federal and State income tax returns remain subject to examination for all tax years ended 2008 and 2007, respectively.
The Company is currently under audit examination by the IRS of the tax year December 31, 2010.
15.
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, 2012:
F-
33
North
Other
America
Europe
Regions
Consolidated
Twelve Months ended March 31, 2012
Net sales to unaffiliated customers
215
4,977
2,038
$
7,230
Property and equipment, net
at March 31, 2012
177
52
1
$
230
North
Other
America
Europe
Regions
Consolidated
Twelve Months ended March 31, 2011
Net sales to unaffiliated customers
688
6,819
1,679
$
9,186
Property and equipment, net
at March 31, 2011
322
65
1
$
388
Our largest customer accounted for 41% of gross revenues in
the year ended March 31, 2012; and 49% in the year ended March 31, 2011.
16.
Commitments and Contingencies
Operating Lease Obligations
The Company leases office facilities and equipment under noncancelable
operating leases expiring in various years through 2014.
Following is a summary of future minimum payments under initial
terms of leases as of:
Year Ending March 31,
2013
$
32
2014
$
5
Total minimum lease payments
$
37
These amounts do not reflect future escalations for real estate
taxes and building operating expenses.  Rental expense for continuing operations amounted to $170 and $291, respectively,
for the years ended March 31, 2012 and 2011.
Other Obligations
As of March 31, 2012, the Company was obligated for payments
under various distribution agreements, equipment lease agreements, employment contracts and consulting agreements with initial
terms greater than one year at March 31, 2012.  Annual payments relating to these commitments at March 31, 2012 are as
follows:
Year Ending March 31,
2013
$
1,108
Total minimum payments
$
1,108
On December 28, 2011, the Company entered into an employment
agreement with Peter Adderton to serve as the Company's Chief Executive Officer and as a member of the Company's Board
of Directors.  The term of the agreement is one year.  Pursuant to the agreement, the Company agreed to the following:
·
Annual Fees: For all services rendered by the Chief Executive Officer under this agreement, the Company shall pay the Executive
an aggregate fee of four hundred fifty thousand dollars ($450,000) per annum.
F-
34
·
Special Incentive Bonus:  Mr. Adderton  is to receive a bonus of $250,000 payable (A) 50% upon completion of a $5
million financing(s) during the two years following the date of the employment agreement ("Measurement Period") 
and (B) the remaining $125,000 upon the successful completion of additional debt or equity financing(s) during the Measurement
Period, which, when aggregated with any prior financings during the Measurement Period, result in the Company realizing at least
$10 million of gross proceeds.
·
Annual Bonus:  Mr. Adderton shall be entitled to be paid an annual incentive bonus in cash in an amount of up to 100%
of his salary based upon satisfaction of performance-related milestones. The performance-related milestones shall be mutually determined
by the Board of Directors and Mr. Adderton within sixty (60) days of the effective Date of the employment agreement.
·
Restricted Stock Grant: The Company granted Mr. Adderton 9,037,500 shares of the Company's restricted common stock, subject
to the certain terms and conditions specified in the restricted stock agreement, which shall vest as follows: (i) one third (1/3)
shall vest immediately upon the completion of one or more debt or equity financings during the Measurement Period in favor of the
Company  of gross proceeds of at least $5 million; (ii) one third (1/3) shall vest immediately if on any date during the Measurement
Period the Company's total enterprise value (computed by multiplying the number of outstanding shares of the Employer's
common stock on a fully diluted (taking into account only those stock options that are in-the-money on such date), as-converted
basis by the average daily trading price for the Company's common stock for the thirty (30) trading day period immediately
preceding the date of determination) equals or exceeds $100 million; and (iii) one third (1/3) shall vest immediately if on any
date during the Measurement Period the Company's total enterprise value (calculated as set forth in clause (ii) above) equals
or exceeds $200 million; provided , however , that all unvested shares of restricted common stock shall vest immediately upon the
sale of all or substantially all of the assets of the Company, upon the merger or reorganization of the Company following which
the equity holders of the Company immediately prior to the consummation of such merger or reorganization collectively own less
than 50% of the voting power of the resulting entity, or upon the sale of equity securities of the Company representing 50% or
more of the voting power of the Company or 50% or more of the economic interest in the Company in a single transaction or in a
series of related transactions (i.e., a "Change of Control"). All shares shall be subject to a one (1) year lock-up
following the vesting of such shares.
·
Additional Performance Bonuses:  Mr. Adderton shall be entitled to payment of (i) a performance bonus equal to $2.5 million
in cash or registered and freely tradable stock of the Company, at Mr. Adderton's choice, if, on any date during the Measurement
Period the Company's total enterprise value (calculated as set forth in Section 4(e)(ii) above) equals or exceeds $150 million;
and (ii) payment of a performance bonus equal to $10 million in cash or registered and freely tradable stock of the Company, at
Mr.  Adderton's choice, if, on any date during the Measurement Period, the Company's total enterprise value (calculated
as set forth in Section 4(e)(ii) above) equals or exceeds $1 billion. Any bonus payable under this subsection (f) shall vest upon
the achievement of the specified criteria and shall be paid on or within thirty (30) days of such vesting date.
The Company entered into an agreement with Robert Ellin to serve
as the Company's Executive Chairman.  The term of the agreement is one year.  Pursuant to the agreement, the
Company agreed to the following:
·
Annual Fees: For all services rendered by the Chairman under this agreement, the Company shall pay the Chairman an aggregate
fee of four hundred fifty thousand dollars ($450,000) per annum.
·
Annual Bonus:  Mr. Ellin shall be entitled to be paid an annual incentive bonus in cash in an amount of up to 100% of
his salary based upon satisfaction of performance-related milestones. The performance-related milestones shall be mutually determined
by the Board of Directors and Mr. Ellin within sixty (60) days of the effective Date of the employment agreement.
F-
35
·
Restricted Stock Grant: The Company granted Mr. Ellin 3,400,000 shares of the Company's restricted common stock, subject
to the certain terms and conditions specified in the restricted stock agreement, which shall vest as follows: (i) one third (1/3)
shall vest immediately upon the completion of one or more debt or equity financings during the Measurement Period in favor of the
Company  of gross proceeds of at least $5 million; (ii) one third (1/3) shall vest immediately if on any date during the Measurement
Period the Company's total enterprise value (computed by multiplying the number of outstanding shares of the Employer's
common stock on a fully diluted (taking into account only those stock options that are in-the-money on such date), as-converted
basis by the average daily trading price for the Company's common stock for the thirty (30) trading day period immediately
preceding the date of determination) equals or exceeds $100 million; and (iii) one third (1/3) shall vest immediately if on any
date during the Measurement Period the Company's total enterprise value (calculated as set forth in clause (ii) above) equals
or exceeds $200 million; provided , however , that all unvested shares of restricted common stock shall vest immediately upon the
sale of all or substantially all of the assets of the Company, upon the merger or reorganization of the Company following which
the equity holders of the Company immediately prior to the consummation of such merger or reorganization collectively own less
than 50% of the voting power of the resulting entity, or upon the sale of equity securities of the Company representing 50% or
more of the voting power of the Company or 50% or more of the economic interest in the Company in a single transaction or in a
series of related transactions (i.e., a "Change of Control"). All shares shall be subject to a one (1) year lock-up
following the vesting of such shares.
