APPS 10-K Fiscal year ended March 31, 2011

Financial Condition

Assets

Our current assets related to continuing operations totaled $3.8 million and $5.8 million at March 31, 2011 and March 31, 2010, respectively, while current assets including discontinued operations were $3.8 million and $13.2 million, respectively. Total assets related to continuing operations were $14.2 million and $22.8 million at March 31, 2011 and March 31, 2010, respectively, while total assets including discontinued operations were $14.2 million and $46.8 million, respectively. The decrease in current assets is primarily due to lower accounts receivable balances and prepayments. The decrease in total assets is primarily due to the impairment charge recorded against goodwill and intangibles assets, as well as the movement in accounts receivable and prepayments.

Liabilities and Working Capital

At March 31, 2011, our current and total liabilities related to continuing operations were $7.4 million, compared to $34.0 million at March 31, 2010. Total liabilities including discontinued operations were $7.4 million and $38.7 million, respectively.  The change in liabilities was related to a significant reduction in accrued license fees, due mainly to resolution of discussions with providers, and accrued compensation.  Additionally, debt was reduced due to the restructure of the Value Act Note.  The Company had negative working capital of $3.6 million at March 31, 2011 and $25.5 million at March 31, 2010.

Liquidity and Capital Resources

		Twelve Months Ended March 31,
		2011				2010
		(In thousands)
Consolidated Statement of Cash Flows Data:
Capital expenditures		$	88			$	433
Cash flows used in operating activities			1,909				3,470
Cash flows used in investing activities			1,635				-
Cash flows provided by financing activities			(2,500	)			-

Twistbox has incurred losses and negative annual cash flows since inception, although the operating loss has narrowed significantly in fiscal year 2011.

The primary sources of liquidity have historically been issuance of common and preferred stock, and in the case of Twistbox, borrowings under credit facilities with aggregate proceeds of $16.5 million. In the future, we anticipate that our primary sources of liquidity will be dependent on one or more of the following:

·

restructuring the Company and reducing ongoing operating expenses

·

settling certain payables for shares of the Company’s common stock

·

entering into settlements with two strategic partners that allow the Company to reduce royalty payments

·

seeking to raise additional equity capital

·

seeking strategic acquisitions

See further discussion on the Company ’ s ability to continue as going concern in Note 2 of the accompanying financial statements located in Item 8 herein.

Operating Activities

In the year ended March 31, 2011, we used $1.0 million of net cash, including an increase in accounts payable and other liabilities of $1.5 million, flowing from the loss excluding impairment charge of $6.0 million, offset by non-cash stock based compensation and depreciation and amortization. In the year ended March 31, 2010, we used $4.0 million of net cash. This primarily related to the net loss excluding impairment charge of $38.4 million, and reductions in accounts payable/accrued license fees/accrued compensation/other liabilities of $3.5 million, partially offset by non-cash stock based compensation and depreciation and amortization included in the net loss.

As of March 31, 2011, the Company had approximately $0.8 million of cash attributed to 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 these sources are insufficient to satisfy our cash requirements, we may seek to sell additional debt securities or additional equity securities or to obtain a credit facility. The sale of convertible debt securities or additional equity securities could result in additional dilution to our stockholders. The incurrence of increased indebtedness would result in additional debt service obligations and could result in additional operating and financial covenants that would restrict our operations. In addition, there can be no assurance that any additional financing will be available on acceptable terms, if at all.

Debt obligations include interest payments under the Senior Debt facility, and also under the ValueAct Note. Under both facilities the Company may elect to add interest to the principal, until 18 months following June 21, 2010, with the full amount payable at the end of the term. The Company’s operating lease obligations include non-cancelable operating leases for the Company’s office facilities in several locations, expiring in various years through 2012.

Off-Balance Sheet Arrangements

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

Stock Sales and Liquidity

In September 2009, the Company granted warrants to purchase 1,200,000 shares of common stock of the Company a vendor. The warrants are exercisable at $1.25 per share, through September 23, 2014 and were valued at $134,000 at the time of issue. In January 2011, the Company amended the warrants to increase the number of shares of common stock underlying the warrants to 1,500,000. The amended warrants are exercisable at $0.25 per share, through September 23, 2014 and were valued at $174,000. In addition and as part of the amended agreement, the Company issued 2,500,000 shares of common stock to the vendor at $0.29 per share. The shares issued were valued at $725,000 at the time of issue.

