10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x Quarterly Report Pursuant to Section13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2008 or

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________ to __________

Commission File Number: 001-12555

New Motion, Inc.

(name of small business issuer in its charter)

doing business as

 

(Exact name of small business issuer as specified in its charter)

Delaware	06-1390025
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

42 Corporate Park, Suite 250, Irvine, California 92606

(Address of principal executive offices and ZIP Code)

(949) 777-3700

(Registrant’s telephone number, including area code)

  (Former name, former address, and former fiscal year, if changed from last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90days.

Yes x    No o

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 Exchange Act.

Large accelerated filer  ¨	Accelerated filer   ¨
Non-accelerated filer   ¨(Do not check if a smaller reporting company)	Smaller reporting company   x

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

Yes o  No x

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities and Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.   Yes x    No o

As of May 16, 2008, the Company has 22,560,064 shares of Common Stock, $.01 par value, outstanding.

New Motion, Inc.

doing business as

Atrinsic 

Table of Contents

	Page
Table of Contents	1
PART I - FINANCIAL INFORMATION	3
Item 1. Financial Statements	3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3. Quantitative and Qualitative Disclosures About Market Risk	41
Item 4T. Controls and Procedures	41
PART II - OTHER INFORMATION	43
Item 1A. Risk Factors	43
Item 6. Exhibits	49

1

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report on Form 10-Q, including the sections entitled “Cautionary Statements and Risk Factors,” “Management’s Discussion and Analysis” and “Description of Business,” contain “forward-looking statements” that include information relating to future events, future financial performance, strategies, expectations, competitive environment, regulation and availability of resources of New Motion, Inc. (“New Motion,” “Atrinsic” or the “Company”, see below for further discussion on corporate name). These forward-looking statements include, without limitation, statements regarding: proposed new services; the Company’s expectations concerning litigation, regulatory developments or other matters; statements concerning projections, predictions, expectations, estimates or forecasts for the Company’s business, financial and operating results and future economic performance; statements of management’s goals and objectives; and other similar expressions concerning matters that are not historical facts, but based on the estimations and expectations of management. Words such as “may,” “will,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes” and “estimates,” and similar expressions, as well as statements in future tense, identify forward-looking statements.

Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by which, that performance or those results will be achieved. Forward-looking statements are based on information available at the time they are made and/or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by our forward-looking statements. Important factors that could cause these differences include, but are not limited to:

·     limited operating history in some of our commercial activities;

·     our reliance on wireless carriers and aggregators to facilitate billing and collections for our subscription net sales;

·     the highly competitive market in which we operate;

·     our ability to develop new applications and services;

·     protection of our intellectual property rights;

·     hiring and retaining key employees;

·     successful completion, and integration of acquisitions;

·     increased costs and requirements encountered as a public company; and

·     other factors discussed under the headings “Risk Factors,” “Management’s Discussion and Analysis” and “Description of Business.”

Forward-looking statements speak only as of the date they are made. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

2

NEW MOTION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

	March 31,			December 31,
	2008			2007
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	16,932		$	987
Marketable securities		13,047			9,463
Accounts receivable, trade, net of allowance for doubtful accounts of $1,304 at March 31, 2008 and $565 at December 31, 2007		18,856			8,389
Other receivable					722
Prepaid income taxes		609			780
Prepaid expenses and other current assets		1,756			325
Deferred income taxes		1,603			451
TOTAL CURRENT ASSETS		52,803			21,117
PROPERTY AND EQUIPMENT		3,104			860
OTHER ASSETS
Marketable securities - non current		6,625			-
Goodwill		97,980			-
Other intangibles, net		41,298			599
Acquisition costs, net		-			1,023
Deposits and other assets		57			57
Deferred income taxes - non current		-			307
TOTAL ASSETS	$	201,867		$	23,963
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$	10,764		$	3,257
Accrued expenses		7,770			3,720
Short term notes payable		588			89
Merger related restructuring charge accrual		3,628			-
Line of credit		-			10
TOTAL CURRENT LIABILITIES		22,750			7,076
LONG TERM LIABILITIES
Deferred income taxes - non current		13,773			-
Notes payable		39			22
TOTAL LIABILITIES		36,562			7,098
Minority interest in consolidated joint venture		254			283
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock - par value $.01, 100,000,000 authorized, 22,505,542 and 12,021,184 issued and outstanding, respectively		225			120
Additional paid-in capital		168,366			19,583
Accumulated other comprehensive loss		(190	)		(38	)
Accumulated deficit		(3,350	)		(3,083	)
TOTAL STOCKHOLDERS' EQUITY		165,051			16,582
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	201,867		$	23,963

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

3

NEW MOTION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except share and per share amounts)

	Three Months Ended
	March 31,
	2008			2007
NET SALES	$	28,738		$	5,642
COST OF SALES		14,486			726
GROSS PROFIT		14,252			4,916
EXPENSES
Selling and marketing		6,573			2,987
General and administrative		8,064			2,200
Restructuring charge		240			-
		14,877			5,187
LOSS FROM OPERATIONS		(625	)		(271	)
OTHER EXPENSE (INCOME)
Interest income and dividends		(292	)		(79	)
Realized losses (gains) on marketable securities		53			-
Interest expense		7			-
Other non-operating expense		77			21
		(155	)		(58	)
LOSS BEFORE PROVISION FOR INCOME TAXES		(470	)		(213	)
(BENEFIT) PROVISION FOR INCOME TAXES		(174	)		4
LOSS BEFORE MINORITY INTEREST		(296	)		(217	)
MINORITY INTEREST, NET OF (BENEFIT) PROVISION FOR INCOME TAX OF $27		(29	)		155
NET LOSS	$	(267	)	$	(372	)
LOSS PER SHARE:
Basic	$	(0.01	)	$	(0.04	)
Diluted	$	(0.01	)	$	(0.04	)
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic		18,932,871			9,483,004
Diluted		18,932,871			9,483,004

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

4

NEW MOTION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

	Three Months Ended
	March 31,
	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(267	)	$	(372	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Allowance for doubtful accounts		(5	)		(563	)
Depreciation and amortization		565			194
Stock-based compensation expense		694			194
Deferred income taxes		180			-
Net (gains) losses on sale of marketable securities		53			-
Minority interest in net income of consolidated jointventure, net of income taxes		(29	)		155
Changes in operating assets and liabilities:
Accounts receivable		1,767			463
Other receivable		722			-
Prepaid expenses and other current assets		(527	)		(155	)
Prepaid income taxes/taxes payable		(202	)		(192	)
Deposits and other assets		-			1
Accounts payable		568			(500	)
Other, principally accrued expenses		(273	)		408
Net cash provided by (used in) operating activities		3,246			(367	)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash expended for Mobliss transaction		-			(36	)
Purchases of securities		(4,972	)		-
Proceeds from sales of securities		7,706			-
Net cash received in merger transaction with Traffix, Inc.		12,398			(56	)
Cash paid for acquisition related costs, parent		(1,823	)		-
Capital expenditures		(383	)		-
Net cash provided by (used in) investing activities		12,926			(92	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of notes payable		(171	)		(530	)
Expenditures for equity financing		-			(363	)
Issuance of warrants		-			57
Issuance of stock		-			18,471
Proceeds from exercise of stock options		36			-
Net cash (used in) provided by financing activities		(135	)		17,635
Effect of exchange rate changes on cash and cash equivalents		(92	)		-
NET INCREASE IN CASH AND CASH EQUIVALENTS		15,945			17,176
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		987			544
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	16,932		$	17,720

See Notes 1, 2, 3 and 4 for a summary of noncash investing and financing activities.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

5

NEW MOTION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2008

(UNAUDITED)

(in thousands, except share amounts)

								Accumulated
						Additional		Other						Total
	Common Stock					Paid-in		Comprehensive			Accumulated			Stockholders'
	Shares			Amounts		Capital		Loss			Deficit			Equity
Balance, December 31, 2007	12,021,184		$	120	$	19,583	$	(38	)	$	(3,083	)	$	16,582
Net loss for the three months ended March 31, 2008											(267	)		(267	)
Unrealized losses on available-for-sale securities								(56	)					(56	)
Reclassification adjustment for losses realized in net income								55						55
Foreign Currency Translation adjustment								(151	)					(151	)
Comprehensive loss														(419	)
Stock-based compensation expense						694								694
Stock option exercises	75,000			1		35								36
Common stock issued in connection with terms of current year merger	10,409,392			104		148,054								148,158
Miscellaneous Share Adjustment	(34	)
Balance, March 31, 2008	22,505,542		$	225	$	168,366	$	(190	)	$	(3,350	)	$	165,051

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

6

NEW MOTION, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A Note Concerning Presentation

This Quarterly Report on Form 10-Q contains information concerning New Motion, Inc. as it pertains to the periods covered by this report - for the three month periods ended March 31, 2008 and 2007. As a result of the acquisition of Traffix, Inc., a Delaware corporation (“Traffix”), by New Motion, Inc. on February 4, 2008 (explained herein, see Note 4 Merger with Traffix, Inc.), this Quarterly Report on Form 10-Q also contains information concerning the combination of New Motion and Traffix, as of March 31, 2008, and for the three month period ended March 31, 2008. To assist the reader where practicable, when reference is made to New Motion, it pertains to the Company’s activities for the three month period ended March 31, 2008.

In February, 2008, New Motion’s newly comprised board of directors approved management’s plan to integrate and reorganize the combined enterprise arising from the recently completed merger. Along with this plan, the board of directors unanimously approved a change in the Company’s name from New Motion, Inc. to Atrinsic (“Atrinsic”), subject to shareholder approval. Atrinsic will be headquartered in New York, NY.

When reference is made to Atrinsic, it pertains to the current activities of the combination of New Motion and Traffix, during the three month period ended March 31, 2008. For purposes of a comparison to a full operating period for our Traffix, Inc. subsidiary, we provide proforma disclosures and discussion of the subsidiary’s income from operations and EBITDA for the period January 1, 2008 to February 4, 2008, included as a component of “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Note 1 – Recent Merger Discussion, Combined Background and Basis of Presentation

Overview of Atrinsic

New Motion, Inc., doing business as Atrinsic, is one of the leading digital advertising and entertainment networks in the United States. Atrinsic is organized as a single segment business with two divisions: (1) Networks activities - offering full service online marketing and distribution; and (2) Entertainment services - offering our unique content applications direct to users. Atrinsic brings together the power of the Internet, the latest in mobile technology, and traditional marketing/advertising methodologies, creating a fully integrated vehicle for sale and distribution of entertainment content, brand-based distribution and pay-for-performance advertising. Atrinsic’s Entertainment service’s content is organized into four strategic service groups - digital music, casual games, interactive contests, and communities/lifestyles. The Atrinsic brands include GatorArcade, a premium online and mobile gaming site, Bid4Prizes, a low-bid mobile auction interactive game, and iMatchUp, one of the first integrated web-mobile dating services. Feature-rich advertising services include a mobile ad network, extensive search capabilities, email marketing, one of the largest and growing publisher networks, and proprietary entertainment content. Headed by a team of Internet, new media, entertainment and technology professionals, Atrinsic is moving its headquarters to New York City, see Note 4, and will continue to maintain offices in Irvine, CA, Seattle, WA, and Moncton, Canada.

Recent Merger Discussion

On September 26, 2007, New Motion (“New Motion” or the “Company”) executed a definitive Agreement and Plan of Merger (the “Merger Agreement”) with Traffix, and NM Merger Sub, a Delaware corporation and wholly-owned subsidiary of New Motion (“Merger Sub”), pursuant to which the Merger Sub would merge with and into Traffix, the separate existence of Merger Sub would cease, and Traffix would continue as the surviving corporation in the merger, thus becoming a wholly-owned subsidiary of New Motion (the “Merger”).

On February 4, 2008, New Motion completed its merger with Traffix (see Notes 2, 3 and 4 for further information, details and discussion of the merger’s accounting treatment, purchase price allocation and other information), pursuant to the Merger Agreement entered into by the companies on September 26, 2007. As a result of the closing of the transaction, Traffix became a wholly owned subsidiary of New Motion. Immediately following the consummation of the merger, Traffix stockholders owned approximately 45% of the capital stock of New Motion, on a fully-diluted basis. Each issued and outstanding share of Traffix common stock was converted into the right to receive approximately 0.676 shares of New Motion common stock based on the capitalization of both companies on the closing date of the merger. Effective the date of the close of the merger, New Motion commenced trading on The NASDAQ Global Market under the symbol “NWMO.” New Motion registered approximately 12.9 million shares after consideration of Traffix’s fully-diluted outstanding shares and option overhang, and issued approximately 10.4 million shares as a result of the conversion factor applied to the Traffix shares outstanding on February 4, 2008.

In February, 2008, the Company’s newly comprised board of directors approved management’s combined company operating budget to assist in the integration and reorganization of the combined enterprise arising from the recently completed merger. Management intends to continue the integration of both companies, focusing on maximizing certain operational efficiencies, while also positioning the combined group for sustained, profitable growth, as a leader in the mobile entertainment and performance-based online marketing industry. Also in February, the board of directors unanimously approved a change in the Company’s name from New Motion, Inc. to Atrinsic, Inc. (“Atrinsic”), subject to shareholder approval being sought at our annual meeting tentatively planned for late July 2008.

7

Recent History

Prior to the merger described above New Motion, Inc. was solely a digital entertainment company, and was headquartered in Irvine, California. The Company exclusively provided a wide range of digital entertainment products and services, using the power of the Internet, the latest in mobile technology, and traditional marketing/advertising methodologies. The Company’s product and service portfolio included contests, games, ringtones, screensavers and wallpapers, trivia applications, fan clubs and voting services, blogs and information services. New Motion’s business was solely focused on services in the following categories within one operating segment — digital music, casual games, interactive contests and communities and lifestyles. These services consisted of a broad array of properties, including Bid4Prizes, a low-bid mobile auction game and GatorArcade, a premium online and mobile gaming site. Other brands included iMatchup, a mobile dating service and MP3Giveaway, a digital music site. New Motion focused on selectively increasing its application portfolio with high-quality, innovative applications. Internally generated content was responsible for the majority of the Company’s net sales. The Company also licensed, and licenses, some identifiable content, such as ringtones, wallpapers and images from third parties to whom it generally pays a licensing fee on a per-download basis. The Company generated revenue on a subscription basis. The monthly end user subscription fees for the Company’s wireless entertainment products and services generally ranged from $3.99 to $9.99.

New Motion, Inc., formerly known as MPLC, Inc., and prior to MPLC, Inc. as The Millbrook Press, Inc. was incorporated under the laws of the State of Delaware in 1994. Until 2004, the Company was a publisher of children’s nonfiction books for the school and library market and the consumer market under various imprints. As a result of market factors, and after an unsuccessful attempt to restructure its obligations out of court, on February 6, 2004, the Company filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code with the United States Bankruptcy Court for the District of Connecticut (the “Bankruptcy Court”). After filing for bankruptcy, the Company sold its imprints and remaining inventory and by July 31, 2004, had paid all secured creditors 100% of amounts owed. At that point in time, the Company was a “shell” company with nominal assets and no material operations. Beginning in January 2005, after the Bankruptcy Court’s approval, all pre-petition unsecured creditors had been paid 100% of the amounts owed (or agreed) and all post petition administrative claims submitted had been paid. In December 2005, $0.464 per eligible share was available for distribution and was distributed to stockholders of record as of October 31, 2005. The bankruptcy proceedings were concluded in January 2006 and no additional claims were permitted to be filed after that date.

New Motion Mobile, the initial predecessor to pre-merger New Motion, Inc., was formed in March 2005 and subsequently acquired the business of RingtonChannel, an Australian aggregator of ringtones in June 2005. RingtoneChannel was originally incorporated on February 23, 2004. In 2004, RingtoneChannel began to sell ringtones internationally and then launched its first ringtone subscription service in the U.S. in February 2005. In August 2005, New Motion Mobile launched its first successful text message campaign incorporating music trivia. In March of 2006, New Motion Mobile partnered with GoldPocket Wireless, now Motricity, a leading provider of mobile technology solutions for media and entertainment companies, to enhance the proficiency and performance of its mobile service offering.

On October 24, 2006, New Motion (then known as MPLC, Inc.) and certain stockholders entered into a Common Stock Purchase Agreement with Trinad Capital Master Fund, Ltd. (“Trinad”), pursuant to which New Motion agreed to redeem 23,448,870 shares of New Motion’s common stock from existing stockholders and sell an aggregate of 69,750,000 shares of New Motion’s common stock, representing 93% of New Motion’s issued and outstanding shares of common stock, to Trinad in a private placement transaction for aggregate gross proceeds of $750,000.