·
Additional Performance Bonuses:  Mr. Ellin shall be entitled to payment of (i) a performance bonus equal to $1.5 million
in cash or registered and freely tradable stock of the Company, at Mr. Ellin's choice, if, on any date during the Measurement
Period the Company's total enterprise value (calculated as set forth in Section 4(e)(ii) above) equals or exceeds $150 million;
and (ii) payment of a performance bonus equal to $3.3 million in cash or registered and freely tradable stock of the Company, at
Mr.  Ellin's choice, if, on any date during the Measurement Period, the Company's total enterprise value (calculated
as set forth in Section 4(e)(ii) above) equals or exceeds $1 billion. Any bonus payable under this subsection (f) shall vest upon
the achievement of the specified criteria and shall be paid on or within thirty (30) days of such vesting date.
Litigation
Twistbox's wholly owned subsidiary, WAAT Media Corp. ("WAAT")
and General Media Communications, Inc. ("GMCI") were parties to a content license agreement dated May 30, 2006, whereby
GMCI granted to WAAT certain exclusive rights to exploit GMCI branded content via mobile devices. GMCI terminated the agreement
on January 26, 2009 based on its claim that WAAT failed to cure a material breach pertaining to the non-payment of a minimum royalty
guarantee installment in the amount of $485. On or about March 16, 2009, GMCI filed a complaint seeking the balance of the minimum
guarantee payments due under the agreement in the approximate amount of $4,085. WAAT counter-sued claiming GMCI was not entitled
to the claimed amount and that it had breached the agreement by, among other things, failing to promote, market and advertise the
mobile services as required under the agreement and by fraudulently inducing WAAT to enter into the agreement based on GMCI's
repeated assurances of its intention to reinvigorate its flagship brand. GMCI filed a demurrer to the counter-claim. WAAT subsequently
filed an amended counter-claim. On August 16, 2011, the LA Superior Court ruled in favor of WAAT's Summary Judgment Motion.
As a result, GMCI's potential damages were limited to the amount of minimum royalty installments that accrued prior to termination
of the content license agreement in the amount of approximately $800. Trial had been scheduled for April 16, 2012, however on December
22, 2011 the parties agreed to a settlement of $300 in favor of GMCI, pursuant to which WAAT will be required to pay GMCI $300
over a 30 month period, beginning December 28, 2011. As of March 31, 2012 the Company has accrued $260, which is included in Accounts
Payable on the balance sheet.
On March 6, 2012 the Company received a notice of levy in the
amount of $73 pertaining to a dispute with a service provider. The Company has recorded the full amount in Accounts Payable on
the consolidated balance sheet.
On May 4, 2012 the Company received notice of a judgment in
the amount of £23 pertaining to a dispute with a previous employee. The Company has recorded the full amount in Accrued Compensation
on the consolidated balance sheet.
F-
36
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 of other claims 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.
17.
Subsequent Events
As previously reported on a Current Report on Form 8-K filed
March 23, 2012, on February 22, 2012, the Company received notice from the OTC Bulletin Board (OTC BB) that its common stock would
be removed from OTC BB under NASD Rule 6530(e), under which any OTC BB issuer that is delinquent in its reporting obligations
three times in a 24-month period is ineligible for quotation on the OTC BB for a period of one year. The Company requested and
received a hearing to review the OTC BB's determination, which occurred on April 2, 2012 before the Financial Industry Regulatory
Authority (FINRA). On May 16, 2012, the Company received notice of decision from FINRA that the Company's securities are
not eligible for continued quotation on the OTC BB and would be promptly removed from the OTC BB. The Company believes that while
it is seeking a long term solution to enhanced stockholder liquidity, its common stock will continue to be traded in other over
the counter markets under its same ticker symbol (MNDL or MNDLE), such as the OTC Market's OTC QB (accessed through
www.otcmarkets.com
,
but not incorporated by reference herein). Although there are no guarantees of success, the Company is actively pursuing appropriate
steps to ensure the long term liquidity of the Company's common stock, including seeking listing on a national securities exchange.
On April 12, 2012, the Company entered into a Separation and
General Release Agreement with Mr. David Mandell, Executive Vice President and General Counsel of Mandalay Digital Group, Inc.
On May 6, 2012, the Board of Directors of the Company elected
Mr. Christopher Rogers as a director.
As previously reported on a Current Report on Form 8-K filed
May, 30, 2012, on May 18, 2012 the Company entered into amendments to the restricted stock agreements governing grants of shares
of restricted common stock made to Mr. Peter Adderton, chief executive officer, and Mr. Robert Ellin, executive chairman, the original
details of which were previously disclosed on the Company's Current Report on Form 8-K filed on January 4, 2012. These amendments
clarified that the holders of such shares have all rights of a stockholder with respect to those shares (vested or unvested), including
voting and dividend rights, subject to the restrictions and forfeiture provisions of the restricted stock agreements.
On May 23, 2012, the Company received the written consent from
stockholders holding a majority of its outstanding common stock to permit (but not require) the Board of Directors of the Company
to amend its Amended and Restated Certificate of Incorporation to (i) effect a reverse stock split of the Company's common
stock at any time prior to April 26, 2013, by a ratio of not less than one-for-two and not more than one-for-ten, with the exact
ratio to be set at a whole number within this range as determined by the Board of Directors in its sole discretion (the "Reverse
Stock Split") and (ii) to increase the number of authorized shares of the Company's capital stock to 202,000,000 shares
of stock, of which 200,000,000 shares would be classified as Company common stock and 2,000,000 shares would be classified as Company
preferred stock (the "Authorized Stock Increase"). In addition, such stockholders, pursuant to the written consent,
also approved the Company's Amended and Restated 2011 Equity Incentive Plan of the Company, and related forms of Equity Incentive
Plan Notice of Grant Restricted Stock Agreement, and Notice of Grant and Stock Option Agreement (the "Plan Approval").
On June 7, 2012, the Company entered into an Equity Financing
Binding Term Sheet, with an accredited investor, pursuant to which the Company agreed to issue an aggregate of 1,428,571 shares
of its common stock and warrants to purchase 357,142 shares of its common stock (subject to adjustment), for an aggregate purchase
price of $1,000,000. The warrants have an exercise price of $0.70 per share (subject to adjustment) and a five year term. In addition,
the Equity Agreement provides that (a) the Company will use its best efforts to file a registration statement covering the shares
of common stock issued and the shares of common stock issuable upon exercise of the warrants within 120 calendar days after the
date of the Equity Agreements and use its best efforts to cause the registration statement to become effective as soon as possible
thereafter; and (b) the applicable investor will have a right to participate in future financings by the Company (subject to standard
exceptions) for a period of two years on a pro rata basis in accordance with his ownership interests in the Company (on a fully
diluted basis assuming exercise of the applicable warrant).