In June 2010, the Company sold and issued $1.5 million and $1.0 million of Senior Secured Convertible Notes due June 21, 2013 to Trinad Capital Master Fund, Ltd. and the Guber Family Trust, respectively (the “Senior Secured Notes”).  The 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 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 Senior Secured Notes be added to the principal due under the Senior Secured Notes. The accrued and unpaid principal and interest due on the 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 Senior Secured Notes are secured by a first lien on substantially all of the assets of the Company and its subsidiaries. The Senior Secured Notes are expressly senior in right of payment to a note that had been outstanding prior to the date on which the Senior Secured Notes were issued and that was amended and restated on such date. 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.  Trinad Capital Master Fund, Ltd. and the Guber Family Trust received Warrants with five-year terms to purchase 5,000,000 and 3,333,333 shares of common stock of the Company, respectively.

In connection with the restructuring of the Company described above, on June 21, 2010, 562,000 shares of common stock of the Company held by ValueAct were cancelled, and 3,541,000 shares of common stock of the Company held by certain founders of AMV were acquired by the Company at a price of $0.02 per share.1,770,713 of the repurchased shares were retired and 1,770,287 of the repurchased shares are being held in treasury. In addition, warrants to purchase 2,185,000 shares of common stock of the Company held by ValueAct were cancelled.

In August 2010, the Company issued 500,000 shares of common stock to Paul Schaeffer, a director of the Company.

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.

In February 2011, the Company issued 300,000 shares of restricted common stock to Ray Schaaf, a former officer and director of the Company, at a purchase price of $0.25 per share.

In February 2011, Russell Burke, our former Chief Financial Officer, agreed to cancel 300,000 shares underlying an option to purchase 350,000 shares of common stock of the Company, and the Company granted Mr. Burke an option to purchase 300,000 shares of the Company’s common stock at an exercise price of $0.25 per share.

In February 2011, David Mandell, our Corporate Secretary and General Counsel of Twistbox, agreed to cancel 400,000 shares underlying an option to purchase 450,000 shares of common stock of the Company, and the Company granted Mr. Mandell an option to purchase 400,000 shares of the Company’s common stock at an exercise price of $0.25 per share.

In February 2011, James Lefkowitz, our Chief Operating Officer, agreed to cancel an option to purchase 500,000 shares of common stock of the Company, and the Company granted Mr. Lefkowitz an option to purchase 500,000 shares of the Company’s common stock at an exercise price of $0.25 per share.

In March 2011, the Company issued an aggregate of 4,800,000 shares of common stock in private placements to (1) a licensor of content to the Company as payment for past due license fees and amounts for related claims, and (2) a service provider to the Company as payment for past services to the Company.

In March 2011, the Company issued warrants to purchase 500,000 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 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) a consultant for services.

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 options to purchase 150,000 shares of the Company’s common stock at an exercise price of $0.47 per share to an advisory board member for consulting services.

Revenues

The discussion herein regarding our future operations pertain to the results and operations of Twistbox. 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 few companies are capable of. We also believe that leveraging 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 to continue to expand our ability to bill 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 will 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 our March quarter. For a variety of reasons, we may experience seasonal sales decreases during the summer, particularly in Europe, which is predominantly reflected in our September quarter. In addition to these possible seasonal patterns, our revenues may be impacted by 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 3 rd 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.

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 consumers. The process is made more complex by the need to deliver content on multiple carriers platforms and across a large number of different handsets.

Sales and Marketing .   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 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.

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 September 2009, the FASB issued Update No. 2009-13, Multiple-Deliverable Revenue Arrangements —a consensus of the FASB Emerging Issues Task Force ” (ASU 2009-13). It updates the existing multiple-element revenue arrangements guidance currently included under ASC 605-25, which originated primarily from the guidance in EITF Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables” (EITF 00-21). The revised guidance primarily provides two significant changes: (1) eliminates the need for objective and reliable evidence of the fair value for the undelivered element in order for a delivered item to be treated as a separate unit of accounting, and (2) eliminates the residual method to allocate the arrangement consideration. In addition, the guidance also expands the disclosure requirements for revenue recognition. ASU 2009-13 became effective for the first annual reporting period beginning on or after June 15, 2010, which was our year ended March 31, 2011. The adoption of this standard update did not impact the Company’s consolidated financial statements.

In October 2009, the FASB concurrently issued ASU No. 2009-14, Software (Topic 985): Certain Revenue Arrangements That Include Software Elements (a consensus of the FASB Emerging Issues Task Force). This new guidance amends the scope of existing software revenue recognition accounting. Tangible products containing software components and non-software components that function together to deliver the product's essential functionality would be scoped out of the accounting guidance on software and accounted for based on other appropriate revenue recognition guidance. For the Company, this guidance is effective for all new or materially modified arrangements entered into on or after January 1, 2011, which was our year ended March 31, 2011. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

New 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 June 1, 2011. The Company is currently evaluating this guidance, but does not expect its adoption will 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 June 1, 2011. The Company is currently evaluating this guidance, but does not expect its adoption will 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 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.