On January 19, 2007, New Motion Mobile entered into an agreement with Index Visual & Games, Ltd. (“IVG”) to purchase certain specified assets of Mobliss, a provider of proprietary applications, delivery systems, and platforms for wireless devices. In return for these assets, New Motion Mobile issued to IVG a convertible promissory note (the “IVG Note”). Mobliss has direct networking and billing connectivity with carriers for executing large-scale SMS campaigns and distributing mobile content to a wide array of mobile devices across multiple carrier networks in the U.S. and Canada. The primary strategic objective of this purchase was to allow New Motion to more efficiently manage its business and operations by enabling it to directly bill and collect from mobile carriers, thus eliminating the fees associated with using third party billing processors and expediting the collection of open carrier receivables. This purchase is expected to enable New Motion to better serve its customers and end users by expediting the time in which it reacts to changes in the marketplace. During the fourth quarter of 2007, and continuing into the current fiscal year, New Motion is allocating an increasing portion of its Cingular / AT&T new subscriber message traffic onto the acquired assets and developed technology, and expects to continue to allocate Cingular / AT&T traffic, at a manageable rate, through this system during our next three quarters.

8

Also on January 19, 2007, New Motion Mobile entered into an agreement with IVG to create an Asian-themed mobile entertainment portal, the first major endeavor of its kind in the North American off-deck arena. This new direct-to-consumer service provides an opportunity for New Motion to tap into a new market with Asian-themed content, delivering sophisticated mobile products. The joint venture was registered under the name The Mobile Entertainment Channel Corporation (“MECC”) and was established to assist New Motion in expanding its service offerings by partnering with IVG, a leading global player in the interactive games and mobile space. As of March 31, 2008, New Motion is continuing to evaluate the services and content offer capabilities of MECC, and as of yet has not deployed any services to a material degree.

In February, 2007, New Motion Mobile completed an exchange transaction (the “Exchange”) pursuant to which it merged with a publicly traded company, MPLC, Inc., so that New Motion Mobile became a publicly traded company. In connection with the Exchange, MPLC, Inc. (now called New Motion, Inc.) raised gross proceeds of approximately $20 million in equity financing through the sale of its Series A Preferred Stock, Series B Preferred Stock and Series D Preferred Stock.

After receiving approval by written consent of holders of a majority of all classes of its common and preferred stock and the approval of such holders voting together and as a single class, on May 2, 2007, MPLC, Inc. filed a certificate of amendment to its restated certificate of incorporation with the Delaware Secretary of State to effect the following corporate actions: (i) increase the authorized number of shares of its Common Stock from 75,000,000 to 100,000,000, (ii) change its corporate name to New Motion, Inc. from MPLC, Inc., and (iii) effect a 1-for-300 reverse split. As such, for comparative purposes, the 7,263,688 shares of outstanding common stock of the combined entity, after recapitalization and the 1-for-300 Reverse Split, has been retroactively applied to January 1, 2006 and consistently applied throughout all periods presented.

In accordance with the terms of the IVG Note, on June 15, 2007, IVG converted all outstanding principal and accrued interest on the IVG Note into 172,572 shares of common stock at a conversion price of $3.44 per share, the fair market value of the Company’s stock on the date of issuance of the IVG Note.

Note 2 – Summaryof Significant Accounting Policies

Basis of presentation

The accompanying interim condensed consolidated financial statements of the Company are unaudited, but in the opinion of management, reflect all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results for the interim periods.  Accordingly, they do not include all information and notes required by generally accepted accounting principles for complete financial statements.  The results of operations for interim periods are not necessarily indicative of results to be expected for the balance of the current fiscal year or any other period.  The balance sheet at December 31, 2007 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.  These interim consolidated financial statements should be read in conjunction with the Company's consolidated financial statements and notes for the year ended December 31, 2007 filed on Form 10-KSB on March 31, 2008, and amended Form 10-KSB, as filed on April 29, 2008, for inclusion of part III, Directors, Executives Officers, Promoters, Control Persons and Corporate Governance; Compliance with Section 16(a) of the Exchange Act.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Traffix, Inc., a subsidiary acquired through a merger, effective February 4, 2008; the condensed consolidated financial statements had included the accounts of RingtoneChannel from its inception in February 2004, and the accounts of New Motion Mobile from its inception in March 2005. All significant intercompany balances and transactions have been eliminated in consolidation.

9

During fiscal 2006, New Motion focused its efforts on the high-growth opportunities in the United States digital applications market, as such, since the fourth quarter of fiscal 2006, the operations and accounts of the RingtoneChannel were essentially blended into the operations of New Motion Mobile and New Motion began the process for the eventual dissolution of the legal entity formerly known as the RingtoneChannel.

Beginning in the first quarter of 2007, New Motion’s consolidated financial statements also include the accounts of its joint venture, MECC. On January 19, 2007, New Motion entered into a Heads of Agreement with IVG, setting forth the terms of the joint venture to distribute IVG content within North America and to manage and service the Mobliss assets acquired from IVG. In accordance with FASB Interpretation No. 46(R), “Consolidation of Variable Interest Entities (revised December 2003) - an interpretation of ARB No. 51,” the results of MECC have been consolidated with New Motion’s accounts because New Motion (i) currently controls the joint venture’s activities, (ii) will share equally in any dividends or other distributions made by the joint venture, and (iii) expects to fund the joint venture and absorb the expected losses for the foreseeable future. New Motion owns a 49% stake and IVG owns a 51% stake in the joint venture. As a result of the consolidation, the minority interest liability on New Motion’s balance sheet represents IVG’s cumulative interest in the operating results of the joint venture, less any distributions paid to the minority interest.

Use of Estimates

The preparation of 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 carrying amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods.

Principally, significant estimates made by management are, among others, the recognition of revenue and related chargebacks and other allowances and credits charged to contra revenue, the realizability of accounts receivable, the realizability of deferred tax assets, the recoverability of long-lived assets, and the valuation of stock based incentive grants. Additionally, at times, the Company may have the potential for exposure resulting from pending and/or threatened litigation. See Note 9, infra. Actual results could differ materially from those estimates.

Management’s estimates and assumptions are continually reviewed against actual results with the effects of any revisions being reflected in the results of operations at that time.

Reclassifications

Certain prior year amounts in the unaudited consolidated financial statements have been reclassified to conform to the current and prior year’s presentation, specific to groupings used in pro forma information included in Note 4.

Marketable Security Investments

The Company has reclassified its auction rate Securities ("ARS") from cash and cash equivalents to marketable securities on its balance sheet in accordance with recent accounting pronouncements.  This reclassification affected both the balance sheet at December 31, 2007, and as at March 31, 2008, and the fiscal 2007 and first quarter fiscal 2008 cash flow statements, it did not affect net income, nor did it affect working capital in fiscal 2007, or income for the three month period ended March 31, 2008. In accordance with Staff Accounting Bulletin ("SAB") No. 108, "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements," no changes to financial statements issued in prior years were deemed necessary. In accordance with the Statement of Financial Accounting Standards ("SFAS") No. 115, Accounting for Certain Investments in Debt and Equity Securities, our Marketable Security investments are accounted for as available-for-sale, based on our intentions under which we held the related paper, with that being a strategy of holding the securities for varying and indefinite periods of time, pursuant to maturity dates, market conditions and other factors.  The Company has not changed its investment policy.  The Company believes that notwithstanding the reclassification, the investments in ARS are: reported as long-term based on current failed auctions, these securities were previously classified as short term and highly liquid, and were readily convertible to known amounts of cash. The Company continues to consider these holdings as having an insignificant risk of change in value due to their underlying issuers, and the Company currently is taking advantage of higher interest yields as a result of the failed auctions.

10

Our long-term investments balance includes $6.625 million in auction rate securities that failed at auction subsequent to March 31, 2008 and are presented as long-term as it is unknown if the Company will be able to liquidate these securities within the next year. At March 31, 2008, and for the three month period then ended, the Company did not record any liquidity impairment related to these investments as it does not believe that the underlying credit quality of the assets has been impacted by the reduced liquidity of these investments.

Risks and Uncertainties

New Motion operates in industries that are subject to intense competition, government regulation and rapid technological change. New Motion’s operations are subject to significant risks and uncertainties including financial, operational, technological, regulatory and other risks associated with operating a business, including the potential risk of general business failure, resulting from internal or external forces, including changes in consumers’ tastes, technological obsolescence of service offers, regulation at the government level and regulation arising from self policing agencies and guidelines within our sector.

Fair Value of Financial Instruments

The carrying amounts of current assets and liabilities, other than marketable securities, are carried at their historical values. Marketable securities subject to market based price fluctuations are carried at the fair market values, and are deemed to be held to maturity, or non-trading, therefore unrealized gains and losses, net of tax are included in our Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Income (Loss) accounts.

Foreign Currency Risk

New Motion has conducted a small amount of sales activity in Australia which is collected by its billing partner in Australian currency and remitted to New Motion in the U.S. In addition, New Motion’s subsidiary in Australia conducts its business in its local currency. New Motion has experienced insignificant foreign exchange gains and losses to date without engaging in any hedging activities.

New Motion also has operations in Canada arising from the Traffix, Inc. merger.

New Motion’s foreign operations’ functional currency is the applicable local currency. Assets and liabilities for these foreign operations are translated at the exchange rate in effect at the balance sheet date, and income and expenses are translated at average exchange rates prevailing during the year. Translation gains or losses are reflected in the accumulated other comprehensive loss in the equity section of the balance sheet.

Neither of the Company’s foreign source income contribute significantly to net sales; our Canadian operations are deemed as a separate profit center within our worldwide tax accrual.

Concentration of Credit Risk

New Motion is currently utilizing several billing partners in order to provide content and subsequent billings to its subscription customers. These billing partners, or aggregators, act as a billing interface between New Motion and the mobile phone carriers that ultimately bill New Motion’s entertainment based end user subscribers. These aggregator companies have not had long operating histories in the U.S., or operations within traditional, and proven business models. These aggregators face a greater business risk in the market place, due to a constantly evolving business environment that stems from the infancy of the U.S. mobile entertainment content industry.

The following table reflects the concentration of sales and accounts receivable with these billing aggregators. Data presented as of and for the three months ended March 31, 2008 shows billing aggregator sales and accounts receivable as a percentage of both aggregator sales only, and of total sales, which includes the two months of consolidated sales of New Motion’s wholly owned subsidiary, Traffix, Inc.

11

	For the three months
	Ended March 31,
	2007			2008
	All			Aggregator			All
	Sales			Sales Only			Sales
Revenue:
Customer A		15	%		2	%		1	%
Customer B		-	%		14	%		7	%
Customer C		85	%		81	%		37	%
Other Customers		-	%		3	%		56	%

	As of			As of
	December 31,			March 31,
	2007			2008
	All			Aggregator			All
	Accounts			Accounts			Accounts
	Receivable			Receivable			Receivable
Accounts receivable:
Customer A		6	%		4	%		2	%
Customer B		7	%		21	%		10	%
Customer C		81	%		73	%		33	%
Other Customers		6	%		1	%		55	%

Accounts Receivable

Accounts receivable are stated at the amount management expects to collect from outstanding balances. New Motion records estimates for future refunds, chargebacks, allowances or credits, and provides for these probable uncollectible amounts through a valuation allowance and a reduction of recorded revenues in the period for which the sale occurs. Estimates of future refunds, chargebacks, allowances or credits, are based on analyses of previous recognized rates and most currently identifiable trends. Historically combined refunds, chargebacks, allowances and credits ranged between 0% and 17% of the associated gross revenue. The reserves are reconciled once carriers remit total payment to New Motion’s aggregator, who subsequently remits payments to New Motion, with such collection cycle usually occurring between 45 to 180 days after date billed. Balances that are still outstanding and deemed uncollectible after management has performed this reconciliation are charged against the valuation allowance and correspondingly reduce the related trade accounts receivable.

Due to the payment terms of the carriers requiring in excess of 60 days from the date of billing or sale, New Motion utilizes an advance program offered by its aggregators. This advance program feature allows for payment of 70% of the prior month’s billings within 15 to 20 days after the end of the month. For this feature, New Motion pays an additional fee, ranging from 2.5% to 5% of the amount advanced. For the three months ended March 31, 2008, the gross amount of invoices subject to the advance program totaled approximately $10.8 million. The total advance amount of these invoices equals approximately $8.7 million. As of March 31, 2008, New Motion had contra assets in the form of reserves and allowances of approximately $0.42 million against such advanced amounts. This compares to $5.7 million of gross invoices subject to the advance program for the three months ended March 31, 2007, of which the total advance amount of these invoices equaled approximately $3.9 million. This advance program is offered on a forward-recourse basis, with potential recourse assessed against future advances. Gross sales for each month are reported net of any of these advance fees. New Motion believes that the reserve established against the accounts receivable balance at March 31, 2008, is adequate to absorb all future processed credits, chargebacks and allowances issued to our customers by the carriers.

Property and Equipment

New Motion provides for depreciation using the straight-line method over the estimated useful lives of its property and equipment, ranging from three to five years. New Motion acquired 4.5 acres of land and a building located in Dieppe, New Brunswick as a result of its merger with Traffix, Inc., we are depreciating the building over 20 years on the straight line basis. Repairs and maintenance expenditures that do not significantly add value to property and equipment, or prolong its life, are charged to expense, as incurred. Gains and losses on dispositions of property and equipment are included in the operating results of the related period. The merger with Traffix, Inc. was affected through a stock-for-stock, tax free merger, therefore any step up in book basis to its fair market value at the time of the merger does not provide deductible tax basis.

12

Intangible Asset Measurement and Recognition

For intangible assets acquired in the current, as well as prior fiscal years, such acquisitions were recorded in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets.” New Motion recognizes and measures the intangible assets acquired based on their fair value; in the case of an acquisition of a group of intangible assets, each asset’s relative fair value is used. New Motion uses independent third party valuation experts, and internally uses a wide range of valuation methodologies, including performing discounted cash flow analysis to assess the value of acquired intangible assets. Discounted cash flow analysis requires assumptions about the timing and amount of future cash inflows and outflows, risk factors, alternative cost of capital considerations, and terminal value calculations. 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 our businesses and their prospects, or changes in market conditions, could result in an impairment charge. As a result of the Traffix merger, New Motion recorded approximately $41 million in identifiable intangibles and approximately $86 million in goodwill. 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 flow projections; 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. At March 31, 2008 the Company’s book value was approximately $165 million and its market capitalization was approximately $113 million. The Company deems that the current decline in its share price is temporary, and has not impaired its goodwill and other intangible assets as at March 31, 2008. Our valuation on the merger net assests has yet to be finalized, changes in the final valuation could potentially affect amortizible assets acquired and cause future fiscal periods to differ based on a change, if any.

Impairment of Long-Lived Assets

Long-lived assets, such as property and equipment subject to depreciation and amortization, are reviewed for impairment whenever events occur, or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. Assets to be disposed of, if any, would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. For each of the periods reported herein, New Motion’s management believes there is no impairment of its long-lived assets. There can be no assurance, however, that market conditions will not change, or that demand for New Motion’s services will continue at rates recognized during the three months ended March 31, 2008, which could result in impairment of long-lived assets in the future. See Note 4, and “Risk Factors” for further discussion of risk associated to Impairment of Long-lived Assets, specifically goodwill, as generated in the Company’s recent merger acquisition with Traffix, Inc.

Stock-Based Compensation

New Motion has historically utilized the fair value method of recording stock-based compensation as contained in Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” as amended, whereby, compensation expense is measured at the grant dated based on the value of the award and is recognized over the service period, which is usually the vesting period. The fair value of stock options is estimated on the grant date using the Black-Scholes option pricing model.

In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123 (revised 2004), “Share-Based Payment,” (“SFAS No. 123(R)”), which is a revision of SFAS No. 123. SFAS No. 123(R) supersedes Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” and amends SFAS No. 95, “Statement of Cash Flows.” Generally, the approach in SFAS No.123(R) is similar to the approach described in SFAS No. 123. However, SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. SFAS No. 123(R) also establishes accounting requirements for measuring, recognizing and reporting share-based compensation, including income tax considerations. One such change was the elimination of the minimum value method, which under SFAS No. 123 permitted the use of zero volatility when performing Black-Scholes valuations. Under SFAS No. 123(R), companies are required to use expected volatilities derived from the historical volatility of the company’s stock, implied volatilities from traded options on the company’s stock and other factors. SFAS No. 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current accounting literature.