F-
37
On June, 7, 2012, Adage Capital Partners, LP agreed that it
would not to abstain from exercising its warrant to purchase 2,500,000 shares of common stock, issued December 29, 2011, as amended
March 1, 2012, until informed in writing by the Company that the Company has increased its authorized capital sufficiently so that
exercise can be effectuated without the Company being in an over-issuance position with respect to the shares underlying such warrants.
On June, 7, 2012, TAJA, LLC agreed that it would abstain
from exercising the following warrants and convertible note, until informed in writing by the Company that the Company has increased
its authorized capital sufficiently so that exercise can be effectuated without the Company being in an over-issuance position
with respect to the shares underlying such warrants and note: (1) Warrant to Purchase 1,071,429 shares of Common Stock, issued
December 29, 2011, as amended on March 1, 2012; (2) Warrant to Purchase 2,000,000 shares of Common Stock issued December 29 ,2011
as amended on March 1, 2012; (3) Unsecured Subordinated Convertible Note, due June 21, 2015, in the original principal amount of
$3,000,000.
F-
38
Mandalay Digital Group, Inc.
PROSPECTUS
23,310,473 shares of
Common Stock, par value $0.0001 per share
,
2012
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13.
Other Expenses of Issuance and Distribution.
Set forth below is an estimate (except
for registration fees, which are actual) of the approximate amount of the fees and expenses payable by us in connection with the
issuance and distribution of the shares of common stock.
EXPENSE
AMOUNT
Registration Fees
$
1,990
Legal Fees
50,000
Accounting Fees
18,700
Miscellaneous Fees and Expenses
1,810
Total
$
72,500
Item 14.
Indemnification of Directors and Officers.
Section 145 of
the Delaware Law General Corporation, or the Delaware Law, provides that a corporation may indemnify directors and officers as
well as other employees and individuals against expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement in connection with specified actions, suits or proceedings, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation — a "derivative action"), if they acted in good
faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. A similar standard is applicable
in the case of derivative actions, except that indemnification only extends to expenses (including attorneys' fees) incurred
in connection with defense or settlement of such action, and the statute requires court approval before there can be any indemnification
where the person seeking indemnification has been found liable to the corporation. Under Section 145 of the Delaware Law,
a corporation shall indemnify an agent of the corporation for expenses actually and reasonably incurred if and to the extent such
person was successful on the merits in a proceeding or in defense of any claim, issue or matter therein.
The Company may from
time to time be subject to Section 2115 of the California Corporations Code, or the California Code, according to which Section 317
of the California Code applies to the indemnification of officers and directors of the Company. Under Section 317 of the California
Code, permissible indemnification by a corporation of its officers and directors is substantially the same as permissible indemnification
under Section 145 of the Delaware Law, except that (i) permissible indemnification does not cover actions the person
reasonably believed were not opposed to the best interests of the corporation, as opposed to those the person believed were in
fact in the best interests of the corporation, (ii) the Delaware Law permits advancement of expenses to agents other than
officers and directors only upon approval of the board of directors, (iii) in a case of stockholder approval of indemnification,
the California Code requires certain minimum votes in favor of such indemnification and excludes the vote of the potentially indemnified
person, and (iv) the California Code only permits independent counsel to approve indemnification if an independent quorum
of directors is not obtainable, while the Delaware Law permits the directors in any circumstances to appoint counsel to undertake
such determination.
Section 145 of
the Delaware Law and Section 317 of the California Code provide that they are not exclusive of other indemnification that
may be granted by a corporation's charter, bylaws, disinterested director vote, stockholders vote, agreement or otherwise.
The limitation of liability contained in our certificate of incorporation and the indemnification provision included in our bylaws
are consistent with the Delaware Law Sections 102(b)(7) and 145, and California Code Section 317.
Section 145 of
the Delaware Law authorizes a court to award, or a corporation's board of directors to grant, indemnity to directors and
officers in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities (including reimbursement
for expenses incurred) arising under the Securities Act of 1933, as amended. The Company's amended and restated certificate
of incorporation and bylaws provide for indemnification of its directors, officers, employees and other agents to the maximum extent
permitted by the Delaware Law. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers or persons controlling the Company pursuant to such provisions, the Company has been informed
that in the opinion of the SEC such indemnification is against public policy as expressed in such Act and is therefore unenforceable.
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Item 15.
Recent Sales of Unregistered Securities.
The following is
a summary of transactions by us during the past three years, involving sales of our securities that were not registered under the
Securities Act. Each sale was exempt from registration under either Section 4(2) of the Securities Act or Section 3(a)(9) of the
Securities Act because (i) the securities were offered and sold only to accredited investors; (ii) there was no general solicitation
or general advertising related to the offerings; (iii) each investor was given the opportunity to ask questions and receive answers
concerning the terms of and conditions of the offering and to obtain additional information; (iv) the investors represented that
they were acquiring the securities for their own account and for investment; and (v) the securities were issued with restrictive
legends where required.
On
June 15, 2012, the Company issued 150,000 shares of common stock of the Company to Merriman Capital, Inc. under the terms of a
restricted stock agreement
as consideration for financial and capital markets advisory services for the Company performed
by Merriman Capital, Inc. The Company agreed to register the securities purchased in this offering. Merriman Capital, Inc. is a
broker-dealer.
The shares vest over one year.
We have been advised that Merriman Capital, Inc.
acquired such shares in the ordinary course of business, not for resale, and did not, at the time of purchase, have any agreements
or understandings, directly or indirectly, with any person to distribute such securities other than this registration statement
.
We relied on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of
common stock under the Securities Act.
On June
8, 2012, the Company sold 1,428,571 shares of its common stock and a warrant to purchase 357,142 shares of common stock to an accredited
investor for an aggregate purchase price of $1,000,000. The warrant has an exercise price of $0.70 per share (subject to adjustment)
and a five year term from the date of issuance. The warrant may not be exercised prior to the first anniversary of the date of
issuance. The Company agreed to register the securities purchased in this offering. The securities were issued pursuant to the
exemption provided by Section 4(2) of the Securities Act of 1933, as amended, for transactions by an issuer not involving any public
offering.
In
March 2012, the Company sold an aggregate of
3,857,143
shares of its common stock and
warrants to purchase an aggregate of 964,284 shares of common stock to accredited investors for an aggregate purchase price of
$2.7 million. Each warrant has an exercise price of $0.70 per share (subject to adjustment) and a five year term from the date
of issuance. Each warrant may not be exercised prior to the first anniversary of the date of issuance. The Company agreed to register
the securities purchased in this offering. The securities were issued pursuant to the exemption provided by Section 4(2) of the
Securities Act of 1933, as amended, for transactions by an issuer not involving any public offering.
