Mandalay Digital Group, Inc. - FORM 10-Q - XML - IDEA: XBRL DOCUMENT - February 24, 2012

Operating Lease Obligations

The Company leases office facilities under non-cancelable operating leases expiring in various years through 2012.

Following is a summary of future minimum payments under initial terms of leases at December 31, 2011:

These amounts do not reflect future escalations for real estate taxes and building operating expenses.  Rental expense for continuing operations amounted to $133 and $284, respectively, for the periods ended December 31, 2011 and 2010.

Other Obligations

As of December 31, 2011, the Company was obligated for payments under various distribution agreements, equipment lease agreements, employment contracts and the management agreement described in Note 11 with initial terms greater than one year at December 31, 2011.  As of December 31, 2011, accrued management fees payable to Trinad Management are $180. Annual payments relating to these commitments are as of

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 December 31, 2011 the Company has accrued $290, which is included in Accounts Payable on the balance sheet.

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.