The provisions of SFAS No. 123(R) were effective for and adopted by New Motion as of January 1, 2006. As the Company was using the fair market value accounting for stock based compensation pursuant to SFAS No. 123, the adoption of SFAS No. 123(R) was made using the modified prospective method. Under the modified prospective application, the cost of new awards and awards modified, repurchased or cancelled after the required effective date and the portion of awards for which the requisite service has not been rendered (unvested awards) that are outstanding as of the required effective date will be recognized as the requisite service is rendered on or after the required effective date. The compensation cost for that portion of awards shall be based on the grant-date fair value of those awards as calculated under SFAS No. 123.

13

Since New Motion had previously recorded stock compensation expense under the fair value method prescribed by SFAS No. 123, the adoption of SFAS No. 123(R) did not have a significant impact on New Motion’s results of operations, income taxes or earnings per share.

New Motion estimates stock option forfeiture rates based on historical trends of its employees.

Revenue Recognition

New Motion has two principal types of revenue, (1) the sale of subscription-based services inherent in its Entertainment services, which the Company recognizes in accordance with Emerging Issues Task Force (“EITF”) No. 99-19, “Reporting Revenue Gross as a Principal Versus Net as an Agent,” and (2) sales from its Network activities, which are earned pursuant to marketing agreements with marketing partners and corporate customers, which the Company recognizes in accordance with Staff Accounting Bulletin (SAB) 101, “Revenue Recognition in Financial Statements,” as modified by SAB 104.

Subscription Revenue. As it pertains to its subscription-based Entertainment sales, the Company recognizes revenue from the sale or subscription of its applications to wireless subscribers under distribution agreements with wireless carriers and other distributors in the period in which the applications are purchased or over the period in which the applications are subscribed, assuming that: (a) fees are fixed and determinable; (b) we have no significant obligations remaining; and (c) collection of the related receivable is reasonably assured. For this subscription-based revenue, the Company makes estimates and creates reserves for future refunds, charge backs or credits in the period for which the sale occurs based on analyses of previous rates and trends, which have historically varied between zero and 17% of gross subscription revenue. This reserve is reconciled once a carrier remits total payment to the Company’s aggregator, who subsequently remits payment usually 45 to 180 days after billing. Management reviews the revenue by carrier on a monthly basis and gross billings on a daily basis to identify unusual trends that could indicate operational, carrier or market issues which could lead to a material misstatement in any reporting period. Additionally, on a weekly basis, management monitors cash settlements made by carriers to the aggregators. The Company’s policy is to record differences between recognized subscription revenue and actual revenue in the next reporting period once the actual amounts are determined. To date, differences between estimates and ultimate reconciled revenues have not been significant.

Subscription revenue earned from certain aggregators may not be reasonably estimated. In these situations, New Motion’s policy is to recognize revenue upon the receipt of a carrier revenue report, which usually is received just prior to actual cash collection (i.e., on a cash basis). These revenue amounts are not significant.

In accordance with Emerging Issues Task Force (“EITF”) No. 99-19, “Reporting Revenue Gross as a Principal Versus Net as an Agent,” the Company recognizes as revenue the net amount the wireless carrier or distributor pays to New Motion upon the sale of applications, net of any service or other fees earned and deducted by the wireless carrier or distributor. New Motion has evaluated its wireless carrier and distributor agreements and has determined that it is not the principal when selling its applications through wireless carriers.

Network Revenue. The Company also earns net sales from its Network activities pursuant to marketing agreements with marketing partners and corporate customers. The provisions of each agreement determine the type and timing of revenue to be recorded. The Company invoices its customers in accordance with the terms of the underlying agreement. Revenue is recognized at the time the marketing activity is delivered, or service is provided, net of an estimated sales allowance, when applicable. Such sales allowance may include an estimate for duplications, invalid addresses, and/or age restrictions that are due from, but have not yet been reported to us by our customers. These sales allowances are recorded as contra-revenue. The Company’s net sales are adjusted in later fiscal periods if actual sales allowances vary from amounts previously estimated. Historically, the variance between actual sales allowances and previously estimated sales allowances has been immaterial. If events were to occur that would cause actual sales allowances (which are recorded as offsets against gross revenue, as contra-revenues, in arriving at reported net revenue) to vary significantly from those originally estimated and reflected in the financial statements, we could suffer material deterioration in future fiscal period gross margins, and, therefore, our profitability, cash flows and capital resources could be adversely affected.

The customer agreements which comprise the Network revenue satisfy the “existence of persuasive evidence of an arrangement” required under the current revenue recognition rules under Staff Accounting Bulletin (SAB) 101 as modified by SAB 104. The provisions of each agreement determines the (a) pricing characteristics of the revenue generating activity, the specific type of revenue activity (e.g., Online Advertising or Search Engine Marketing), and (b) the method of the Company’s delivery obligations to, and acceptance obligations of its clients and customers, with (a) and (b) satisfying the criterion of SAB 101, that “sales price is fixed or determinable” and “delivery has occurred”. As a function of the Company’s client and customer acceptance process, the Company reviews bank and credit references, business financial statements, personal financial statements and/or obtain corporate officer guarantees (if appropriate), all of which satisfy the SAB 101 criteria, “collectibility is reasonably assured”. Based on this revenue recognition criteria, the Company believes it recognizes Network revenue when it is realizable and earned.

14

Certain revenue related obligations pertaining to the Company’s Network activities are recorded at the time revenue is recognized. They include costs payable to other online, as well as off-line, media companies for generating registered users and consumer data for the Company, database fee sharing costs under third-party database use agreements, email message delivery costs, contingent-based prize indemnification coverage (i.e. sweepstakes payout indemnification), estimated premium fulfillment costs related to the respective promotion (when and if applicable) and all other variable costs directly associated with completing the Company’s obligations relative to the revenue being recognized. When our estimates vary from that which was originally accrued, the associated variance is deemed a change in management’s estimate, and accordingly the Company takes the increase or decrease to sales, costs, or overhead in the fiscal period that the variance is determinable.

Should the Internet operating landscape change resulting in (a) higher costs of acquiring consumer data and registered users for the Company’s websites; (b) higher costs of acquiring data for the Company’s marketing partners, compromising such marketing partners' ability to maintain adequate sized databases to allow for continued third-party database use agreements; (c) failure to maintain a lower cost of email delivery activities and web development and web hosting service costs as compared to our competitors, or being required to depend on third-party emailing service bureaus, to a degree higher, and/or at a cost in excess of our anticipated internally-generated costs, (d) the Company’s contingent-based prize indemnification premiums for indemnification coverage increasing due to an increase in the number of prize winners at the sites; or (e) unpredictable technology changes or commercial technology applications; then, if any one, or a combination, of the above factors were to materialize the Company could suffer material deterioration in future fiscal period revenue growth and gross margins and, therefore, the Company’s profitability, cash flows and capital resources could be materially adversely affected.

Network activities revenue recognition is also subject to provisions based on the probability of collection of the related trade accounts receivable. Management continuously evaluates the potential of the collectibility of trade receivables by reviewing such factors as deterioration in the operating results, financial condition, or bankruptcy filings, of the Company’s customers. As a result of this review process, the Company records bad debt provisions to adjust the related receivables' carrying amount to an estimated realizable value. Provisions for bad debts are also recorded due to the review of other factors, including the length of time the receivables are past due, historical experience and other factors obtained during the conduct of collection efforts. If circumstances change regarding our specific customers on an individual basis, or if demand for Internet direct marketing softens, or if the U.S. economy stumbles, our estimates for bad debt provisions could be further increased, which could adversely affect the Company’s operating margins, profitability, cash flows and capital resources.

Software Development Costs

New Motion accounts for software development costs in accordance with SFAS No. 86, “Accounting for the Costs of Computer Software to Be Sold, Leased or Otherwise Marketed.” Costs incurred in the research and development of software products and enhancements to existing software products are expensed until the time when technological feasibility is established. Costs incurred from that point through the point the product is available for general release to customers are capitalized. Under New Motion’s current practice of developing new applications, the technological feasibility of the underlying software is not established until substantially all product development is complete, which generally includes the development of a working model. As a result, to date, New Motion has not capitalized any costs relating to its application development because the costs incurred after the establishment of technological feasibility of applications have not been significant.

Advertising and Marketing Expense

New Motion expenses advertising and marketing costs as incurred. For the three months ended March 31, 2008 and 2007, advertising and marketing expenses were $6.0 and $3.0 million, respectively. In the month of January 2008, New Motion, Inc. expended approximately $1.9 million in marketing expenses with Traffix, Inc., prior to the merger.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date.

15

New Motion’s estimate of the value of its tax reserves contains assumptions based on past experiences and judgments about the interpretation of statutes, rules and regulations by taxing jurisdictions. It is possible that the ultimate resolution of these matters may be greater or less than the amount that New Motion estimated. If payment of these amounts proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period in which it is determined that the liabilities are no longer necessary. If the estimate of tax liabilities proves to be less than the ultimate assessment, a further charge to expense would result.

In June 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes —an interpretation of FASB Statement No. 109,” which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” This Interpretation prescribes a comprehensive model for how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that it has taken or expects to take on a tax return, including a decision whether to file or not to file a return in a particular jurisdiction. Under the Interpretation, the financial statements must reflect expected future tax consequences of these positions presuming the taxing authorities’ full knowledge of the position and all relevant facts. The Interpretation also revises disclosure requirements and introduces a prescriptive, annual, tabular roll-forward of the unrecognized tax benefits. This Interpretation is effective for fiscal years beginning after December 15, 2006.

New Motion and its subsidiaries file income tax returns in the U.S., Canada and Australian federal jurisdictions and the states of California and New York jurisdictions. New Motion is subject to U.S., Canadian and Australia federal examinations and California and New York state examinations by tax authorities. The statute of limitations for 2005, 2006 and 2007 in all jurisdictions remains open and are subject to examination by tax authorities.

New Motion adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, on January 1, 2007. As a result of the implementation of Interpretation 48, New Motion recognized no change in the liability for unrecognized tax benefits. New Motion does not have any unrecognized tax benefits as of January 1, 2008, and March 31, 2008.

New Motion does not have any tax positions in the balance at January 1, 2008, for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to taxing authorities to an earlier period. New Motion also has no unrecognized tax benefits in the balance at January 1, 2008, that if recognized, would impact the effective tax rate. As a result, New Motion expects no adjustment to its amount of unrecognized tax benefits during 2008.

New Motion recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. The Company had no amount accrued for the payment of interest and penalties accrued at March 31, 2008.

16

Net Income Per Share

        Basic earnings per share (“EPS”) for the Company is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period. Diluted EPS includes the effect, if any, of the potential issuance of additional shares of common stock as a result of the exercise or conversion of dilutive securities, using the treasury stock method. Diluted earnings per share has not been presented in the accompanying condensed consolidated statement of income since the Company has no dilutive options, warrants and other potential common stock outstanding during the periods based on the Company’s net loss for the three months ended March 31, 2008.  Options to purchase 3,531,789 and 1,575,383 shares of the Company's common stock, and 314,446 and 314,446 warrants to purchase shares of common stock, and none and 974,419 shares of common stock issuable upon conversion of the IVG note, were not included in the calculation, due to the fact that these options and warrants were anti-dilutive for the three months ended March 31, 2008 and 2007, respectively.

New Accounting Pronouncements

In February 2007, FASB issued FAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“FAS 159”), which gives companies the option to measure eligible financial assets, financial liabilities and firm commitments at fair value (i.e., the fair value option), on an instrument-by-instrument basis, that are otherwise not permitted to be accounted for at fair value under other accounting standards. The election to use the fair value option is available when an entity first recognizes a financial asset or liability or upon entering into a firm commitment. Subsequent changes in fair value must be recorded in earnings. FAS159 is effective for financial statements issued for fiscal year beginning after November 15, 2007. New Motion does not expect adoption of FAS 159 will have a material impact on our consolidated results of operations or financial position.

17

Note 3 – Goodwill and Identifiable Intangible Asset

The gross carrying value of goodwill and the gross carrying value and accumulated amortization of other intangibles as set forth below in whole dollars:

	As of March 31, 2008					As of December 31, 2007
	Gross					Gross
	Carrying		Accumulated			Carrying		Accumulated
	Value		Amortization			Value		Amortization
Unamortized intangible assets:
Goodwill	$	97,979,880				$	-
Other unamortized identifiable intangible assets:
Trademarks (indefinite lived assets)	$	35,498,000	$	-		$	11,000	$	-
Other amortized identifiable intangible assets:
Acquired Software Technology		2,431,300		135,072			-		-
Licensing and trade names		1,899,600		607,057			580,000		555,833
Customer list		1,618,400		566,770			949,000		385,040
Restrictive Covenants		1,227,500		68,194			-		-
Total identifiable intangible assets	$	42,674,800	$	1,377,093		$	1,540,000	$	940,873
Total Carrying Value - Identifiable Intangibles			$	42,674,800				$	1,540,000
Total Acc. Amortization - Identifiable Intangibles				(1,377,093	)				(940,873	)
Net Carrying Value - Identifiable Intangibles			$	41,297,707				$	599,127

The identifiable intangibles and unamortized goodwill carrying value changes as a result of the effects of foreign currency exchange translation.

The amortizable intangibles listed in the previous table are deemed to have lives ranging between two and ten years and are generally amortized on a straight-line basis, with the weighted average life being 4.3 years.

Amortization expense from acquired identifiable intangibles have been recorded from the dates of the respective acquisitions.

The future intangible amortization expense for the next five fiscal years is estimated, and set forth below:

	2008		2009		2010		2011		2012		Thereafter
Acquired Software Technology	$	607,825	$	810,433	$	810,433	$	67,537	$	-	$	-
Licensing and trade names		98,970		131,960		131,960		131,960		131,960		665,733
Customer list		337,660		301,173		133,880		133,880		133,880		11,157
Restrictive Covenants		306,875		409,167		409,167		34,097		-		-
Total amortization expense	$	1,351,330	$	1,652,733	$	1,485,440	$	367,474	$	265,840	$	676,890

18

Note 4—Merger and Restructuring Activity

Traffix, Inc.

Pursuant to the Agreement and Plan of Merger, dated September 27, 2007, by and between New Motion, Inc. and Traffix, Inc. (the Merger Agreement), the Company acquired 100 percent of the outstanding stock of Traffix, Inc. on February 4, 2008, in a tax-free merger, in order to expand the Company’s media distribution platform and to achieve more cost effective customer acquisitions. The Traffix, Inc. results of operations were included in the Corporation’s results beginning February 4, 2008.

As provided by the Merger Agreement, approximately 15.4 million shares of Traffix, Inc. common stock were exchanged for approximately 10.4 million shares of the Company’s common stock. At the date of the Merger, this represented approximately 87 percent of the Company’s outstanding common stock. Traffix, Inc. stockholders also received an immaterial amount of cash ($384) in lieu of any fractional shares of the Company’s common stock that would have otherwise been issued on February 4, 2008.

The Merger was accounted for under the purchase method of accounting in accordance with SFAS No. 141, “Business Combinations” (SFAS 141). Accordingly, the purchase price was allocated to the assets acquired and the liabilities assumed based on their estimated fair values at the Merger date as summarized below.

Purchase price
Traffix, Inc. common stock exchanged		15,396,869
Exchange ratio		0.676072
Total shares of the Company's common stock exchanged		10,409,392
Purchase price per share of the Company's common stock (1)	$	14.1750
Total value of the Company's common stock exchanged			$	147,553,132
Fair value of outstanding stock options and restricted shares				605,114
Other direct acquisition costs				2,058,040
Total purchase price			$	150,216,286
Allocation of the purchase price
Traffix, Inc. stockholders' equity			$	46,435,783
Traffix, Inc. goodwill and other intangibles				(14,745,510	)
Adjustments to reflect assets acquired and liabilities assumed at fair value:
Net-deferred income tax liabilities				(16,672,667	)
Property, plant and equipment				125,000
Identified intangibles				41,134,800
Merger related exit and termination liabilities				(4,041,000	)
Fair value of net assets acquired				52,236,406
Estimated goodwill resulting from the Merger (2) (3)			$	97,979,880

(1) The value of the shares of common stock exchanged with Traffix, Inc. shareholders was based upon the average of the closing prices of the Company’s common stock for the period commencing three trading days before, and ending three trading days after, September 27, 2007, the date of the signing and announcement of the Merger Agreement.

(2)

The Company intends to aggregate goodwill and use the entity’s market capitialization in measuring for future potential impairments. Our book value at March 31, 2008 was approximately $165 million; our market capitalization at March 31, 2008 and May 12, 2008 was approximately $99 million and $114 million, respectively. Management has determined that based on the current market conditions affecting all domestic equities, coupled with the $15 million, or over 15% increase in our market capitalization from March 31, 2008 to May 12, 2008, that it is premature to consider an impairment charge during the first quarter ended March 31, 2008, predicated on the February 4, 2008 merger closing. Management will continue to review the prospects for the business, as well as general market conditions, and will assess the likelihood of a required impairment charge in future fiscal periods based on facts, circumstances and market valuations at that time.