In March
2012, the Company entered into a Convertible Note Financing Binding Term Sheet (the "Adage Term Sheet") with Adage
Capital Partners, L.P. ("Adage"), pursuant to which the parties agreed to restructure certain terms of the convertible
note financing consummated on December 29, 2011. In connection with the restructuring, $7,037,333, representing the entire outstanding
principal amount and all accrued and unpaid interest thereon under the Subordinated Convertible Promissory Note in the original
principal amount of $7,000,000 issued by the Company to Adage (the "Adage Note"), was converted into 10,053,333
shares of common stock of the Company effective as of March 1, 2012, and the exercise price of the warrant to purchase common
stock of the Company issued to Adage in connection with the purchase and sale of the Adage Note was changed to $0.70 per share,
subject to adjustment. As a result of the change to the exercise price, the warrant gives Adage the right to purchase up to 2,500,000
shares of common stock of the Company, subject to adjustment. We relied on Section 3(a)(9) of the Securities Act of 1933, as amended,
as providing an exemption from registration for this transaction and relied on Section 4(2) of the Securities Act of 1933, as amended,
as providing for an exemption for the original issuance of the Adage Note and warrants.
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In
March 2012, the Company issued to
TAJA, LLC
warrants to purchase 2,000,000 shares of common
stock of the Company at an exercise price of $0.70 cents per share with a term of 5 years. In connection with the same
transaction, the Company issued 1,071,429 warrants to purchase shares of common stock of the Company at an exercise price of
$0.70 cents per share. The warrants were issued as consideration related to the modification of an existing note to
convertible debt. Also in connection with the same transaction, the Company issued 2,600,000 shares of common stock of the
Company as payment of $1,820.000 of principle of a convertible note.
We relied on Section 3(a)(9) of the Securities
Act as providing an exemption from registering the issuance of these shares of common stock under the Securities Act inasmuch
as the conversion was made with our existing security holders exclusively and no commission or other remuneration was paid or
given directly or indirectly for soliciting the exchange.
In
March 2012, the Company issued 50,000 shares of common stock of the Company to Hayden IR in consideration of investor
relations services. The shares are vested, but restricted for a one year period. The shares were valued at the closing market
price on that date of $0.85 cents per share.
We relied on Section 4(2) of the Securities Act as providing an exemption
from registering the issuance of these shares of common stock under the Securities Act inasmuch as the conversion was made
with our existing security holders exclusively and no commission or other remuneration was paid or given directly or
indirectly for soliciting the exchange.
In
January 2012, the Company issued 1,375,000 shares of common stock of the Company to three employees
Lisa Higgins-Lucero,
David Mandell and David Waldman
. The shares are vested, but are restricted for a two year period. The
shares were valued at the closing market price on that date of $0.65 cents per share.
We relied on Section 4(2) of the
Securities Act, as providing an exemption from registering the sale of these shares of common stock under the Securities Act.
In January
2012, the Company entered into a consulting agreement with Andrew Schleimer for advisory board services, pursuant to which, the
Company issued 150,000 shares of common stock of the Company under a two-year lock-up and an additional 850,000 shares of common
stock of the Company that vests upon the achievement of certain company milestons. We relied on Section 4(2) of the Securities
Act, as providing an exemption from registering the sale of these shares of common stock under the Securities Act.
In January
2012, the Company entered into a consulting agreement with Michael Lambert for advisory
board services, pursuant to which, the Company issued 150,000 shares of common stock of the Company. The shares vest over one year
and were valued at the closing market price on that date of $0.65 cents per share. We relied on Section 4(2) of the Securities
Act, as providing an exemption from registering the sale of these shares of common stock under the Securities Act.
In
December 2011, the Company issued 3,600,000 shares of common stock of the Company to a director. The shares are vested, but are
restricted for a one year period. The shares were valued at the closing market price on that date of $0.61 cents per share.
We
relied on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock
under the Securities Act.
In
December 2011, the Company issued 3,400,000 shares of common stock of the Company to a director. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.
We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.
In
December 2011, the Company issued 1,000,000 shares of common stock of the Company to a director. The shares vest over a period
of one year. The shares were valued at the closing market price on that date of $0.61 cents per share.
We relied on Section
4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under the Securities
Act.
In
December 2011, the Company issued 1,000,000 shares of common stock of the Company to a director. The shares vest over a period
of one year. The shares were valued at the closing market price on that date of $0.62 cents per share.
We relied on Section
4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under the Securities
Act.
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In
December 2011, the Company issued 1,000,000 shares of common stock of the Company to a director. The shares vest over a period
of one year. The shares were valued at the closing market price on that date of $0.62 cents per share.
We relied on Section
4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under the Securities
Act.
In
December 2011, the Company issued 500,000 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.
We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.
In
December 2011, the Company issued 25,000 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.
We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.
In
December 2011, the Company issued 500,000 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.
We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.
In
December 2011, the Company issued 200,000 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.
We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.
In
December 2011, the Company issued 9,037,500 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.
We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.
In
December 2011, the Company issued 100,000 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.
We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.
In
December 2011, the Company issued 50,000 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.
We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.
In
December 2011, the Company issued 1,787,500 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.
We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.
In
December 2011, the Company issued 100,000 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.
We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.
In
December 2011, the Company issued 100,000 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.
We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.
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In
December 2011, the Company issued 50,000 shares of common stock of the Company to a consultant. The shares are partially vested,
but are restricted for a one year period. The vesting of the shares is both performance and market based.
We relied
on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under
the Securities Act.
In
December 2011, the Company issued 50,000 of common stock of the Company to Digital Turbine Group LLC for the purchase of its assets.
The shares were valued at the closing market price on that date of $0.65 cents per share.
We relied on Section 4(2)
of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under the Securities
Act.
On
December 29, 2011, the Company issued a convertible promissory note for $7,000,000 pursuant to which the Company issued warrants
to purchase 3,500,000 shares based on 25% coverage and a conversion rate of $0.50. The exercise price was $0.50 at the date of
issuance with a five year life. On March 1, 2012 the note was amended, changing the conversion price to $0.70 cents per share,
and the Company issued 10,053,333 shares of common stock of the Company in full payment of principle and interest of the New Convertible
Note at the new conversion price.
We relied on Section 4(2) of the Securities Act, as providing an exemption from registering
the sale of these shares of common stock under the Securities Act.