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.

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.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable as we are a smaller reporting company.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements required by Item 8 are submitted in a separate section of this report, beginning on Page F-1, and are incorporated herein and made apart hereof.

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

None.

ITEM 9A CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information that we are required to file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Our principal executive officer and principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Annual Report on Form 10-K, have concluded that, based on such evaluation, our disclosure controls and procedures were ineffective as of March 31, 2011 because of the material weaknesses described below.

Management’s Report on Internal Control Over Financial Reporting

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

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

Our management assessed the effectiveness of our internal controls over financial reporting as of March 31, 2011 based on the framework in Internal Control-Integrated Framework , published by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  Based on our assessment, we have concluded that our internal controls over financial reporting were not effective as of March 31, 2011 because of the material weaknesses identified below.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a more than remote likelihood that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

During management’s annual review of our internal control over financial reporting, we determined the following processes contain material weaknesses as of March 31, 2011:

Maintenance of Corporate Records and Contracts

Management did not maintain sufficient records of signed and approved records, contracts and board minutes. Board minutes were not always prepared and approved on a timely basis and signed and executed versions were not readily available.  Additionally, management does not have a policy in place to track board minutes to ensure completeness that all board minutes have been prepared.

Management also did not maintain a systematic process for managing and controlling contracts such as corporate governance, financing and employee agreements, signed and executed stock option agreements and amendments, to ensure they are authorized timely and that the financial statement effect is properly recognized in the general ledger.

Financial Close and Reporting Process

Management did not maintain adequate resources to ensure a complete and timely close of the general ledger which resulted in an excessive number of post-closing journal entries.  The post-closing entries included, but were not limited to, entries affecting accruals and liabilities, equity transactions, accounts receivable, amortization of intangible assets and various reclassifications between assets and liabilities.

Management does not believe that any of our annual or interim financial statements issued to-date contain a material misstatement as a result of the aforementioned weaknesses in our internal controls.  However, these material weaknesses related to the entity as a whole affect all of our significant accounts and could result in a material misstatement to our annual or interim consolidated financial statements that would not be prevented or detected.

Our management is in the process of identifying the steps necessary to address the material weaknesses existing as of March 31, 2011 described above, as follows:

(1)

Hiring additional accounting personnel with adequate experience, skills and knowledge to assist in the closing of our financial statements and further segregate duties of financial personnel;

(2)

Documenting, to standards established by senior accounting personnel and the principal accounting officer, the review and analysis and related conclusions with respect to complex, non-routine transactions; and

(3)

Creating policy and guidelines to streamline  the corporate reporting process , as well as managing non-routine transactions.

The Company is developing the remediation plans for the material weaknesses identified above. These remediation efforts are expected be implemented during the fiscal year ending March 31, 2012.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the company’s registered public accounting firm pursuant to rules of the SEC that permit the company to provide only management’s report in this annual report.

Changes in Internal Controls over Financial Reporting

There were no changes in our internal controls over financial reporting or in other factors identified in connection with the evaluation required by Exchange Act Rules 13a-15(d) or 15d-15(d) that occurred during the fiscal period ended March 31, 2011 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The following table sets forth our directors and executive officers as of July 14, 2011:

Name		Age		Position(s)
James Lefkowitz		52		Chief Operating Officer
David Mandell		50		Executive Vice President, General Counsel of Twistbox and Corporate Secretary of NeuMedia, Inc.
Peter Guber		69		Co-Chairman
Robert S. Ellin		46		Co-Chairman
Paul Schaeffer		64		Director

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

James Lefkowitz. Mr. Lefkowitz joined the Company as President on June 28, 2007, and was named Chief Operating Officer on October 27, 2009. He is a 20 year entertainment industry veteran with a wide range of experience in law, business, finance, film and television. Mr. Lefkowitz joined NeuMedia from Cantor Fitzgerald (Cantor), where he was managing director of Cantor Entertainment. Prior to Cantor, Mr. Lefkowitz was an agent for eight years at Creative Artists Agency, the premiere talent agency in Hollywood, where he represented actors, writers and directors. He began his career as an attorney at the law firm of Manatt, Phelps, and Phillips in Los Angeles. He subsequently worked for six years as a business affairs executive at Walt Disney Studios and Touchstone Pictures. Mr. Lefkowitz is a graduate of the University of Michigan School of Business Administration and Michigan Law School.