(3)

Management considers the following factors in recording goodwill arising from the merger transaction described above, and includes, but is not limited to: (a) the positive reputation of the acquired business; (b) the methods of operations that have defined its prior success which were acquired in the transaction under the basis of going concern principals; (c) the business processes which were acquired in the transaction under the basis of going concern principals; (d) the customer relationships acquired; and (e) the market position and accompanying competitive advantage acquired.

19

Unaudited Pro Forma Summary

The following pro forma consolidated amounts give effect to the acquisition of Traffix, Inc. by New Motion, inc. accounted for by the purchase method of accounting as if it had occurred as at January 1, 2008 and 2007, the beginning of the respective periods presented. The pro forma consolidated results are not necessarily indicative of the operating results that would have been achieved had the transaction been in effect as of the beginning of the periods presented and should not be construed as being representative of future operating results.

	Three Months Ended
	March 31, 2008		March 31, 2007
Net sales	$	37,414	$	23,675
Cost of sales		21,927		12,621
Gross profit		15,487		11,054
Operating expense net of interest income and other expense		14,833		10,589
Income tax expense		377		191
Net income		277		274
Basic and Diluted earnings per share	$	0.01	$	0.01

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition of Traffix, Inc. The estimated fair values of intangibles assets acquired and liabilities assumed were obtained through a preliminary third party valuation. The estimated fair value of accounts receivable, and all other assets and liabilities are preliminary and could be adjusted based on a final determination.

Fair value of assets acquired and liabilities assumed
Cash and cash equivalents	$	12,270,616
Marketable securities		13,150,654
Account receivable		12,229,391
Prepaid and other current assets		1,359,181
Property and equipment		2,020,588
Customer List		669,400
Trade name / Trademark		35,487,000
Software		2,431,300
License Agreement		1,319,600
Non Compete Agreement		1,227,500
Goodwill		97,979,880
Other assets		2,968,480
Total assets acquired		183,113,590
Debt		-
Trade accounts payable		6,938,843
Accrued expenses		3,205,238
Income taxes payable		333,986
Accrued restructuring and exit costs associated with merger		4,041,000
Deferred tax liabilities		16,672,667
Other liabilities		1,705,570
Total liabilities assumed		32,897,304
Net assets acquired	$	150,216,286

Goodwill and Trade-names have an indefinite life; other amortizable intangibles have a weighted average amortizable life of 4.3 years.

20

Merger and Restructuring Charges

Merger and Restructuring Charges in connection with the merger acquisition of Traffix, Inc. are associated with legacy Traffix, Inc. exit costs and restructuring reserves, and are recorded as an increase to Goodwill, and are all more fully described below. See analysis of exit costs reserves below.

Exit Costs Reserves

On February 1, 2008, $4.041 million of liabilities for the Traffix, Inc. exit and termination costs as a result of the Merger were recorded as purchase accounting adjustments resulting in an increase in Goodwill. Included in the $4.041 million were $3.1 million for severance, contract terminations, relocation and other employee-related costs, and $0.9 million for other costs. During the two months ended March 31, 2008, cash payments of $0.7 million have been charged against this liability, with all $0.7 million relating to payments of severance, relocation and other employee-related costs.

Payments under these reserves are expected to be substantially completed by the end of fiscal 2009, predicated on our progress related to lease renegotiations, but in no case to exceed fiscal 2011.

Exit Costs and Restructuring Reserves

	Balance		Charges		Charges		Balance
Components of reserve in	January 1,		to		against		March 31,
connetion with the merger	2008		Reserve		Reserve		2008
Severence, termination and other employment costs	$	-	$	2,348,110	$	412,509	$	1,935,601
Lease renegotiation, workout and sub-let loss costs		-		758,355		-		758,355
Moving costs and information technology buildout in new headquarters		-		334,535		-		334,535
Insurance related costs for acquired entity's tail risk coverage		-		600,000		-		600,000
Totals for columns, as indicated (date or activity)	$	-	$	4,041,000	$	412,509	$	3,628,491

(1) Exit costs reserves were established at February 1, 2008 and included in our purchase accounting resulting in an increase in goodwill. During the three months ended March 31, 2008, the above referenced $412,509 were payments made to employees during the period February 4, 2008 to March 31, 2008, with all such employees being released from employment on May 2, 2008, in accordance with our restructuring and exit activities in connection with the merger acquisition of Traffix, Inc. During the three months ended March 31, 2008, the Company recorded a Restructuring Charge of $240,000, relating to New Motion, Inc. employees severed from employment on May 2, 2008. See Subsequent Event Note.

Note 5—Stock options and other stock based compensation

In 2005, New Motion established the Stock Incentive Plan, (the “2005 Plan”), for eligible employees and other directors and consultants. Under the 2005 Plan, officers, employees and non-employees may be granted options to purchase New Motion’s common stock at no less than 100% of the market price at the date the option is granted. Incentive stock options granted to date typically vest at the rate of 33% on the anniversary of the vesting commencement date, and 1/24th of the remaining shares on the last day of each month thereafter until fully vested. The options expire ten years from the date of grant subject to cancellation upon termination of employment or in the event of certain transactions, such as a merger of New Motion. The options granted under the 2005 Plan were assumed by MPLC in the Exchange and, at that time of the Exchange, the MPLC’s board of directors adopted a resolution to not grant any further equity awards under the 2005 Plan.

21

On February 16, 2007, New Motion’s board of directors approved the 2007 Stock Incentive Plan (the “2007 Plan”). On March 15, 2007, New Motion received, by written consent of holders of a majority of all classes of its common and preferred stock and the consent of the holders of a majority of New Motion’s common stock and preferred stock voting together and as a single class, approval of the 2007 Plan. Under the 2007 Plan, officers, employees and non-employees may be granted options to purchase New Motion’s common stock at no less than 100% of the market price at the date the option is granted. Incentive stock options granted under the 2007 Plan typically vest at the rate of 33% on the anniversary of the vesting commencement date, and 1/24th of the remaining shares on the last day of each month thereafter until fully vested. The options expire ten years from the date of grant subject to cancellation upon termination of employment or in the event of certain transactions, such as a merger of New Motion.

Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS 123(R), using the modified prospective transition method. The adoption of SFAS 123(R) resulted in share-based compensation expense for the three months ended March 31, 2008 and 2007 of approximately $694,000 and $194,000, respectively.

In conjunction with the Merger, New Motion assumed Traffix’s existing stock option plans so that all outstanding Traffix employee stock options and other stock-based awards were converted into options and stock-based awards of New Motion, and those options and awards now entitle the holder to receive New Motion common stock. The number of shares issuable under those options and awards, and the exercise prices for those options and awards, were adjusted based on the Merger exchange ratio of 0.676. As a result of the change in control of Traffix, at the effective the date of the merger, all Traffix options fully vested.

The fair value of each option award, and number of awards, during the three months ended March 31, 2008 was estimated on the grant date using a Black-Scholes valuation model that used the assumptions in the flowing table. The Company also issued restricted stock during the three months ended March 31, 2008 with the assumptions listed below.

	2007			Outside
	Plan			of Plan
Stock options:
Shares underlying grant		300,000			300,000
Stock price	$	10.92		$	10.92
Strike price	$	10.92		$	10.92
Maturity		7 years			7 years
Risk free interest rate		3.5	%		3.5	%
Volatility		25.0	%		25.0	%
Fair market value per option	$	3.86		$	3.86
Forfeiture rate		5.0	%		5.0	%
Restricted stock:
Restricted shares		110,000
Stock Price	$	8.33
Fair market value per share	$	8.33

Note 6—Segments

The Company operates in one segment, basically being entertainment and network services and activities delivered over the internet and other hand held wireless devices. In classifying the financial information for our operating activities, management relies on the evaluations of its chief operating decision maker (CODM – as managed by committee) and executive management in deciding how to allocate Company resources and assess our performance. The statement of operations, as included in the “Management’s Discussion and Analysis”, provides detail between our entertainment services and online marketing network activities for net sales, cost of sales and gross margin. The Company’s workforce and other items are not clearly allocable to either the entertainment or the network gross margin due to the fact that staff, office space and all other overhead items are multi-purposed across both gross margin outputs.

22

Note 7—Commitments and contingencies

Litigation

        The Company is involved in various claims and legal actions arising in the ordinary course of business. Management is of the opinion that the ultimate outcome of these matters would not have a material adverse impact on the financial position of the Company or the results of its operations.

Note 8 - Subsequent Events

On May 2, 2008, the Company, pursuant to its restructuring and exit activities plan executed on its reduction in force (“RIF”) component, and released employees, with severance under such plan. Of the total severance and termination payments made of approximately $652,000, approximately $513,000 were attributable directly to the merger for the severance of Traffix, Inc. employees, and were charged to the merger accrual originally formed as part of the purchase price goodwill. The balance of the RIF disbursement, or approximately $139,000 were attributable to New Motion, Inc. employees, and correspondingly will be reflected as a Restructuring Charge in the quarter ending June 30, 2008.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The information contained in this Form 10-Q, as at and for the three month periods ended March 31, 2008 and 2007, and is intended to update the information contained in the Annual Report on Form 10-KSB for the year ended December 31, 2007 of New Motion, Inc. (“we,” “our,” “us”, the “Company,” or “New Motion”) and presumes that readers have access to, and will have read, the “Management’s Discussion and Analysis” and other information contained in our Form 10-KSB. The following discussion and analysis also should be read together with our consolidated financial statements and the notes to the consolidated financial statements contained in our Form 10-KSB, and also included elsewhere in this Form 10-Q.

This discussion summarizes the significant factors affecting our consolidated operating results, financial condition and liquidity and cash flows for the three months ended March 31, 2008 and the three months ended March 31, 2007. Except for historical information, the matters discussed in this“Management’s Discussion and Analysis” are forward-looking statements that involve risks and uncertainties and are based upon judgments concerning various factors that are beyond our control. Actual results could differ materially from those projected in the “forward-looking statements” as a result of, among other things, the factors described under the “Cautionary Statements and Risk Factors” included elsewhere in this report.

23

Overview of Atrinsic

New Motion, Inc., doing business as Atrinsic, is one of the leading digital advertising and entertainment networks in the United States. Atrinsic is organized as a single segment business with two divisions: (1) Networks activities – offering full service online marketing and distribution; and (2) Entertainment services – offering our unique content applications direct to users. Atrinsic brings together the power of the Internet, the latest in mobile technology, and traditional marketing/advertising methodologies, creating a fully integrated vehicle for sale and distribution of entertainment content, brand-based distribution and pay-for-performance advertising. Atrinsic’s Entertainment service’s content is organized into four strategic service groups – digital music, casual games, interactive contests, and communities/lifestyles. The Atrinsic brands include GatorArcade, a premium online and mobile gaming site, Bid4Prizes, a low-bid mobile auction interactive game, and iMatchUp, one of the first integrated web-mobile dating services. Feature-rich advertising services include a mobile ad network, extensive search capabilities, email marketing, one of the largest and growing publisher networks, and proprietary entertainment content. Headed by a team of Internet, new media, entertainment and technology professionals, Atrinsic will be headquartered in New York with offices in Irvine, CA, Seattle, WA, and Moncton, Canada.

Recent Merger Discussion

On September 26, 2007, New Motion (“New Motion” or the “Company”) executed a definitive Agreement and Plan of Merger (the “Merger Agreement”) with Traffix, and NM Merger Sub, a Delaware corporation and wholly-owned subsidiary of New Motion (“Merger Sub”), pursuant to which the Merger Sub would merge with and into Traffix, the separate existence of Merger Sub would cease, and Traffix would continue as the surviving corporation in the merger, thus becoming a wholly-owned subsidiary of New Motion (the “Merger”).

On February 4, 2008, New Motion completed its merger with Traffix (see Notes 2, 3 and 4 for further information, details and discussion of the merger’s accounting treatment, purchase price allocation and other information), pursuant to the Merger Agreement entered into by the companies on September 26, 2007. As a result of the closing of the transaction, Traffix became a wholly owned subsidiary of New Motion. Immediately following the consummation of the merger, Traffix stockholders owned approximately 45% of the capital stock of New Motion, on a fully-diluted basis. Each issued and outstanding share of Traffix common stock was converted into the right to receive approximately 0.676 shares of New Motion common stock based on the capitalization of both companies on the closing date of the merger. Effective the date of the close of the merger, New Motion commenced trading on The NASDAQ Global Market under the symbol “NWMO.” New Motion registered approximately 12.9 million shares after consideration of Traffix’s fully-diluted outstanding shares and option overhang, and issued approximately 10.4 million shares as a result of the conversion factor applied to the Traffix shares outstanding on February 4, 2008.

In February, 2008, the Company’s newly comprised board of directors approved management’s combined company operating budget to assist in the integration and reorganization of the combined enterprise arising from the recently completed merger. Management intends to continue the integration of both companies, focusing on maximizing certain operational efficiencies, while also positioning the combined group for sustained, profitable growth, as a leader in the mobile entertainment and performance-based online marketing industry. Also in February, the board of directors unanimously approved a change in the Company’s name from New Motion, Inc. to Atrinsic, Inc. (“Atrinsic”), subject to shareholder approval being sought at our annual meeting tentatively planned for late July 2008.

Recent History

Prior to the merger described above New Motion, Inc. was solely a digital entertainment company, and was headquartered in Irvine, California. The Company exclusively provided a wide range of digital entertainment products and services, using the power of the Internet, the latest in mobile technology, and traditional marketing/advertising methodologies. The Company’s product and service portfolio included contests, games, ringtones, screensavers and wallpapers, trivia applications, fan clubs and voting services, blogs and information services. New Motion’s business was solely focused on services in the following categories within one operating segment — digital music, casual games, interactive contests and communities and lifestyles. These services consisted of a broad array of properties, including Bid4Prizes, a low-bid mobile auction game and GatorArcade, a premium online and mobile gaming site. Other brands included iMatchup, a mobile dating service and MP3Giveaway, a digital music site. New Motion focused on selectively increasing its application portfolio with high-quality, innovative applications. Internally generated content was responsible for the majority of the Company’s net sales. The Company also licensed, and licenses, some identifiable content, such as ringtones, wallpapers and images from third parties to whom it generally pays a licensing fee on a per-download basis. The Company generated revenue on a subscription basis. The monthly end user subscription fees for the Company’s wireless entertainment products and services generally ranged from $3.99 to $9.99.

24

New Motion, Inc., formerly known as MPLC, Inc., and prior to MPLC, Inc. as The Millbrook Press, Inc. was incorporated under the laws of the State of Delaware in 1994. Until 2004, the Company was a publisher of children’s nonfiction books for the school and library market and the consumer market under various imprints. As a result of market factors, and after an unsuccessful attempt to restructure its obligations out of court, on February 6, 2004, the Company filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code with the United States Bankruptcy Court for the District of Connecticut (the “Bankruptcy Court”). After filing for bankruptcy, the Company sold its imprints and remaining inventory and by July 31, 2004, had paid all secured creditors 100% of amounts owed. At that point in time, the Company was a “shell” company with nominal assets and no material operations. Beginning in January 2005, after the Bankruptcy Court’s approval, all pre-petition unsecured creditors had been paid 100% of the amounts owed (or agreed) and all post petition administrative claims submitted had been paid. In December 2005, $0.464 per eligible share was available for distribution and was distributed to stockholders of record as of October 31, 2005. The bankruptcy proceedings were concluded in January 2006 and no additional claims were permitted to be filed after that date.

New Motion Mobile, the initial predecessor to pre-merger New Motion, Inc., was formed in March 2005 and subsequently acquired the business of RingtoneChannel, an Australian aggregator of ringtones in June 2005. RingtoneChannel was originally incorporated on February 23, 2004. In 2004, RingtoneChannel began to sell ringtones internationally and then launched its first ringtone subscription service in the U.S. in February 2005. In August 2005, New Motion Mobile launched its first successful text message campaign incorporating music trivia. In March of 2006, New Motion Mobile partnered with GoldPocket Wireless, now Motricity, a leading provider of mobile technology solutions for media and entertainment companies, to enhance the proficiency and performance of its mobile service offering.

On October 24, 2006, New Motion (then known as MPLC, Inc.) and certain stockholders entered into a Common Stock Purchase Agreement with Trinad Capital Master Fund, Ltd. (“Trinad”), pursuant to which New Motion agreed to redeem 23,448,870 shares of New Motion’s common stock from existing stockholders and sell an aggregate of 69,750,000 shares of New Motion’s common stock, representing 93% of New Motion’s issued and outstanding shares of common stock, to Trinad in a private placement transaction for aggregate gross proceeds of $750,000.