On
December 29, 2011, the Company
completed a convertible note financing with TAJA, LLC by exchanging $3,000,000 of principal
amount of an existing senior subordinated secured note with an unsecured subordinated convertible note in the same principal amount
due June 21, 2013 and extending the term of the existing senior subordinated secured note to June 21, 2015. The new subordinated
secured note was issued with 25% warrant coverage with the warrant exericsable for five years at an exercise price based on the
conversion price of the note. In addition, in connection with the exchange, TAJA, LLC was issued a warrant exercisable for 2,000,000
shares of Common Stock exericisable for a five-year term at an exercise price equal to $0.25, but is not exercisable for one year
following its issuance. We relied on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of
these shares of common stock under the Securities Act.
In
June 2011, the Company entered into a consulting agreement, pursuant to which, the Company issued warrants to purchase 150,000
shares of the Company's common stock at an exercise price of $0.47 cents per share. The warrants vest over a one year period.
We relied on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common
stock under the Securities Act.
In
June 2011, the Company entered into a consulting agreement, pursuant to which, the Company issued warrants to purchase 150,000
shares of the Company's common stock at an exercise price of $0.47 cents per share. The warrants vest over a one year period.
We
relied on Section 4(2) of the Securities Act, as providing an exemption from registering the sale of these shares of common stock
under the Securities Act.
In
May 2011, 150,000 shares of common stock of the Company were issued to a vendor as a settlement, at the closing market price on
that date of $0.40 cents per share.
We relied on Section 4(2) of the Securities Act, as providing an exemption from
registering the sale of these shares of common stock under the Securities Act.
On
April 6, 2011, the Company issued warrants to purchase 75,000 shares of the Company's common stock to a vendor, as compensation
for services rendered, at $0.25 cents per share. The warrants vest over a six month period.
We relied on Section 4(2)
of the Securities Act, as providing an exemption from registering the sale of these shares of common stock under the Securities
Act.
On
April 6, 2011, the Company entered into a consulting agreement. On January 3, 2012 the Company issued 150,000 shares of common
stock of the Company to the consultant. The shares vest over a one year period.
The shares were valued at the closing market
price on that date of $0.58 cents per share. We relied on Section 4(2) of the Securities Act, as providing an exemption from registering
the sale of these shares of common stock under the Securities Act.
On April
1, 2011, 347,244 shares of common stock of the Company were issued to two former employees of the Company, as compensation, at
the closing market price on that date of $0.58 cents per share. In addition, the employees each agreed to cancel options to purchase
173,622 shares of common stock in connection with their respective termination agreements.  We relied on Section 4(2) of the
Securities Act, as providing an exemption from registering the sale of these shares of common stock under the Securities Act.
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In September
2009, the Company issued a warrant to purchase 1,200,000 shares of common stock to Vivid Entertainment, LLC at an exercise price
of $1.25 per share., which included an obligation to register such shares in connection with a registration by the Company. In
January 2011, the warrant terms were amended and restated to provide the vendor with a warrant to acquire 1,500,000 shares of common
stock at an exercise price of $0.25 per share and the Company issued to the vendor 2,500,000 shares of common stock under the terms
of a restricted stock agreement.
On April
24, 2009, the Company granted certain senior executives 229,388 shares of the Company's common stock in exchange for them agreeing
to reduce their salaries from April 1, 2009 through April 30, 2010. 187,348 of the shares granted to such senior executives are
subject to forfeiture in the event that the senior executive leaves the Company within one year from the date of grant, and becomes
fully vested one year from the date of grant or in the event of change of control of the Company. The securities were issued pursuant
to the exemption from registration permitted under Rule 506 of Regulation D promulgated under the Securities Act of 1933, as amended.
Item 16.
Exhibits and Financial Statement Schedules
(a)
Exhibits
.  The exhibits
are incorporated by reference to the Exhibit Index attached hereto and a part hereof by reference.
(b)
Financial Statements.
See
page F-1 for an index of the financial statements and financial statement schedules included in the Registration Statement.
Item 17.
Undertakings.
(a)
The undersigned registrant hereby undertakes:
(1)
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i)
To include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii)
To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and
(iii)
To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
(2)
That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial
bona fide
offering thereof.
(3)
To remove from registration by means of a post-effective amendment any of the securities being registered that remain unsold at the termination of the offering.
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(4)
That, for the purpose of determining liability under the Securities Act to any purchaser, if the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness.
Provided, however
, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
(b)
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that the registrant meets all of the
requirements for filing on Form S-1 and has duly caused this registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Los Angeles, State of California, on this 9
th
day of July, 2012.
MANDALAY DIGITAL GROUP, INC.
By:
/S/  PETER ADDERTON
Peter Adderton
Chief Executive Officer (Principal
Executive Officer)
KNOW ALL PERSONS BY THESE PRESENTS
,
that each person whose signature appears below constitutes and appoints Peter Adderton and Lisa Higgins-Lucero, and each of them,
as his true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration
Statement on Form S-1 (and any related registration statement filed pursuant to Rule 462 under the Securities Act of 1933), and
to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite
and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent or any of them, or of their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities
Act of 1933, as amended, this prospectus has been signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Signature
Title
Date
/s/ Peter Adderton
Chief Executive Officer and Director
July 9, 2012
PETER ADDERTON
(Principal Executive Officer)
/s/ Lisa Higgins-Lucero
Chief Financial Officer, Twistbox
July 9, 2012
Lisa Higgins-Lucero
(Principal Financial and Accounting Officer)
/s/ Robert S. Ellin
Executive Chairman of the Board
July 9, 2012
ROBERT S. ELLIN
/s/ Peter Guber
Chairman
July 9, 2012
PETER GUBER
/s/ Paul Schaeffer
Vice-Chairman
July 9, 2012
PAUL SCHAEFFER
/s/ Chris Rogers
Director
July 9, 2012
CHRIS ROGERS
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EXHIBIT INDEX
Agreements included as exhibits to this
Registration Statement on Form S-1 are included to provide information regarding their terms and are not intended to provide any
other factual or disclosure information about our company (including its consolidated subsidiary) or the other parties to the agreements.  Where
an agreement contains representations and warranties by any party, those representations and warranties have been made solely for
the benefit of the other parties to the agreement or express third-party beneficiaries as explicitly set forth in the agreement.  Any
such representations and warranties:
·
should not be treated as categorical statements of fact, but rather as an allocation of risk;
·
may have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable
agreement, which disclosures are not necessarily reflected in the agreement;
·
may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors;
and
·
were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement
and may be subject to more recent developments.
Accordingly, any such representations and
warranties may not describe the actual state of affairs as of the date they were made or at any other time.
Exhibit
No.
Description
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 York. (1)
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 NeuMedia 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 NeuMedia 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 NeuMedia 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 NeuMedia 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 NeuMedia Media, Inc., Twistbox Acquisition, Inc., Twistbox Entertainment, Inc. and Adi McAbian and Spark Capital, L.P. (4)
2.9
Certificate of Ownership merging Mandalay Digital Group, Inc. into Neumedia, Inc., dated February 2, 2012. (32)
3.1
Certificate of Incorporation. (2)
3.2
Bylaws. (2)
3.3
Certificate of Amendment to Bylaws. (28)
4.1
Form of Warrant to Purchase Common Stock dated September 14, 2006.