David Mandell. Mr. Mandell has served as Executive Vice President, General Counsel and Corporate Secretary of Twistbox since June 2006, and was recently appointed Corporate Secretary of NeuMedia. Mr. Mandell is responsible for all corporate governance matters, including those related to all foreign and domestic subsidiaries and affiliated companies. Prior to joining Twistbox, Mr. Mandell was Senior Vice President, Business/Legal Affairs of Gemstar-TV Guide International, Inc. (now ROVI Corporation), which was a NASDAQ publicly traded company that engaged in the development, licensing, marketing, and distribution of products and services for TV guidance and home entertainment needs of TV viewers worldwide. From October 1998 to January 2003, Mr. Mandell served as Vice President, Business/Legal Affairs of Playboy Entertainment Group, Inc., a subsidiary of Playboy Enterprises, Inc., which owns film and television properties (Playboy Films, Playboy TV, Spice Networks), related home video imprints, and online content and gaming operations. Mr. Mandell received a B.A. from the University of Florida and a J.D. from the University of Miami, School of Law.

Peter Guber .  Mr. Guber has served as Co-Chairman of our Board of Directors since August 2007.  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 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.

Robert S. Ellin. Mr. Ellin has been a member of our Board of Directors and our Co-Chairman since February 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 currently 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 has served on our Board of Directors since August 2007 as Vice-Chairman.  He is Vice Chairman, Chief Operating Officer and Co-Founder of Mandalay Entertainment. Along with Peter Guber, Mr. Schaeffer is responsible for all aspects of the motion picture and television business, focusing primarily on the corporate and business operations of those entities. Prior to forming Mandalay Entertainment, Mr. Schaeffer was the Executive-Vice President of Sony Pictures Entertainment, overseeing the worldwide corporate operations for SPE including Worldwide Administration, Financial Affairs, Human Resources, Corporate Affairs, Legal Affairs and Corporate Communications. During his tenure, Mr. Schaeffer also had supervisory responsibility for the $105 million rebuilding and renovation of Sony Pictures Studios. Mr. Schaeffer is a member of the Academy of Motion Pictures, Arts, & Sciences. A veteran of 20 years of private law practice, Mr. Schaeffer joined SPE from Armstrong, Hirsch and Levine, where he was a senior partner working with corporate entertainment clients. He spent two years as an accountant with Arthur Young & Company in Philadelphia. He graduated from the University of Pennsylvania Law School and received his accounting degree from Pennsylvania State University. 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 Childrens Hospital Los Angeles, as well as a member of its Audit Committee, and member of its Compensation Committee and Executive Committee for more than five years.

Audit Committee

The Company’s 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 the company’s auditors, and monitors the Company’s compliance with its obligations under the assessment of internal control over financial reporting.

Nominating Committee

The entire Board of Directors currently operates as our Nominating Committee.

Code of Ethics

We intend to establish a code of ethics.

Section 16(A) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our officers, directors, and persons owning more than ten percent of a registered class of our equity securities (“ten percent stockholders”) to file reports of ownership and changes of ownership with the SEC. 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, 2011, 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 Guber and the Guber Family Trust with respect to two transactions; (ii) one Form 4 report was not timely filed by Trinad Capital Master Fund, Ltd, Trinad Advisors II, LLC, Trinad Capital L.P., Trinad Management, LLC and Robert Ellin with respect to two transactions; and (iii) two Form 4 reports were not timely filed by David E. Smith with respect to sixteen transactions.

ITEM 11. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth information concerning the total compensation paid during our fiscal years ended March 31, 2010 and March 31, 2011, for our principal executive officer and two most highly compensated executive officers

Position		Period		Salary				Bonus				Stock (1)				Option				All Other				Total
				($)				($)				($)				($)				($)				($)
Ray Schaaf		Year ended March 31, 2011			285,960				125,000				75,000				-				30,268				516.228
President		Year ended March 31, 2010			105,128				-				-				-				61,363				166,491
James Lefkowitz		Year ended March 31, 2011			226,403				-				-								28,856				255,259
Chief Operations Officer		Year ended March 31, 2010			218,750				37,500				-				-				28,682				284,932
David Mandell		Year ended March 31, 2011			332,600				-				-				-				16,251				348,851
EVP, General Counsel of Twistbox and Corporate Secretary of NeuMedia		Year ended March 31, 2010			269,596								-				-				16,828				286,424