On January 19, 2007, New Motion Mobile entered into an agreement with Index Visual & Games, Ltd. (“IVG”) to purchase certain specified assets of Mobliss, a provider of proprietary applications, delivery systems, and platforms for wireless devices. In return for these assets, New Motion Mobile issued to IVG a convertible promissory note (the “IVG Note”). Mobliss has direct networking and billing connectivity with carriers for executing large-scale SMS campaigns and distributing mobile content to a wide array of mobile devices across multiple carrier networks in the U.S. and Canada. The primary strategic objective of this purchase was to allow New Motion to more efficiently manage its business and operations by enabling it to directly bill and collect from mobile carriers, thus eliminating the fees associated with using third party billing processors and expediting the collection of open carrier receivables. This purchase is expected to enable New Motion to better serve its customers and end users by expediting the time in which it reacts to changes in the marketplace. During the fourth quarter of 2007, and continuing into the current fiscal year, New Motion is allocating an increasing portion of its Cingular / AT&T new subscriber message traffic onto the acquired assets and developed technology, and expects to continue to allocate Cingular / AT&T traffic, at a manageable rate, through this system during our next three quarters.

Also on January 19, 2007, New Motion Mobile entered into an agreement with IVG to create an Asian-themed mobile entertainment portal, the first major endeavor of its kind in the North American off-deck arena. This new direct-to-consumer service provides an opportunity for New Motion to tap into a new market with Asian-themed content, delivering sophisticated mobile products. The joint venture was registered under the name The Mobile Entertainment Channel Corporation (“MECC”) and was established to assist New Motion in expanding its service offerings by partnering with IVG, a leading global player in the interactive games and mobile space. As of March 31, 2008, New Motion is continuing to evaluate the services and content offer capabilities of MECC, and as of yet has not deployed has services to a material degree.

In February, 2007, New Motion Mobile completed an exchange transaction (the “Exchange”) pursuant to which it merged with a publicly traded company, MPLC, Inc., so that New Motion Mobile became a publicly traded company. In connection with the Exchange, MPLC, Inc. (now called New Motion, Inc.) raised gross proceeds of approximately $20 million in equity financing through the sale of its Series A Preferred Stock, Series B Preferred Stock and Series D Preferred Stock.

25

After receiving approval by written consent of holders of a majority of all classes of its common and preferred stock and the approval of such holders voting together and as a single class, on May 2, 2007, MPLC, Inc. filed a certificate of amendment to its restated certificate of incorporation with the Delaware Secretary of State to effect the following corporate actions: (i) increase the authorized number of shares of its Common Stock from 75,000,000 to 100,000,000, (ii) change its corporate name to New Motion, Inc. from MPLC, Inc., and (iii) effect a 1-for-300 reverse split. As such, for comparative purposes, the 7,263,688 shares of outstanding common stock of the combined entity, after recapitalization and the 1-for-300 Reverse Split, has been retroactively applied to January 1, 2006 and consistently applied throughout all periods presented.

In accordance with the terms of the IVG Note, on June 15, 2007, IVG converted all outstanding principal and accrued interest on the IVG Note into 172,572 shares of common stock at a conversion price of $3.44 per share, the fair market value of the Company’s stock on the date of issuance of the IVG Note.

Business Strategy

Our business strategy involves increasing our profitability by offering a large number of diverse, segmented products through a unique distribution network in the most cost effective manner possible. To achieve this goal, we plan to pursue the following objectives.

Leverage the Cross Media Benefits of the Merger with Traffix. One of our strategic objectives is to leverage the cross media benefit from the combination of New Motion and Traffix. New Motion’s premium-billed subscriptions allow Atrinsic to integrate and to leverage Traffix’s online and New Motion’s mobile distribution channels to deliver compelling media and entertainment. The advantage of the fixed Internet is that from a marketing expense standpoint, the cost of customer acquisitions is generally determinable. In addition, the Internet is full of free content that is advertisement supported and the Internet also allows for the delivery of rich media over broadband. The advantage of mobile media is that it already has a well established customer activation and customer retention capability and is accessible and portable for those using it to access content. Our cross media strategy seamlessly enables our subscriber to realize true convergence. Atrinsic enables subscribers to interact with our content at work, at home or on a remote basis.

Vertically Integrate and Expand Distribution Options. As a result of the merger with Traffix, we are already beginning to see the benefits of margin expansion through vertical integration. We now own a large library of wholly owned content, proprietary premium billed services, and our own media and distribution. By allocating a large proportion of the marketing that the Atrinsic entertainment groups engage in through Atrinsic’s own marketing and distribution networks, we expect to generate cost savings through the elimination of third-party margins. These cost savings are expected to result in lower customer acquisition costs on the Network and Entertainment sides of the business. We also expect to continue to enhance our distribution channels by expanding existing channels to market and sell our products and services online and explore alternative marketing mediums. We also expect, with limited modification, to market and sell our existing online-only content directly to wireless customers. Finally, we expect to continue to drive a portion of our consumer traffic directly to our proprietary products and services without the use of third-party media outlets and media publishers.

Multiple Revenue Streams and Advertiser Networks. The merger with Traffix is expected to result in less customer concentration and more diversification of the combined company’s revenue streams. Atrinsic will continue to generate recurring revenue streams from a subscription–based business model, which is targeted at end user mobile subscribers. Atrinsic will also have the traditional revenue streams inherent in Traffix’s performance-based Internet business model, which is targeted to publishers and advertisers. Further revenue diversification is expected to result from the larger distribution reach of the combined company, and of the opportunity to generate ad revenue across the combined company’s portfolio of web properties.

Publish High-Quality, Branded Entertainment Content. We believe that publishing a diversified portfolio of the highest quality, most innovative applications is critical to our business. We intend to continue to develop innovative and sought-after content and intend to continue to devote significant resources to the development of high-quality, innovative products, services and Internet storefronts. The U.S. consumer’s propensity to use the fixed internet to acquire, redeem and use mobile entertainment products is unique. In this regard, we aim to provide complementary services between these two high-growth media channels. We also expect to continue to create Atrinsic-branded applications, products and services, which typically generate higher margins. In order to enhance the Atrinsic brand, and the brands of its products, we plan to continue building brands through product and service quality, subscriber, customer and carrier support, advertising campaigns, public relations and other marketing efforts.

26

Gain Scale Through Select Acquisitions. As demonstrated with our acquisition of Traffix, we believe there may be future opportunities to acquire other companies or products, where appropriate, to take advantage of the growth opportunities in the online advertising and mobile entertainment industries.

Application of Critical Accounting Policies and Estimates

We have identified the policies below as critical to our business operations and understanding of our financial results. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results may differ from these estimates under different assumptions or conditions.

Revenue Recognition and Receivables. We have two principal types of revenue, (1) the sale of subscription-based services inherent in our Entertainment services, which we recognize in accordance with Emerging Issues Task Force (“EITF”) No. 99-19, “Reporting Revenue Gross as a Principal Versus Net as an Agent,” and (2) sales from our Network activities, which are earned pursuant to marketing agreements with marketing partners and corporate customers, which we recognize in accordance with Staff Accounting Bulletin (SAB) 101, “Revenue Recognition in Financial Statements,” as modified by SAB 104.

Subscription Revenue

As it pertains to our subscription-based Entertainment sales, we recognize revenue from the sale or subscription of its applications to wireless subscribers under distribution agreements with wireless carriers and other distributors in the period in which the applications are purchased or over the period in which the applications are subscribed, assuming that: (a) fees are fixed and determinable; (b) we have no significant obligations remaining; and (c) collection of the related receivable is reasonably assured. For this subscription-based revenue, we make estimates and create reserves for future refunds, charge backs or credits in the period for which the sale occurs based on analyses of previous rates and trends, which have historically varied between zero and 17% of gross subscription revenue. This reserve is reconciled once a carrier remits total payment to our aggregator, who subsequently remits payment usually 45 to 180 days after billing. Management reviews the revenue by carrier on a monthly basis and gross billings on a daily basis to identify unusual trends that could indicate operational, carrier or market issues which could lead to a material misstatement in any reporting period. Additionally, on a weekly basis, management monitors cash settlements made by carriers to the aggregators. Our policy is to record differences between recognized subscription revenue and actual revenue in the next reporting period once the actual amounts are determined. To date, differences between estimates and ultimate reconciled revenues have not been significant.

Subscription revenue earned from certain aggregators may not be reasonably estimated. In these situations, our policy is to recognize revenue upon the receipt of a carrier revenue report, which usually is received just prior to actual cash collection (i.e., on a cash basis). These revenue amounts are not significant.

In accordance with Emerging Issues Task Force (“EITF”) No. 99-19, “Reporting Revenue Gross as a Principal Versus Net as an Agent,” we recognize as revenue the net amount the wireless carrier or distributor pays to us upon the sale of applications, net of any service or other fees earned and deducted by the wireless carrier or distributor. We have evaluated our wireless carrier and distributor agreements and has determined that we are not the principal when selling our applications through wireless carriers.

Network Revenue

We also earn net sales from our Network activities pursuant to marketing agreements with marketing partners and corporate customers. The provisions of each agreement determine the type and timing of revenue to be recorded. We invoice our customers in accordance with the terms of the underlying agreement. Revenue is recognized at the time the marketing activity is delivered, or service is provided, net of an estimated sales allowance, when applicable. Such sales allowance may include an estimate for duplications, invalid addresses, and/or age restrictions that are due from, but have not yet been reported to us by our customers. These sales allowances are recorded as contra-revenue. Our net sales are adjusted in later fiscal periods if actual sales allowances vary from amounts previously estimated. Historically, the variance between actual sales allowances and previously estimated sales allowances has been immaterial. If events were to occur that would cause actual sales allowances (which are recorded as offsets against gross revenue, as contra-revenues, in arriving at reported net revenue) to vary significantly from those originally estimated and reflected in the financial statements, we could suffer material deterioration in future fiscal period gross margins, and, therefore, our profitability, cash flows and capital resources could be adversely affected.

The customer agreements which comprise the Network revenue satisfy the “existence of persuasive evidence of an arrangement” required under the current revenue recognition rules under Staff Accounting Bulletin (SAB) 101 as modified by SAB 104. The provisions of each agreement determines the (a) pricing characteristics of the revenue generating activity, the specific type of revenue activity (e.g., Online Advertising or Search Engine Marketing), and (b) the method of the Company’s delivery obligations to, and acceptance obligations of its clients and customers, with (a) and (b) satisfying the criterion of SAB 101, that “sales price is fixed or determinable” and “delivery has occurred”. As a function of our client and customer acceptance process, we review bank and credit references, business financial statements, personal financial statements and/or obtain corporate officer guarantees (if appropriate), all of which satisfy the SAB 101 criteria, “collectibility is reasonably assured”. Based on this revenue recognition criteria, we recognize Network revenue when it is realizable and earned.

27

Certain revenue related obligations pertaining to our Network activities are recorded at the time revenue is recognized. They include costs payable to other online, as well as off-line, media companies for generating registered users and consumer data, database fee sharing costs under third-party database use agreements, email message delivery costs, contingent-based prize indemnification coverage (i.e. sweepstakes payout indemnification), estimated premium fulfillment costs related to the respective promotion (when and if applicable) and all other variable costs directly associated with completing our obligations relative to the revenue being recognized. When our estimates vary from that which was originally accrued, the associated variance is deemed a change in management’s estimate, and accordingly we take the increase or decrease to sales, costs, or overhead in the fiscal period that the variance is determinable.

Should the Internet operating landscape change resulting in (a) higher costs of acquiring consumer data and registered users for our websites; (b) higher costs of acquiring data for our marketing partners, compromising such marketing partners' ability to maintain adequate sized databases to allow for continued third-party database use agreements; (c) failure to maintain a lower cost of email delivery activities and web development and web hosting service costs as compared to our competitors, or being required to depend on third-party emailing service bureaus, to a degree higher, and/or at a cost in excess of our anticipated internally-generated costs, (d) our contingent-based prize indemnification premiums for indemnification coverage increasing due to an increase in the number of prize winners at the sites; or (e) unpredictable technology changes or commercial technology applications; then, if any one, or a combination, of the above factors were to materialize we could suffer material deterioration in future fiscal period revenue growth and gross margins and, therefore, our profitability, cash flows and capital resources could be materially adversely affected.

Network activities revenue recognition is also subject to provisions based on the probability of collection of the related trade accounts receivable. Management continuously evaluates the potential of the collectibility of trade receivables by reviewing such factors as deterioration in the operating results, financial condition, or bankruptcy filings, of our customers. As a result of this review process, we record bad debt provisions to adjust the related receivables' carrying amount to an estimated realizable value. Provisions for bad debts are also recorded due to the review of other factors, including the length of time the receivables are past due, historical experience and other factors obtained during the conduct of collection efforts. If circumstances change regarding our specific customers on an individual basis, or if demand for Internet direct marketing softens, or if the U.S. economy stumbles, our estimates for bad debt provisions could be further increased, which could adversely affect our operating margins, profitability, cash flows and capital resources.

Intangibles Assets Measurement and Recognition. For intangible assets acquired in the current, as well as prior fiscal years, such acquisitions were recorded in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets.” We recognize and measure the intangible assets acquired based on their fair value; in the case of an acquisition of a group of intangible assets, each asset’s relative fair value is used. We use independent third party valuation experts, and internally we use a wide range of valuation methodologies, including performing discounted cash flow analysis to assess the value of acquired intangible assets. Discounted cash flow analysis requires assumptions about the timing and amount of future cash inflows and outflows, risk factors, alternative cost of capital considerations, and terminal value calculations. 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 our businesses and their prospects, or changes in market conditions, could result in an impairment charge. As a result of the Traffix merger, New Motion recorded approximately $41 million in identifiable intangibles and approximately $86 million in goodwill. 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 flow projections; 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. At March 31, 2008 our book value was approximately $165 million and its market capitalization was approximately $113 million. We deem that the current decline in its share price is temporary, and has not impaired its goodwill and other intangible as at March 31, 2008.

Our valuation on the merger’s net assets has yet to be finalized; changes in the final valuation could potentially affect amortizable assets acquired and cause future fiscal periods to differ based on a change, if any.

28

Impairment of Long-Lived Assets. We assess impairment of our long-lived assets in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-lived Assets.” An impairment review is performed whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors considered by us include significant underperformances relative to expected historical or projected future operating results; significant changes in the manner of use of the acquired assets or the strategy for our overall business; and significant negative industry or economic trends. When we determine that the carrying value of a long-lived asset may not be recoverable based upon the existence of one or more of the above indicators of impairment, we estimate the future undiscounted cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future undiscounted cash flows and eventual disposition is less than the carrying amount of the asset, we recognize an impairment loss. We report an impairment loss in the amount by which the carrying amount of the asset exceeds the fair value of the asset, based on the fair market value if available, or discounted cash flows if not. To date, we have not had an impairment of long-lived assets.

For each of the periods reported herein, the Company’s management believes there is no impairment of its long-lived assets. There can be no assurance, however, that market conditions will not change or demand for the Company’s products or services will continue which could result in impairment of long-lived assets in the future.

Income Taxes. Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date.

Our estimate of the value of its tax reserves contains assumptions based on past experiences and judgments about the interpretation of statutes, rules and regulations by taxing jurisdictions. It is possible that the ultimate resolution of these matters may be greater or less than the amount estimated. If payment of these amounts proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period in which it is determined that the liabilities are no longer necessary. If the estimate of tax liabilities proves to be less than the ultimate assessment, a further charge to expense would result.

29

Accounting for Stock-Based Compensation. We have historically utilized the fair value method of recording stock-based compensation as contained in SFAS No. 123, “Accounting for Stock-Based Compensation,” as amended. Compensation expense is measured at the grant dated based on the value of the award and is recognized over the service period, which is usually the vesting period. The fair value of stock options is estimated on the grant date using the Black-Scholes option pricing model.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment,” (SFAS No. 123(R)”), which is a revision of SFAS No. 123. SFAS No. 123(R) supersedes Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” and amends SFAS No. 95, “Statement of Cash Flows.” Generally, the approach in SFAS No.123(R) is similar to the approach described in SFAS No. 123. However, SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. SFAS No. 123(R) also establishes accounting requirements for measuring, recognizing and reporting share-based compensation, including income tax considerations. One such change was the elimination of the minimum value method, which under SFAS No. 123 permitted the use of zero volatility when performing Black-Scholes valuations. Under SFAS No. 123(R), companies are required to use expected volatilities derived from the historical volatility of the company's stock, implied volatilities from traded options on the company's stock and other factors. SFAS No. 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current accounting literature.