(5)
4.2
Form of Warrant to Purchase Common Stock dated October 12, 2006. (6)
4.3
Form of Warrant to Purchase Common Stock dated December 26, 2006. (7)
4.4
Form of Warrant Issued to David Chazen to Purchase Common Stock dated August 3, 2006. (8)
4.5
Form of Warrant issued to Investors, dated October 23, 2008. (9)
4.6
Warrant dated September 23, 2009 issued to Vivid Entertainment, LLC and related Registration Rights Agreement. (23)
4.7
Form of Warrant issued to Investors, dated June 21, 2010. (25)
4.8
Form of Senior Secured Convertible Note due June 21, 213. (25)
4.9
Amended and Restated Senior Subordinated Secured Note due June 21, 2013, by Twistbox Entertainment, Inc. in favor of ValueAct SmallCap Master Fund, L.P. (25)
4.10
Form of Warrant Relating to Equity Financing Binding Term Sheet, dated as of March 1, 2012 (32)
4.11
Form of Warrant Relating to Equity Financing Binding Term Sheets, dated as of March 5, 2012 (32)
4.12
Amended and Restated Warrant Issue Agreement, dated January 1, 2011. (32)
4.13
Allonge to Warrant, dated January 1, 2011. (32)
5.1
Opinion of Manatt, Phelps & Phillips, LLP regarding the validity of the common stock being registered. **
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. (10†)
10.4
Form of Restricted Stock Agreement. (11)†
10.5
Twistbox 2006 Stock Incentive Plan. (4)†
10.6
Form of Stock Option Agreement for Twistbox 2006 Stock Incentive Plan. (4)†
10.7
Loan Agreement with Trinad Capital Master Fund, Ltd., dated March 20, 2006. (4)†
10.8
Form of Subscription Agreement between the Company and certain investors listed thereto dated September 14, 2006. (5)
10.9
Form of Subscription Agreement between the Company and certain investors listed thereto dated October 12, 2006. (6)
10.10
Series A Convertible Preferred Stock Purchase Agreement dated October 12, 2006 between the Company and Trinad Management, LLC. (6)
10.11
Form of Subscription Agreement between the Company and certain investors listed thereto dated December 26, 2006. (7)
10.12
Form of Subscription Agreement between the Company and certain investors listed thereto. (13)
10.13
Employment Letter, by and between the Company and James Lefkowitz, dated as of June 28, 2007. (14)†
10.14
Salary Reduction Letter by and between Mandalay Media, Inc. and James Lefkowitz, dated March 16, 2009. (11)†
10.15
Securities Purchase Agreement, dated July 30, 2007, by and among Twistbox Entertainment, Inc., the Subsidiary Guarantors and ValueAct SmallCap Master Fund, L.P. (4)
10.16
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)
10.17
Control Agreement, dated July 30, 2007, by and among Twistbox Entertainment. Inc. and ValueAct SmallCap Master Fund, L.P. to East West Bank. (4)
10.18
Trademark Security Agreement, dated July 30, 2007, by Twistbox, in favor of ValueAct SmallCap Master Fund, L.P. (4)
10.19
Copyright Security Agreement, dated July 30, 2007, by Twistbox in favor of ValueAct SmallCap Master Fund, L.P. (4)
10.20
Guaranty given as of February 12, 2008, by Mandalay Media, Inc. to ValueAct SmallCap Master Fund, L.P. (4)
10.21
Termination Agreement, dated as of February 12, 2008, by and between Twistbox Entertainment, Inc. and ValueAct SmallCap Master Fund, L.P. (4)
10.22
Waiver to Guarantee and Security Agreement, dated February 12, 2008, by and between Twistbox Entertainment, Inc. and ValueAct SmallCap Master Fund, L.P. (4)
10.23
Standard Industrial/Commercial Multi-Tenant Lease, dated July 1, 2005, by and between Berkshire Holdings, LLC and The WAAT Corp. (4)
10.24
Letter Agreement, dated May 16, 2006, between The WAAT Corp. and Adi McAbian. (4)†
10.25
Amendment to Employment Agreement by and between Twistbox Entertainment, Inc. and Adi McAbian, dated as of December 31, 2007. (4)†
10.26
Second Amendment to Employment Agreement, dated February 12, 2008, by and between Twistbox Entertainment, Inc. and Adi McAbian. (4)†
10.27
Letter Agreement, dated May 16, 2006 between The WAAT Corp. and Ian Aaron. (4)†
10.28
Salary Reduction Letter by and between Mandalay Media, Inc. and Ian Aaron, dated March 16, 2009. (11)†
10.29
Amendment to Employment Agreement, by and between Twistbox Entertainment, Inc. and Ian Aaron, dated as of December 31, 2007. (4)†
10.30
Second Amendment to Employment Agreement by and between Twistbox Entertainment, Inc. and Ian Aaron, dated February 12, 2008. (4)†
10.31
Employment Agreement, dated May 9, 2006, between Charismatix and Eugen Barteska. (4)†
10.32
Employment Agreement, dated June 5, 2006, between The WAAT Corp. and David Mandell. (4)†
10.33
First Amendment to Employment Agreement, by and between Twistbox Entertainment, Inc. and David Mandell, dated February 12, 2008. (4)†
10.34
Employment Agreement, dated December 11, 2006 between Twistbox and Russell Burke. (4)†
10.35
First Amendment to Employment Agreement by and between Twistbox Entertainment, Inc. and Russell Burke, dated February 12, 2008. (4)†
10.36
Directory Agreement, dated as of May 1, 2003, between Vodafone Global Content Services Limited and The WAAT Corporation. (4)
10.37
Contract Acceptance Notice – Master Global Content Reseller Agreement by Vodafone Hungary Ltd. (4)
10.38
Master Global Content Agency Agreement, effective as of December 17, 2004, between Vodafone Group Services Limited and The WAAT Media Corporation. (4)
10.39
Letter of Amendment, dated February 27, 2007, by and between WAAT Media Corporation and Vodafone UK Content Services Limited. (4)
10.40
Content Schedule, dated December 17, 2004, by and between WAAT Media Corporation and Vodafone Group Services Limited. (4)
10.41
Contract Acceptance Notice – Master Global Content Agency Agreement by Vodafone D2 GmbH. (4)
10.42
Contract Acceptance Notice – Master Global Content Agency Agreement by Vodafone Sverige AB. (4)
10.43
Master Global Content Reseller Agreement, effective January 17, 2005, between Vodafone Group Services Limited and The WAAT Corporation. (4)
10.44
Contract Acceptance Notice – Master Global Content Agency Agreement by Vodafone New Zealand Limited. (4)
10.45
Contract Acceptance Notice – Master Global Content Agency Agreement by Vodafone España, S.A. (4)
10.46
Contract Acceptance Notice – Master Global Content Reseller Agreement by Vodafone UK Content Services LTD. (4)
10.47
Contract Acceptance Notice – Master Global Content Reseller Agreement by VODAFONE-PANAFON Hellenic Telecommunications Company S.A. (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 Belgacom Mobile NV.