The provisions of SFAS No. 123(R) were effective for and adopted by us as of January 1, 2006. As we were using the fair market value accounting for stock based compensation pursuant to SFAS No. 123, the adoption of SFAS No. 123(R) was under the modified prospective method. Under the modified prospective application, the cost of new awards and awards modified, repurchased or cancelled after the required effective date and the portion of awards for which the requisite service has not been rendered (unvested awards) that are outstanding as of the required effective date will be recognized as the requisite service is rendered on or after the required effective date. The compensation cost for that portion of awards shall be based on the grant-date fair value of those awards as calculated under SFAS No. 123.

Since we had previously recorded stock compensation expense under the fair value method prescribed by SFAS No. 123, the adoption of SFAS No. 123(R) did not have a significant impact on our results of operations.

30

Product Development Costs. We expense product development costs, which consist primarily of software development costs, as they are incurred. We account for software development costs in accordance with SFAS No. 86, “Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed.” We expense software development costs that we incur in the research and development of software products and enhancements to existing software products until the time when we establish technological feasibility, and we capitalize costs from that time until the product is available for general release to customers. Under our current practice of developing new applications, the technological feasibility of the underlying software is not established until substantially all product development is complete, which generally includes the development of a working model. As a result, to date, we have not capitalized any costs relating to our application development because the costs incurred after the establishment of technological feasibility of our applications have not been significant. In addition, in the future, we will consider the following factors in determining whether costs can be capitalized: the emerging nature of the wireless entertainment market; the rapid evolution of the platforms and mobile phones on which we develop; the lack of pre-orders or sales history for our applications; the uncertainty regarding an application's revenue-generating potential; our lack of control over the sales channel resulting in uncertainty as to when an application will be available for sale, if at all; and our historical practice of canceling applications throughout each stage of the development process. We do not consider the amount of our software development costs to be material for the periods presented.

Consolidation. The condensed consolidated financial statements include the accounts of Traffix, Inc., a subsidiary acquired through a merger, effective February 4, 2008; the condensed consolidated financial statements had included the accounts of RingtoneChannel from its inception in February 2004, and the accounts of New Motion Mobile from its inception in March 2005. All significant intercompany balances and transactions have been eliminated in consolidation.

During fiscal 2006, New Motion focused its efforts on the high-growth opportunities in the United States digital applications market, as such, since the fourth quarter of fiscal 2006, the operations and accounts of the RingtoneChannel were essentially blended into the operations of New Motion Mobile and New Motion began the process for the eventual dissolution of the legal entity formerly known as the RingtoneChannel.

Beginning in the first quarter of 2007, New Motion’s consolidated financial statements also include the accounts of its joint venture, MECC. On January 19, 2007, New Motion entered into a Heads of Agreement with IVG, setting forth the terms of the joint venture to distribute IVG content within North America and to manage and service the Mobliss assets acquired from IVG. In accordance with FASB Interpretation No. 46(R), “Consolidation of Variable Interest Entities (revised December 2003) - an interpretation of ARB No. 51,” the results of MECC have been consolidated with New Motion’s accounts because New Motion (i) currently controls the joint venture’s activities, (ii) will share equally in any dividends or other distributions made by the joint venture, and (iii) expects to fund the joint venture and absorb the expected losses for the foreseeable future. New Motion owns a 49% stake and IVG owns a 51% stake in the joint venture. As a result of the consolidation, the minority interest liability on New Motion’s balance sheet represents IVG’s cumulative interest in the operating results of the joint venture, less any distributions paid to the minority interest.

We have consolidated the accounts of our Mobile Entertainment Channel Corporation (“MECC”) joint venture, in accordance with FASB Interpretation No. 46(R), “Consolidation of Variable Interest Entities (revised December 2003) – an interpretation of ARB No. 51.” The results of MECC have been consolidated with our accounts because we (i) currently control the joint venture’s activities, (ii) will share equally in any dividends or other distributions made by the joint venture, and (iii) expect to fund the joint venture for the foreseeable future. We own a 49% stake and IVG owns a 51% stake in the joint venture.

The consolidation of MECC reflects the elimination of all intercompany transactions. MECC is reflected with the following balances in our consolidated balance sheet at March 31, 2008: current assets of $739,000 and current liabilities of $183,000. MECC’s results of operations are reflected in our consolidated statement of operations for the three months ended March 31, 2008 as minority interest of $29,000, net of provision for income tax of $44,000. The minority interest reflects our joint venture partner’s portion of MECC’s net income or loss for the period.

In the future, we will consider the following factors in determining whether this joint venture entity, or other entities should be consolidated: (i) whether the variable interest entity (“VIE”) has sufficient equity investment at risk and (ii) whether equity investors in the VIE lack any of the following three characteristics of controlling financial interest: (a) participate in decision-making processes by voting their shares, (b) expect to share in returns generated by the entity and (c) absorb any losses the entity may incur.

31

SELECTED FINANCIAL DATA

The following table provides a summary of our consolidated results of operations for the three months ended March 31, 2008 and March 31, 2007 (dollars in thousands):

	THREE						THREE
	MONTHS			AS A			MONTHS			AS A
	ENDED			% OF			ENDED			% OF
	MARCH			NET			MARCH			NET
	31, 2008 (1)(2)			SALES			31, 2007 (2)			SALES
Net sales	$	28,738			100	%	$	5,642			100	%
Cost of sales		14,486			50	%		726			13	%
Gross profit		14,252			50	%		4,916			87	%
Selling and Marketing		6,573			23	%		2,987			53	%
General and administrative expenses		8,064			28	%		2,200			39	%
Restructuring Charge		240			1	%		-			-
Other (income) expense, net		(155	)		-1	%		(58	)		-1	%
Loss before provision for income taxes		(470	)		-2	%		(213	)		-4	%
Provision for income taxes		(174	)		-1	%		4			-
Loss before minority interest		(296	)		-1	%		(217	)		-4	%
Minority interest		(29	)		0	%		155			3	%
Net loss	$	(276	)		-1	%	$	(372	)		-7	%

NOTE: Prior year presentations have been changed to conform to fiscal 2008 presentation, which changes did not impact net income.

(1) On February 4, 2008, we acquired Traffix, Inc. through a non-taxable, stock-for-stock, merger transaction. From February 4, 2008 to March 31, 2008, our accounts include the income statement activity of Traffix, Inc.

(2) On January 29, 2007, we entered into an agreement with Index Visual & Games, Ltd. (“IVG”) creating the joint venture, The Mobile Entertainment Channel Corporation (“MECC”). MECC’s accounts are included for the period January 29, 2007 to March 31, 2007, and for the entire period ended March 31, 2008.

Results of Operations for the three months ended March 31, 2008 compared to three months ended March 31, 2007.

The following analysis and discussion pertains to our results of operations for the three months ended March 31, 2008, compared to our results of operations for the three months ended March 31, 2007 (Dollars presented in tables are in thousands).

32

Our net sales, and disclosure of our net sale components, for each of the three-month periods ended March 31, 2008 and March 31, 2007, are set forth below:

Net Sale Components – Entertainment Services and Network Activities

(in thousands, except share data)

	THREE MONTHS ENDED				CHANGE		CHANGE
	MARCH 31,				INC(DEC)		INC(DEC)
	2008		2007		$$$		%%%
Entertainment Services	$	13,107	$	5,642	$	7,465		132	%
Network Activities		15,631		-		15,631		100	%
Total Net Sales	$	28,738	$	5,642	$	23,096		409	%

Net sales increased approximately $23.1 million, or 409%, to $28.7 million for the three months ended March 31, 2008, compared to $5.6 million for the three months ended March 31, 2007. Entertainment Service net sales increase by approximately $7.5 million, or 132%, to $13.1 million for the three months ended March 31, 2008, compared to $5.6 million for the three months ended March 31, 2007. Approximately 68% of the increase in net sales, or $15.6 million, was attributable to net sales included in the first quarter of fiscal 2008 arising from our acquisition of Traffix, Inc., which was effective as of February 4, 2008.

The increase in Entertainment Service net sales of approximately $7.5 million, or 132% was principally attributable to the expansion of our entertainment service offerings into new areas during the 2007 fiscal year’s 2^nd, 3^rd and 4^th quarters, where we invested substantial marketing expenses in the acquisition of new customers to our recurring billed subscriber base and increased efforts to improve our retention of customers. This resulted in an increase in our subscriber base in the first quarter of fiscal 2008. We ended the first quarter of 2008 with approximately one million subscribers, compared to approximately 840,000 at the end of the fourth quarter of fiscal 2007.

The Network Activities net sales, for each of the three months ended March 31, 2008 and March 31, 2007, were generated within the following categories, as set forth below:

	THREE MONTHS ENDED				CHANGE		CHANGE
	MARCH 31,				INC(DEC)		INC(DEC)
	2008		2007 (1)		$$$		%%%
Network Activities Net Sales
Online Promtional and Content	$	4,830	$	-	$	4,830		100	%
Search Engine Marketing		8,332		-		8,332		100	%
Affiliate Networks		2,279		-		2,279		100	%
Email and data		190		-		190		100	%
Total Network net sales	$	15,631	$	-	$	15,631		100	%

(1) During the three month period ended March 31, 2008, we acquired Traffix, Inc., effective February 4, 2008, in a merger transaction. As more fully described in the Notes to the attached unaudited financial statements, and elsewhere within this Management’s Discussion and Analysis, the accounting treatment of the merger called for including the accounts of Traffix, Inc. as of February 4, 2008, and for the operating period February 4, 2008 to March 31, 2008.

Our cost of sales during the three months ended March 31, 2008 were comprised of internally generated customer acquisition costs associated with the acquisition and retention of customers in our Entertainment Services activities and the acquisition and retention of clients in our Network activities. Our cost of sales during the three months ended March 31, 2007 were comprised of direct and indirect customer acquisition costs associated with the acquisition and retention of customers in our Entertainment Services. As described above, and elsewhere within this Form 10-Q, we acquired Traffix, Inc., through a merger transaction, effective February 4, 2008, and in accordance with the accounting treatment of the purchase accounting transaction, our accounts reflect the inclusion of the Traffix, Inc. merger accounts at February 4, 2008, and for the period February 4, 2008 to March 31, 2008.

33

Our cost of sales, and disclosure of the cost of sale components, for each of the three-month periods ended March 31, 2008 and March 31, 2007, are set forth below:

Cost of Sale Components – Entertainment Services and Network Activities

	THREE MONTHS ENDED				CHANGE		CHANGE
	MARCH 31,				INC(DEC)		INC(DEC)
	2008		2007		$$$		%%%
Entertainment Services	$	3,816	$	726	$	3,090		426	%
Network Activities		10,670		-		10,670		100	%
Total Net Sales	$	14,486	$	726	$	13,760		1895	%

Cost of sales increased approximately $13.8 million, or over 18 fold, to approximately $14.5 million for the three months ended March 31, 2008, compared to $0.7 million for the three months ended March 31, 2007. Entertainment Service cost of sales increased by approximately $3.1 million, or 426%, to $3.8 million for the three months ended March 31, 2008, compared to $0.7 million for the three months ended March 31, 2007. Approximately 97% of the increase in cost of sales, or $13.4 million, was attributable to cost of sales included in the first quarter of fiscal 2008 arising from our acquisition of Traffix, Inc., which was effective as of February 4, 2008. Regarding this cost of sale increase of $13.4 million attributable to the Traffix, Inc. merger: (a) approximately $2.7 million was incurred subsequent to the merger date to March 31, 2008, for the acquisition of Entertainment Services customers through Traffix media vendors; and (b) approximately $10.7 million was incurred subsequent to the merger date to March 31, 2008, for the acquisition of Network Activity clients.

The Entertainment cost of sale increase of approximately $3.1 million, or 426%, was directly attributable to increased costs associated with the fixed fee payments earned by our vendors in connection with their acquisition of Entertainment Service subscribers during the three month period ended March 31, 2008, when compared to the three months ended March 31, 2007. Of the $3.8 million in cost of sales, approximately $1.1 million was attributable to vendors that New Motion, Inc. had conducted business with prior to the merger, and $2.7 million was attributable to vendors associated with our Traffix, Inc. subsidiary, and incurred subsequent to the February 4, 2008, effective merger date.

The Network Activities cost of sales, for each of the three-month periods ended March 31, 2008 and March 31, 2007, were generated within the following categories, as set forth below:

Network Activities Cost of Sales

	THREE MONTHS ENDED				CHANGE		CHANGE
	MARCH 31,				INC(DEC)		INC(DEC)
	2008		2007		$$$		%%%
Online Promtional and Content	$	2,412	$	-	$	2,412		100	%
Search Engine Marketing		6,499		-		6,499		100	%
Affiliate Networks		1,744		-		1,744		100	%
Email and data		15		-		15		100	%
Total Network Activities Cost of Sales	$	10,670	$	-	$	10,670		100	%

34

The Network Activities cost of sales of approximately $10.7 million was directly attributable to: (a) $6.5 million in costs associated with conducting our search engine marketing activities, with such costs representing fees incurred from the major search engines; (b) approximately $2.4 million incurred in procuring marketing media in the acquisition of customers for our Online Promotional and Content client offerings; and (c) approximately $1.7 million incurred in fees paid to affiliates if the conduct of our Affiliate Network activities, with all the above incurred during the three months ended March 31, 2008.

Our gross profit in terms of dollars, on a consolidated basis and a component basis, and our gross profit percentage, on a consolidated basis and a component basis, for each of the three-month periods ended March 31, 2008 and March 31, 2007, for our Entertainment Services and Network Activities, are set forth below:

Consolidated Gross Profit
	THREE MONTHS ENDED				CHANGE		CHANGE
	MARCH 31,				INC(DEC)		INC(DEC)
	2008		2007		$$$		%%%
Entertainment Services	$	9,291		4,916	$	4,375		89	%
Network Activities		4,961		-		4,961		100	%
Consolidated Gross Profit	$	14,252	$	4,916	$	9,336		190	%

Consolidated Gross Profit

							ABSOLUTE			RELATIVE
	THREE MONTHS ENDED						CHANGE			CHANGE
	MARCH 31,						INC(DEC)			INC(DEC)
	2008			2007			$$$			%%%
Entertainment Services		71	%		87	%		-16	%		-19	%
Network Activities		32	%		0	%		32	%		100	%
Consolidated Gross Profit		50	%		87	%		-37	%		-42	%

Network Activities Gross Profit
	THREE MONTHS ENDED				CHANGE		CHANGE
	MARCH 31,				INC(DEC)		INC(DEC)
	2008		2007		$$$		%%%
Online Promtional and Content	$	2,418	$	-	$	2,418		100	%
Search Engine Marketing		1,833		-		1,833		100	%
Affiliate Networks		535		-		535		100	%
Email and data		175		-		175		100	%
Total Network Activities Gross Profit	$	4,961	$	-	$	4,961		100	%

35

Network Activities Gross Profit
							ABSOLUTE			RELATIVE
	THREE MONTHS ENDED						CHANGE			CHANGE
	MARCH 31,						INC(DEC)			INC(DEC)
	2008			2007			$$$			%%%
Online Promtional and Content		50	%		0	%		50	%		100	%
Search Engine Marketing		22	%		0	%		22	%		100	%
Affiliate Networks		23	%		0	%		23	%		100	%
Email and data		92	%		0	%		92	%		100	%
Total Network Activities Gross Profit		32	%		0	%		32	%		100	%

Our consolidated gross profit, in absolute dollars, increased by approximately $9.3 million, or 190%, and was partially the result of the gross profit attributable to our Network Activities, specifically as they relate to our Traffix, Inc. merger acquisition, which occurred within the current quarter. The Network Activities accounted for approximately 53% of the quarter-over-quarter increase in consolidated gross profit. This increase was supplemented by an increase in the gross profit attributable to our Entertainment Services, which is directly the result of our increased revenues; note that gross margin for our Entertainment Services increased 89% on a quarter-over-quarter basis, compared to a 132% increase in the related Entertainment Service net sales on a quarter-over-quarter basis. The differing relationship in the previously mentioned percentages, was attributable to a decline in our gross margin generated from our Entertainment Service activities of approximately 16% in absolute terms, and 19% in relative terms, which directly resulted from amounts included in our cost of sale accounts for customer acquisition costs incurred for our benefit by our Traffix, Inc. subsidiary’s media vendors in the first quarter of fiscal 2008; prior to the merger transaction such costs were treated as marketing expenses, within our selling expense category, on a separate company basis, and therefore were excluded from having an impact on margin.

Our consolidated gross profit as a percentage of net sales was 50% during the three months ended March 31, 2008, compared to 87% in the prior year’s first quarter, representing an absolute decline of 37%, and a relative decline of 42% when compared to our prior year’s first quarter. The variance in our reported gross profit percentage is the result of the contribution to gross margin from our Network Activities arising from our Traffix, Inc. merger, which are less, in terms of gross margin percentages, then that which was historically recognized by New Motion, Inc., coupled with the inclusion in cost of sales for customer acquisition costs incurred on our behalf by our Traffix, Inc. subsidiary for the benefit of our Entertainment Service activities, which were previously treated as a marketing expense, and included in our selling expense category, prior to the consummation of the merger.

Regarding the single month of January 2008, as it relates to Traffix, Inc., prior to the merger, Traffix, Inc. recorded approximately $10.6 million in net sales, of which approximately $1.9 million was attributable to net sales made to New Motion, Inc.

Traffix, Inc. incurred costs of approximately $7.4 million in generating such sales in January 2008, yielding a gross profit of approximately $3.2 million, with a corresponding gross profit margin of approximately 30%. The $1.9 million in net sales generated in January 2008 for New Motion, Inc. by Traffix, Inc. yielded a gross profit of approximately $0.41 million, with a corresponding gross profit margin of approximately 21%.

Our selling expense, on a consolidated basis, for each of the three month periods ended March 31, 2008 and 2007 are set forth below:

36

Selling Expense Components
	THREE MONTHS ENDED				CHANGE		CHANGE
	MARCH 31,				INC(DEC)		INC(DEC)
	2008		2007		$$$		%%%
Marketing expenses	$	6,069	$	2,987	$	3,082		103%
Selling salaries and related costs		464		-		464		100%
Travel and entertainment		40		-		40		100%
				-		-		100%
Total Selling Expenses	$	6,573	$	2,987	$	3,586		120%

Selling expenses on a consolidated basis, increased by approximately $3.6 million, or 120%, to $6.6 million during the three months ended March 31, 2008, as compared to approximately $3.0 million incurred during the three months ended March 31, 2007. The following tables set forth the components of the selling expenses as they relate to our Entertainment Services and Network Activities, furthermore we provide a discussion of the comparable quarter over quarter fluctuations for such accounts. Marketing expenses, attributable to our Entertainment Services increased by approximately $3.1 million, or approximately 86% of our consolidated increase in selling expenses. Included within the $3.2 million increase is approximately $1.9 million in marketing expenses incurred from Traffix, Inc., for the period January 1, 2008 to February 3, 2008, the period prior to the effective date of our Traffix, Inc. merger closing. The balance of the increase or approximately $1.3 million is attributable to increases in marketing costs expended with our other marketing partners and client acquisition vendors, which partially helped to support our 132% increase in Entertainment Service revenues. Selling expenses included above are attributable to our Network Activities, and increased by approximately $0.5 million, or approximately 14% of our consolidated increase in selling expenses. All such selling expenses are attributable to our Network Activities, and are the product of our Traffix, Inc. merger transaction. Selling expenses include selling salaries and commission expenses related to our Network Activities sales force and their related travel and entertainment expenses. During the month of January 2008, prior to our acquisition, Traffix, Inc. incurred approximately $0.26 million in selling expenses.

37

Our consolidated general and administrative expenses (“G&A”) are principally comprised of (a) compensation expense and related benefit expense for executives, finance, information technology, marketing, and general administration personnel, (b) professional fees (which include legal; audit, accounting and tax; public relations; database management and outside consulting; and public company related printing and filing costs), (c) insurance costs, (d) occupancy and other equipment rental costs, (e) salaries, depreciation, amortization and other related operating costs associated with our internally maintained site development, maintenance and modification teams currently located in Moncton, Canada and Seattle, Washington, and (f) all other general and administrative corporate expense items. Our workforce and capital assets are multi-purposed and serve each of our entertainment and network activities somewhat equally, but specific allocation of resources is not calculable. Our CODM uses gross margin to determine the allocation of resources to our combined overhead, and to assess our performance in terms of consolidated income from operations.

Our consolidated general and administrative expense for the three months ended March 31, 2008 and March 31, 2007 are set forth below:

	THREE MONTHS ENDED				CHANGE		CHANGE
	MARCH 31,				INC(DEC)		INC(DEC)
	2008		2007		$$$		%%%
Compensation and related costs	$	4,353	$	976	$	3,377		346%
Professional Fees		2,065		786		1,279		163%
Insurance Costs		120		5		115		2300%
Occupancy and equipment costs		328		83		245		295%
Depreciation and amortization		417		195		222		114%
All other miscellaneous G&A		781		155		626		404%
Total General and Administrative Expense	$	8,064	$	2,200	$	5,864		267%

General and administrative expenses on a consolidated basis, increased by approximately $5.9 million, or 267%, to $8.1 million during the three months ended March 31, 2008, as compared to approximately $2.2 million incurred during the three months ended March 31, 2007.

When comparing the two quarterly periods ended March 31, 2008 and 2007, respectively, the increases in general and administrative expenses are attributable to the significant growth in our business: from both organic means, as well as through the acquisition of Traffix, Inc. This increase of $5.9 million, or approximately 267% includes the impact of increased headcount in growing our business organically (approximately $1.6 million including approximately $0.7 million in non-cash stock compensation expense) and compensation and related costs resulting from the acquisition of Traffix, Inc. ($1.9 million). Professional fees increased by approximately $1.3 million as a result of increased expenses incurred for legal, accounting, tax services and Sarbanes/Oxley compliance expenses. Occupancy costs increased approximately $245,000 as a result of increased office space occupied in our California presence, coupled with the rents expense attributable to leases assumed in the merger transaction. The increases in all other G&A expenses were principally attributable to the acquisition, coupled with increases in our legacy costs arising from our organic growth, outside of the effects of the merger transaction.

38

Liquidity and Capital Resources

As of March 31, 2008, the Company had cash and cash equivalents of approximately $16,932,000, marketable securities of approximately $19,672,000 and a working capital balance of approximately $30,053,000. As of December 31, 2007, the Company had cash and cash equivalents of approximately $987,000 and a working capital balance of approximately $14,041,000. The Company’s positive cash balance results primarily from investing activities. In the first quarter of 2008, the Company received net proceeds of $12 million as a result of the merger with Traffix, Inc.

New Motion believes that its existing cash and cash equivalents and anticipated cash flows from our operating activities will be sufficient to fund minimum working capital and capital expenditure needs for at least the next twelve months. The extent of the Company’s future capital requirements will depend on many factors, including its results of operations. If the Company’s cash from operations is less than anticipated or its working capital requirements or capital expenditures are greater than it expects, or if the Company expands its business by acquiring or investing in additional technologies, it may need to raise additional debt or equity financing. The Company is continually evaluating various financing strategies to be used to expand its business and fund future growth. There can be no assurance that additional debt or equity financing will be available on acceptable terms or at all. The inability to obtain additional debt or equity financing, if required, could have a material adverse effect on the Company’s operations.

Cash Flows

The Company currently satisfies its working capital requirements through cash flows from operations, supplemented by cash generated from recent acquisitions. Cash flows provided by (used in) operating, investing and financing activities for the three months ended March 31, 2008 and 2007 are set forth in the following table (Dollars in thousands):

	Three Months Ended
	March 31,
	2008			2007
Operating Activities	$	3,246		$	(367	)
Investing Activities		14,749			(92	)
Financing Activities		(1,958	)		17,635
Effect of exchange rate changes		(92	)		-
Net change in cash and cash equivalents	$	15,945		$	17,176

39

Cash Provided By (Used In) Operating Activities

New Motion’s cash requirements are principally for working capital. For the three months ended March 31, 2008, cash provided by operating activities was $3,375,000, compared to cash used in operating activities of $367,000 for the three months ended March 31, 2007. The Company’s operating cash flows result primarily from cash received from its aggregator customers and online advertising clients, offset by cash payments the Company makes for products and services, including sales and marketing expenses, media costs, employee compensation and consulting fees. Cash received from customers generally corresponds to net sales.

Cash Provided By (Used) In Investing Activities

For the three months ended March 31, 2008, cash provided by investing activities was $14,622,000, compared to $92,000 used in investing activities for the three months ended March 31, 2007. The Company’s investing cash flows are comprised of purchases of fixed assets, net proceeds from sales of securities and cash received in connection with the merger with Traffix, Inc.

Cash Provided By (Used In) Financing Activities

For the three months ended March 31, 2008, cash used in financing activities was $1,958,000, compared to cash provided by financing activities of $17,635,000 for the three months ended March 31, 2007. Cash used in financing activities resulted primarily from acquisition costs in connection with the Traffix merger, issuances of stock, issuance and repayment of notes payable and payments on capital lease obligations.

On January 19, 2007, New Motion entered into an Asset Purchase Agreement with IVG, pursuant to which it purchased from IVG certain specified assets of Mobliss. In exchange for the assets specified in the Asset Purchase Agreement, New Motion issued IVG a convertible promissory note in the initial principal amount of $500,000, with an aggregate maximum principal amount of up to $2,320,000. The IVG Note bore interest at the rate of five percent per annum accruing from the initial issuance of the IVG Note and matured on the earlier of November 30, 2007 or 30 days after delivery by IVG of written notice to us demanding payment. As a result of the assignment of one of the cellular carrier connection contracts listed in the Asset Purchase Agreement, on January 26, 2007, the Company increased the principal amount of the IVG Note by $580,000 to $1,080,000. On February 26, 2007, the Company repaid $500,000 of the IVG Note.

In accordance with the terms of the IVG Note, on September 15, 2007, IVG converted all outstanding principal and accrued interest on the IVG Note into 172,572 shares of common stock at a conversion price of $3.44 per share, the fair market value of the Company’s stock on the date of issuance of the IVG Note. As a result of the conversion, the IVG Note has been fully extinguished and no further amount is owed to IVG.  

In accordance with the Heads of Agreement, New Motion is required to pay a fee for management services rendered by the joint venture equal to 10% of the revenue generated from the assets New Motion acquired from IVG, up to the purchase price paid under the Asset Purchase Agreement, or $1,080,000. This management fee is to be fully paid by June 30, 2008.

New Motion made an advance payment on the management fee of $500,000 on March 12, 2007, and made another, final, advance payment of $500,000 on September 4, 2007. As of the end of the fourth quarter of 2007, New Motion is evaluating, in conjunction with IVG, services and content to be offered by MECC.

In February, 2007, New Motion Mobile completed an exchange transaction (the “Exchange”) pursuant to which it merged with a publicly traded company, MPLC, Inc., so that New Motion Mobile became a publicly traded company, trading under the ticker “MPNC” on the Over-The-Counter Bulletin Board. In connection with the Exchange, the Company raised gross proceeds of approximately $20 million in equity financing through the sale of its Series A Preferred Stock, Series B Preferred Stock and Series D Preferred Stock.

On February 4, 2008, New Motion completed the transactions contemplated by the Agreement and Plan of Merger executed on September 26, 2007 by and among New Motion, NM Merger Sub and Traffix pursuant to which Merger Sub merged with and into Traffix. As a result of the Merger, Traffix became a wholly-owned subsidiary of New Motion. The Merger was approved by the stockholders of each of New Motion and Traffix on January 31, 2008. In consideration for the Merger, shareholders of Traffix received approximately 0.676 shares of common stock of New Motion for each share of Traffix common stock. In the aggregate, New Motion issued approximately 10,409,000 shares of New Motion stock to Traffix shareholders. In addition, under the terms of the Merger Agreement, a stock option to purchase shares of Traffix converted into and became an option to purchase New Motion common stock, and New Motion assumed such option in accordance with the terms of the stock option plan or agreement under which that option was issued, subject to an option exchange ratio calculated in accordance with the Merger Agreement.

40

Contractual Obligations and Off Balance Sheet Arrangements

At March 31, 2008 and March 31, 2007, the Company did not have any relationships with unconsolidated entities or financial partnerships, 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. As such, the Company is not exposed to any financing, liquidity, market or credit risk that could arise if it had engaged in such relationships.

The following table shows the Company’s future commitments for future minimum lease payments required under operating leases that have remaining noncancellable lease terms in excess of one year and future commitments under employment agreements, as of March 31, 2008 (Dollars in thousands):

					Total
	Operating		Employment		Contractual
	Leases		Agreements		Obligations
2008	$	1,190	$	1,280	$	2,470
2009		1,575		1,290		2,865
2010		1,306		1,132		2,438
2011		1,201		35		1,236
Thereafter		3,921		-		3,921
	$	9,193	$	3,737	$	12,930

Due to the payment terms of the carriers requiring in excess of 60 days from the date of billing or sale, New Motion utilizes an advance program offered by its aggregators. This advance program feature allows for payment of 70% of the prior month’s billings within 15 to 20 days after the end of the month. For this feature, New Motion pays an additional fee, ranging from 2.5% to 5% of the amount advanced. For the three months ended March 31, 2008, the gross amount of invoices subject to the advance program totaled approximately $10.8 million. The total advance amount of these invoices equals approximately $8.7 million. As of March 31, 2008, New Motion had contra assets in the form of reserves and allowances of approximately $0.42 million against such advanced amounts. This compares to $5.7 million of gross invoices subject to the advance program for the three months ended March 31, 2007, of which the total advance amount of these invoices equaled approximately $3.9 million. This advance program is offered on a forward-recourse basis, with potential recourse accessed against future advances. Gross sales for each month are reported net of any of these advance fees. New Motion believes that the reserve established against the accounts receivable balance at March 31, 2008, is adequate to absorb all future processed credits, chargebacks and allowances issued to our customers by the carriers.

Item 3. Quantitative and Qualitative Disclosures About Market Risk 

Not required.

Item 4T. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The SEC defines the term “disclosure controls and procedures” to mean a company’s controls and other procedures that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms.

As discussed in our Annual Report on Form 10-KSB for the year ended December 31, 2007, we identified two material weaknesses pertaining to controls related to (i) the treatment of events subsequent to the year ended December 31, 2007, and (ii) our consolidation process.

41

In order to address these material weaknesses, during the quarter ended March 31, 2008 we implemented procedures to provide an additional layer of supervisory review of subsequent event transactions and implemented a comprehensive set of consolidation protocols to improve our controls and procedures over financial reporting.

Members of the Company's management, including our Chief Executive Officer, Burton Katz, and Chief Financial Officer, Dan Harvey, have evaluated the effectiveness of our disclosure controls and procedures, as defined by paragraph (e) of Exchange Act Rules 13a-15 or 15d-15, as of March 31, 2008, the end of the period covered by this report. Based upon that evaluation other than as described above, Messrs. Katz and Harvey concluded that our disclosure controls and procedures were effective as of March 31, 2008, the end of the quarterly period covered by this report.

INTERNAL CONTROL OVER FINANCIAL REPORTING

Other than as described above, there were no changes in our internal control over financial reporting or in other factors identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the first quarter ended March 31, 2008 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 4. Submission of Matters to a Vote of Security Holders

During the quarter covered by this report, our security holders voted on matters submitted to a vote of security holders through the solicitation of proxies. The date of the special meeting was January 31, 2008. The following table provides a brief description of each matter voted upon at the special meeting and the number of votes cast for or against or withheld, as well as the number of abstentions and broker non-votes as to each such matter.

Matters Voted	For		Against or Withheld		Abstentions And Broker Non-votes
Proposal to approve the issuance of New Motion common stock in connection with the merger contemplated by the Agreement and Plan of Merger, dated September 26, 2007, by and among Traffix, Inc., NM Merger Sub, Inc. and New Motion, Inc.		7,937,121		-		-
Proposal to grant discretionary authority to management to adjourn the special meeting, if necessary, to solicit additional proxies if there appear to be insufficient votes at the time of the special meeting to approve any of the foregoing proposals		7,936,821		200		100
To transact such other business as may properly come before the meeting or any adjournment or adjournments thereof		7,711,721		400		225,000

42

PART II – OTHER INFORMATION

Item 1A. Risk Factors

Risk Factors

Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors and all other information contained in this report before purchasing our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that management is unaware of, or that it currently deems immaterial, also may become important factors that affect us. If any of the following risks occur, our business, financial condition, cash flows and/or results of operations could be materially and adversely affected. In that case, the trading price of OUR common stock could decline, and stockholders are at risk of losing some or all of the money invested in purchasing our common stock.

We face substantial risks and uncertainties in our operating and competitive marketing environment and some of our businesses have a limited operating history.

Evaluations of our current business model and of our future prospects must address the risks and uncertainties encountered by companies in various stages of development, that may possess limited operating history, and may have had wide fluctuations in net sale and profitability levels, and that are conducting business in new and emerging markets that have yet to produce tangible business success accomplishments of significant magnitude.