(4)
10.50
Content Schedule, dated January 17, 2005, by and between WAAT Media Corporation and Vodafone Group Services Limited. (4)
10.51
Contract Acceptance Notice – Master Global Content Agency Agreement by Swisscom Mobile. (4)
10.52
Linking Agreement, dated November 1, 2006 between Vodafone Libertel NV and Twistbox Entertainment, Inc. (4)
10.53
Agreement, dated as of March 23, 2007, between Twistbox Entertainment, Inc. and Vodafone Portugal – COMUNICAÇÕES PESSOAIS, S.A (4)
10.54
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)
10.55
Partner Agreement, dated August 27, 2007, by and between Vodafone D2 GmbH and Twistbox. (4)
10.56
Letter of Amendment, dated February 25, 2006 by and between WAAT Media Corporation and Vodafone UK Content Services Limited. (4)
10.57
Letter of Amendment, dated August 2007, by and between WAAT Media Corporation and Vodafone UK Content Services Limited. (4)
10.58
Content Schedule, dated December 17, 2004, by and between WAAT Media Corporation and Vodafone Group Services Limited. (4)
10.59
Consolidated financial statements of Twistbox Entertainment, Inc. for the fiscal years ended March 31, 2006 and March 31, 2007. (4)
10.60
Consolidated financial statements of Twistbox Entertainment, Inc. for the six months ended September 20, 2006 and September 30, 2007. (4)
10.61
Stock Purchase Agreement, by and among Mandalay Media, Inc., Jonathan Cresswell, Nathaniel MacLeitch and the shareholders of AMV Holding Limited signatories thereto, dated as of October 8, 2008. (15)
10.62
Amendment to the Stock Purchase Agreement, between Mandalay Media, Inc. and Nathaniel MacLeitch as the Sellers' Representative, dated as of October 23, 2008. (9)
10.63
Employment Agreement, by and between AMV Holding Limited and Nathaniel MacLeitch, dated as of October 23, 2008. (9)†
10.64
Employment Agreement, by and between AMV Holding Limited and Jonathan Cresswell (a/k/a Jack Cresswell), dated as of October 23, 2008. (9)†
10.65
Securities Purchase Agreement, by and among Mandalay Media, Inc. and the investors set forth therein, dated as of October 23, 2008. (9)
10.66
Note, dated October 23, 2008, issued by Mandalay Media, Inc. to Nathaniel MacLeitch, as the Sellers' Representative. (9)
10.67
Management Agreement dated September 14, 2006 between the Company and Trinad Management, LLC. (5)
10.68
Commercial Lease Agreement, dated as of March 1, 2007, between Trinad Management LLC and Mediavest, Inc.
(16)
10.69
First Amendment to Promissory Note, dated August 14, 2009, issued by Mandalay Media, Inc. to Nathaniel MacLeitch, as the Sellers' Representative. (21)
10.70
Severance and Release Agreement, by and among Mandalay Media, Inc., Twistbox Entertainment, Inc. and Ian Aaron, dated as of October 7, 2009.
(22)†
10.71
Waiver to Senior Secured Note by and among Mandalay Media, Inc., Twistbox Entertainment, Inc. and ValueAct SmallCap Master Fund, L.P., dated as of January 25, 2010.
(24)
10.72
Agreement, dated as of June 21, 2010, between ValueAct SmallCap Master Fund, L.P., NeuMedia, Inc., Jonathan Cresswell, Nathaniel MacLeitch, Robert Ellin, Trinad Management, LLC, Trinad Capital Master Fund, Ltd. and the Guber Family Trust. (25)
10.73
Mutual Release, dated as of June 21, 2010, among ValueAct SmallCap Master Fund, L.P., Antiphony (Management Holdings) Limited, Nathaniel MacLeitch, Jonathan Cresswell, NeuMedia, Inc., Twistbox Entertainment, Inc., Peter Guber, Robert Ellin, Paul Schaeffer, Adi McAbian, Richard Spitz, Ray Schaaf, Keith McCurdy, Russell Burke, James Lefkowitz and Trinad Management.
(25)
10.74
Subordination Agreement, dated as of June 21, 2010, by and between Trinad Capital Master Fund, Ltd., and ValueAct SmallCap Master Fund, L.P., and each of NeuMedia, Inc. and Twistbox Entertainment, Inc. (25)
10.75
Deed Poll Release, dated as of June 21, 2010, between NeuMedia, Inc., Twistbox Entertainment, Inc., James Lefkowitz and Russell Burke. (25)
10.76
Non-Competition Agreement, dated as of June 21, 2010, among NeuMedia, Inc., Antiphony (Management Holdings) Limited,  Jack Cresswell and Nate MacLeitch. (25)
10.77
Earn-Out Termination Letter Agreement, dated as of June 21, 2010, among ValueAct SmallCap Master Fund, L.P., NeuMedia, Inc., Jonathan Cresswell, Nathaniel MacLeitch and certain other parties. (25)
10.78
Amended and Restated Guaranty, dated as of June 21, 2010, by NeuMedia, Inc. to ValueAct SmallCap Master Fund, L.P. (25)
10.79
Letter Agreement, dated as of June 21, 2010, between ValueAct SmallCap Master Fund, L.P., NeuMedia, Inc., Rob Ellin and Trinad Management, LLC. (25)
10.80
Amended and Restated Guarantee and Security Agreement, dated as of June 21, 2010, among Twistbox Entertainment, Inc., NeuMedia, Inc. and each of its subsidiaries identified on Schedule I as being a subsidiary guarantor, the investors party thereto and ValueAct SmallCap Master Fund, L.P. (25)
10.81
Guarantee and Security Agreement, dated as of June 21, 2010, among Twistbox Entertainment, Inc., NeuMedia, Inc., each of the subsidiaries thereof party thereto, the investors party thereto and Trinad Capital Management, LLC. (26)†
10.82
Confidential Separation, Transition and Release Agreement, dated as of February 22, 2011, by and between Ray Schaaf and NeuMedia, Inc. (26)†
10.83
Restricted Stock Agreement, dated as of February 22, 2011, by and between Ray Schaaf and NeuMedia, Inc. (26)†
10.84
Confidential Separation, Transition and Release Agreement, dated as of February 21, 2011, by and between Russell Burke and NeuMedia, Inc. (26)†
10.85
Non-Qualified Stock Option Agreement, dated as of February 21, 2011, by and between Russell Burke and NeuMedia, Inc. (26)†
10.86
Amendment to Employment Letter Agreement, dated as of February 21, 2011, by and between James Lefkowitz and NeuMedia, Inc. (26)†
10.87
Non-Qualified Stock Option Agreement, dated as of February 21, 2011, by and between James Lefkowitz and NeuMedia, Inc. (26)†
10.88
Subordinated Convertible Promissory Note, dated December 23, 2011, made by NeuMedia, Inc. in favor of Adage Capital Management L.P. (29)
10.89
Warrant, dated December 23, 2011, made by NeuMedia, Inc. in favor of Adage Capital Management L.P. (29)
10.90
Letter Agreement, dated December 23, 2011, made by and between NeuMedia, Inc. and Adage Capital Management L.P. (29)
10.91
Letter Agreement, dated December 28, 2011, made by and between NeuMedia, Inc. and Trinad Management, LLC. (29)
10.92
Second Amended and Restated Senior Subordinated Secured Note due June 21, 2013, made by Twistbox Entertainment, Inc. in favor of Taja, LLC. (29)
10.93
Restricted Stock Agreement, dated January 1, 2011. (32)
10.93
Employment Agreement, dated as of December 28, 2011, by and between NeuMedia, Inc. and Peter Adderton.
(27)†
10.94
Asset Purchase Agreement, dated as of December 28, 2011, by and among Digital Turbine, Inc., Digital Turbine Group, LLC, Peter Adderton and Fred Golding.
(27)
10.95
Executive Chairman Agreement, dated as of December 28, 2011, by and between NeuMedia, Inc. and Robert Ellin.
(27) †
10.96
Convertible Note Financing Binding Term Sheet, effective March 1, 2012 with TAJA, LLC. (32)
10.97
Convertible Note Financing Binding Term Sheet, effective March 1, 2012 with Adage Capital Partners, L.P. (32)
10.98
Form of Equity Financing Binding Term Sheet, effective as of March 1, 2012 (32)
10.99
Form of Equity Financing Binding Term Sheet, dated as of March 5, 2012 (32)
10.101
Form of Indemnification with Directors and Executive Officers. (30) †
10.102
Restricted Stock Agreement, dated December 28, 2011, between Mandalay Digital Group, Inc. and Peter Adderton, for 9,037,500 shares of common stock. (31) †
10.103
Restricted Stock Agreement, dated December 28, 2011, between Mandalay Digital Group, Inc. and Robert Ellin, for 3,600,000 shares of common stock. (31) †
10.104
Restricted Stock Agreement, dated December 28, 2011 between Mandalay Digital Group, Inc. and Robert Ellin, for 3,400,000 shares of common stock. (31) †
10.105
Restricted Stock Agreement, dated December 28, 2011, between Mandalay Digital Group, Inc. and Robert Ellin, for 1,000,000 shares of common stock. (31) †
10.106
Amendment to Restricted Stock Agreement, dated May 18, 2012, between Mandalay Digital Group, Inc. and Peter Adderton. (31) †
10.107
Amendment to Restricted Stock Agreements, dated May 18, 2012, between Mandalay Digital Group, Inc. and Robert Ellin. (31) †
10.108
Amended and Restated 2011 Equity Incentive Plan of Mandalay Digital Group, Inc. (31)
10.109
Amended and Restated 2011 Equity Incentive Plan Notice of Grant and Restricted Stock Agreement of Mandalay Digital Group, Inc. (31)
10.110
Amended and Restated 2011 Equity Incentive Plan Notice of Grant and Stock Option Agreement of Mandalay Digital Group, Inc. (31)
10.111
Form of Equity Financing Binding Term Sheet, dated as of June 7, 2012. (32)
21
List of Subsidiaries. (32)
23.1
Consent of SingerLewak LLP. *
23.2
Consent of Manatt, Phelps & Phillips, LLP (included in Exhibit 5.1 filed herewith)
24.1
Powers of Attorney (included in the signature pages to this registration statement).
*
Filed herewith.
**
To be filed by amendment.
†
Management or compensatory plan or arrangement.
(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 the Registrant's Current Report on Form 8-K (File No. 000-10039), filed with the Commission
on October 27, 2008.
(10)
Incorporated by reference to the Registrant's Current Report on Form 8-K (File No. 000-10039), filed with the Commission on
March 28, 2008.
(11)
Incorporated by reference to the Registrant's Current Report on Form 8-K (File No. 000-10039), filed with the Commission
on March 20, 2009.
(12)
Incorporated by reference to the Registrant's Current Report on Form 8-K (File No. 000-10039), filed with the Commission
on March 23, 2006.
(13)
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.
(14)
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.
(15)
Incorporated by reference to our Current Report on Form 8-K (File No. 000-10039 ), filed with the Commission on October 15,
2008.
(16)
Incorporated by reference to our Registrant's Transition Report on Form 10-KT (File No. 000-10039), filed with
the Commission on July 15, 2008.
(17)
Incorporated by reference to our Current Report on Form 8-K (File No. 000-10039 ), filed with the Commission on May 16, 2007.
(18)
Incorporated by reference to our Current Report on Form 8-K (File No. 000-10039 ), filed with the Commission on June 2, 2008.
(19)
Incorporated by reference to our Current Report on Form 8-K (File No. 000-10039 ), filed with the Commission on February 23,
2009.
(20)
Incorporated by reference to our Current Report on Form 8-K (File No. 000-10039 ), filed with the Commission on June 4, 2009.
(21)
Incorporated by reference to our Quarterly Report on Form 10-Q (File No. 000-10039 ), filed with the Commission on August 14,
2009.
(22)
Incorporated by reference to our Current Report on Form 8-K (File No. 000-10039 ), filed with the Commission on October 14,
2009.
(23)
Incorporated by reference to our Quarterly Report on Form 10-Q (File No. 000-10039 ), filed with the Commission on November
16, 2009.
(24)
Incorporated by reference to our Current Report on Form 8-K (File No. 000-10039 ), filed with the Commission on January 28,
2010.
(25)
Incorporated by reference to our Current Report on Form 8-K (File No. 000-10039 ), filed with the Commission on June 23, 2010.
(26)
Incorporated by reference to our Quarterly Report on Form 10-Q (File No. 000-10039 ), filed with the Commission on February
22, 2011.
(27)
Incorporated by reference to our Current Report on Form 8-K (File No. 000-10039 ), filed with the Commission on January 4,
2012.
(28)
Incorporated by reference to our Current Report on Form 8-K (File No. 000-10039 ), filed with the Commission on February 7,
2012.
(29)
Incorporated by reference to our Quarterly Report on Form 10-Q (File No. 000-10039 ), filed with the Commission on February
24, 2012.
(30)
Incorporated by reference to our Current Report on Form 8-K (File No. 000-10039 ), filed with the Commission on May 10, 2012.
(31)
Incorporated by reference to our Current Report on Form 8-K (File No. 000-10039 ), filed with the Commission on May 30, 2012.
(32)
Incorporated by reference to Annual Report on Form 10-K (File No. 000-10039), filed with the Commission
on June 29, 2012.