The following is a list of some of the risks and uncertainties that exist in our operating, and competitive marketing environment. To be successful, we believe that we must:

• maintain and develop new wireless carrier and billing aggregator relationships upon which our mobile entertainment business currently depends;

• maintain a compliance based control system to render our products and services compliant with carrier and aggregator demands, as well as marketing practices imposed by private marketing rule makers, such as the Mobile Marketing Association (MMA), and to conform with the stringent marketing demands as imposed by various States’ Attorney Generals;

• respond effectively to competitive pressures in order to maintain our market position;

• increase brand awareness and consumer recognition to secure continued growth;

• attract and retain qualified management and employees for the expansion of the operating platform;

• continue to upgrade our technology to process increased usage and remain competitive with message delivery;

• continue to upgrade our information processing systems to assess marketing results and customer satisfaction ;

• continue to develop and source high-quality mobile content that achieves significant market acceptance;

• maintain and grow our off-deck distribution (“off-deck” refers primarily to services delivered through the Internet, which are independent of the carriers own product and service offers), including such distribution through our web sites and third-party direct-to-consumer distributors;

• obtain the financial resources necessary to execute our business plan when such financing may be difficult and/or more expensive to obtain, especially in a period of slowed-economic-growth in the United States; and

• our ability to successfully execute on our business and marketing strategies.

If we are unable to address these risks, and respond accordingly, our operating results may not meet our publicly forecasted expectations, and/or the expectations as derived by our investors, which could cause the price of our common stock to decline. The potential for a decline in our stock price could also have a negative impact on our recorded goodwill and intangible asset values, and potentially subject us to a non-cash impairment write-down on such assets. At March 31, 2008, our approximate book value was $165 million, and our market capitalization was approximately $113 million on May 12, 2008.

Our mobile entertainment business commenced offering entertainment products and services directly to consumers in 2005. Accordingly, this business has a limited history of generating revenues, and its future revenue and income generating potential is uncertain and unproven based on its limited operating history. As a result of the mobile entertainment business’s short operating history, and its existence during that time in the nascent and dynamically evolving mobile entertainment industry, we have limited financial data that can be used to develop trends and other historical based evaluation methods to project and forecast this business. Any evaluation of our business and the potential prospects derived from such evaluation must be considered in light of the mobile entertainment business’s limited operating history and should be discounted accordingly.

43

A large proportion of our business relies on wireless carriers and aggregators to facilitate billing and collections in connection with our entertainment products sold and services rendered. The loss of, or a material change in, any of these relationships could materially and adversely affect our business, operating results and financial condition.

We expect that we will continue to bill a significant portion of our revenues through a limited number of aggregators for the foreseeable future, although these aggregators may vary from period to period. In a risk diversification and cost saving effort, we have established a direct billing relationship with a carrier that mitigates a portion of its revenue generation risk as it relates to aggregator dependence; conversely this risk is replaced with internal performance risk regarding our ability to successfully process billable messages directly with the carrier.

Our aggregator agreements are not exclusive and generally have a limited term of less than three years with automatic renewal provisions upon expiration in the majority of the agreements. These agreements set out the terms of our relationships with the carriers, and provide that either party to the contract can terminate such agreement prior to its expiration, and in some instances, terminate without cause.

Many other factors exist that are outside of our control and could impair our carrier relationships, including:

• a carrier’s decision to suspend delivery of our products and services to our customer base;

• a carrier’s decision to offer its own competing entertainment applications, products and services;

• a carrier’s decision to offer similar entertainment applications, products and services to its subscribers for price points less than our offered price points, or for free;

• a network encountering technical problems that disrupt the delivery of, or billing for, our applications;

• the potential for concentrations of credit risk embedded in the amounts receivable from the aggregator should any one, or group of aggregators, encounter financial difficulties, directly or indirectly, as a result of the current period of slowed-economic-growth currently affecting the United States; or

• A decision to increase the fees it charges to market and distribute our applications, thereby increasing its own revenue and decreasing our share of revenue.

If one or more of these wireless carriers decides to suspend the offering of off-deck applications, we may be unable to replace such revenue source with an acceptable alternative, within an acceptable time frame. This could cause us to lose the capability to derive revenue from those subscribers, which could materially harm our business, operating results and financial condition.

We depend on third-party internet and telecommunications providers, over whom we have no control, for the conduct of our network business. Interruptions in these services caused by one of the providers could have an adverse effect on revenue and securing alternate sources of these services could significantly increase expenses and cause significant interruption to both our network and entertainment business.

We depend heavily on several third-party providers of Internet and related telecommunication services, including hosting and co-location facilities, in operating our network services. These companies may not continue to provide services without disruptions in service, at the current cost, or at all. The costs associated with any transition to a new service provider would be substantial, requiring the reengineering of computer systems and telecommunications infrastructure to accommodate a new service provider to allow for a rapid replacement and return to normal network operations. This process would be both expensive and time-consuming. In addition, failure of the Internet and related telecommunications providers to provide the data communications capacity in the time frame required by us could cause interruptions in the services we provide across all of our business activities. In addition to service interruptions arising from third-party service providers, unanticipated problems affecting our proprietary internal computer and telecommunications systems have the potential to occur in future fiscal periods, and could cause interruptions in the delivery of services, causing a loss of revenue and related gross margins, and the potential loss of customers, all of which could materially and adversely affect our business, results of operations and financial condition.

We may be unable to successfully keep pace with the rapid technological changes that may occur in the wireless communication, internet and e-commerce arenas which would adversely affect our business operations.

44

To remain competitive, we must continually monitor, enhance and improve the responsiveness, functionality and features of our services, offered both in our entertainment and network activities. Wireless network and mobile phone technologies, the Internet and the online commerce industry in general are characterized by rapid innovation and technological change, changes in user and customer requirements and preferences, frequent new product and service introductions requiring new technologies to facilitate commercial delivery, as well as the emergence of new industry standards and practices that could render existing technologies, systems and/or business methods obsolete in future fiscal periods. Success in our mobile entertainment business will depend, in part, on our ability to license or internally develop leading technologies that address the increasingly sophisticated and varied needs of prospective consumers, and respond to technological advances and emerging industry standards and practices on a timely-cost-effective basis. Website and other proprietary technology development entails significant technical and business risks, including the significant cost and time to complete development, the successful implementation of the application once developed, and time period for which the application will be useful prior to obsolescence. There can be no assurance that we will use internally developed or acquired new technologies effectively or adapt existing websites and operational systems to customer requirements or emerging industry standards. If we are unable, for technical, legal, financial or other reasons, to adopt and implement new technologies on a timely basis in response to changing market conditions or customer requirements, our business, prospects, financial condition and results of operations could be materially adversely affected.

We may not be able to comply with the adoption of newly created laws and governmental regulation of the internet industry and new restrictions for internet use may increase our cost of doing business.

As a direct-to-consumer marketing company, we are subject to a variety of federal, state and local laws and regulations designed to protect consumers that govern certain of its marketing practices, all as more fully set forth in our periodic reports filed pursuant to the Securities Exchange Act of 1934 under the heading “Business - Government Regulation.”

We rely exclusively on the Internet for much of our revenue generating activities. In the event that the marketing preferences of advertisers change such that advertisers reduce the amount they spend on internet advertising and digital marketing solutions, our financial results could be adversely impacted.

Companies doing business on the Internet must compete with traditional advertising media, including television, radio, cable and print, for a share of advertisers' total marketing budgets. Potential customers may be reluctant to devote a significant portion of their marketing budget to Internet advertising or digital marketing if they perceive the Internet to be trending towards a limited or ineffective marketing medium. Any shift in marketing budgets away from Internet advertising spending or digital marketing solutions could directly, materially and adversely affect our network business, as well as our entertainment business, with both having a materially negative impact on our results of operations and financial condition.

Our success depends on our ability to continue forming relationships with other Internet and interactive media content, service and product providers.

The Internet includes an ever-increasing number of businesses that offer and market consumer products and services. These entities offer advertising space on their websites, as well as profit sharing arrangements for joint effort marketing programs. We expect that with the increasing number of entrants into the Internet commerce arena, advertising costs and joint effort marketing programs will become extremely competitive. This competitive environment might limit, or possibly prevent us from obtaining profit generating advertising or reduce our margins on such advertising, and reduce our ability to enter into joint marketing programs in the future. If we fail to continue establishing new, and maintain and expand existing, profitable advertising and joint marketing arrangements, we may suffer substantial adverse consequences to our financial condition and results of operations. Additionally, as a result of our acquisition of Traffix, we now have a significant economic dependence on the major search engine companies that conduct business on the Internet; such search engine companies maintain ever changing rules regarding scoring and indexing their customers marketing search terms. If we cannot effectively monitor the ever changing scoring and indexing criteria, and effectively adjust our search term applications to conform within these scoring and indexing practices, we could suffer a material decline in our search term generated acquisitions, correspondingly reducing our ability to fulfill our clients marketing needs. This would have an adverse impact on our revenues and profitability.

The demand for a portion of our network services may decline due to the proliferation of “spam” and the expanded commercial adoption of software designed to prevent its delivery.

45

Our business may be adversely affected by the proliferation of "spam" or unwanted internet solicitations. In response to the proliferation of spam, Internet Service Providers ("ISPs") have been adopting technologies, and individual computer users are installing software on their computers that are designed to prevent the delivery of certain Internet advertising, including legitimate solicitations such as the ones we deliver. We cannot assure you that the number of ISPs and individual computer users who employ these or other similar technologies and software will not increase, thereby diminishing the efficacy of our network, as well as our entertainment service activities. In the case that one or more of these technologies, or software applications, realize continued and/or widely increased adoption, demand for our services could decline in response. During 2007 Traffix, (our recently acquired subsidiary) recognized a decline in a component of its network activity revenue attributable to email marketing compared to the prior year, and further noted declines in such revenue during the quarter ended March 31, 2008, as compared with the year ago period. We believe that such decline is the result of the factors mentioned above, and such decline may continue at higher rates in future fiscal periods.

We have no intention to pay dividends on our equity securities.

Our recently acquired subsidiary, Traffix, had paid a dividend of $0.08 per share on its common stock for its last 18 fiscal quarters prior to the acquisition. It is our current and long-term intention that we will use all cash flows to fund operations and maintain excess cash requirements for the possibility of potential future acquisitions. Future dividend declarations, if any, will result from the reversal of our current intention, and would depend on our performance, the level of our then current and retained earnings and other pertinent factors relating to our financial position. Prior dividend declarations should not be considered as an indication for the potential for any future dividend declarations.

We face intense competition in the marketing of its entertainment services and its network based clients’ products.

The development, distribution and sale of wireless entertainment applications is a highly competitive business. In our entertainment services and network services, we compete primarily on the basis of marketing acquisition cost, brand awareness, consumer penetration and carrier and distribution depth and breadth, as specific to our entertainment services.

We consider our primary entertainment business competitors to be Buongiorno, Playphone, Dada Mobile, Acotel, Glu Mobile, Cellfish (Lagadere), Jamster (Fox), Hands on Mobile and Thumbplay. In the network business, we consider Azoogle, Value Click, Miva, Kowabunga! (Think Partnership), Right Media, Aptimus and Blue Lithium to be our primary competitors. In the future, likely competitors may include other major media companies, traditional video game publishers, content aggregators, wireless software providers and other pure-play wireless entertainment publishers. Wireless carriers may also decide to develop and distribute their own similar on-deck wireless entertainment applications, products and services and as such they might refuse to, or limit the distribution of some or all of our applications or may deny access to all or part of their networks.

New Motion also competes for experienced and talented employees from the same domestic labor pool as its competitors.

Some of our competitors’ advantages include the following:

• substantially greater revenues and financial resources;

• stronger brand names, broader distribution networks and enhanced consumer recognition;

• the capacity to leverage their marketing expenditures across a broader portfolio of wireless and non-wireless products;

• pre-existing and long standing relationships with marquee brand holders;

• deeper resources, both financial and otherwise, to effectively execute on acquisition identification, closing and integration; and

• broader geographic presence potentially allowing for entrance into new markets, both domestically and internationally.

If we are not as successful as our competitors in executing on our strategy in targeting new markets, increasing customer penetration in existing markets, executing on marquee brand alignment, and/or effectively executing on business level accretive acquisition identification and successful closing and post acquisition integration, our sales could decline, our margins could be negatively impacted and we could lose market share, any and all of which could materially harm our business prospects, and potentially have a negative impact on our stock price.

46

We are dependent on our key personnel for managing our business affairs. The loss of their services could materially and adversely affect the conduct and the continuation of our business.

We are currently highly dependent upon the efforts of the members of our management team, particularly those of Burton Katz, our Chief Executive Officer, Andrew Stollman, our President, Raymond Musci, our Executive-vice President, and Daniel Harvey, our Chief Financial Officer. The loss of the services of Messrs. Katz, Stollman, Musci or Harvey may impede the execution of our business strategy and the achievement of its business objectives. We can give you no assurance that we will be able to attract and retain the qualified personnel necessary for the development of our business. Our failure to recruit key personnel or failure to adequately train, motivate and supervise our existing or future personnel will adversely affect our operations.

We have been named as a defendant in litigation, either directly, or indirectly through its merger/acquisition of Traffix, Inc., with the outcome of such litigation being unpredictable; a materially adverse decision in any such matter could have a material adverse affect on our financial position and results of operations.

From time to time we are named as a defendant in litigation matters, as described under "Legal Proceedings" in our periodic reports filed pursuant to the Securities Exchange Act of 1934. The defense of these claims may divert financial and management resources that would otherwise be used to benefit our operations. Although we believe that we have meritorious defenses to the claims made in each and all of the litigation matters to which we have been a named party, whether directly or indirectly, and despite our intent to contest each lawsuit vigorously, no assurances can be given that the results of these matters will be favorable. A materially adverse resolution of any of these lawsuits could have a material adverse affect on our financial position and results of operations.

We are subject to market fluctuation and debt repayment risk of marketable securities investment portfolio

We maintain an investment portfolio that is managed by prominent financial institutions. The portfolio includes high-grade corporate commercial paper and auction rate securities, and common stock equities, all of which are held for varying periods of time depending on market conditions and other factors. These investments are subject to market price volatility, in addition to the potential for business failure at the company level. Moreover, due to the potential for an economic downturn in the United States as a result of the current “sub-prime mortgage” problems and the potential of related fiscal difficulties that may be faced by some of the municipalities, educational institutions and companies in which we have investments, our investment portfolio could become impaired by the failure of such entities to repay principal upon maturity. Additionally, our cash flows and interest income could be negatively impacted by Federal Reserve Bank interest rate reductions.

We expect to record a significant amount of goodwill and other intangible assets in connection with the acquisition of Traffix, which may result in significant future charges against earnings if the goodwill and other intangible assets become impaired.

In the accounting of the merger with Traffix, we expect to allocate and record a large portion of the purchase price paid in the merger to goodwill and other intangible assets. Under SFAS No. 142, we must assess, at least annually and potentially more frequently, whether the value of goodwill and other intangible assets has been impaired. Any reduction or impairment of the value of goodwill or other intangible assets will result in a charge against earnings, which could materially adversely affect our results of operations in future periods.

The integration of Traffix following the merger may divert managements’ attention away from our day-to-day business and negatively impact the combined business.

The acquisition of Traffix involves the integration of two companies that have previously operated independently with principal offices in two distinct locations. The combined company will be required to devote significant management attention and resources to integrate the two companies. Delays in this process could adversely affect the combined company’s business, financial results, financial condition and accordingly, our stock price. Even if we were able to integrate the businesses successfully, there can be no assurance that this integration will result in the realization of all of the synergies, cost savings, innovation and operational efficiencies that may be possible from this integration or that these benefits will be achieved within a reasonable period of time.

47

We may be impacted by the affects of a slow-down of the United States economic environment and potential for recession.

The majority of our client audience is comprised of individuals dispersed throughout the United States that will be directly and negatively impacted by increased mortgage payments, foreclosures and other factors arising out of a recessionary economy, and the results of the sub-prime mortgage problems, that restrict disposable income that is expended on our products and services. Should current expectations of a looming recession become fiscal fact, we could be materially and adversely affected by reductions in revenue, and the corresponding negative impact on results of operations and financial condition.

We depend on a limited number of applications, products and services for a significant portion of revenue.

We derive a significant portion of our revenue from a limited number of applications. We expect to continue to derive a substantial portion of our mobile entertainment revenue from Bid4Prizes and Gator Arcade and a limited number of other applications in the foreseeable future. Due to this dependence on a limited number of applications, the failure to achieve anticipated results with any one of these key applications may harm our business. Additionally, if we cannot develop new applications that are as successful as Bid4Prizes, our future revenue could be limited and our business will suffer.

We will become subject to more stringent reporting and disclosure requirements as a result of the merger with Traffix, which could harm the combined company’s business.

As a result of the completion of the merger with Traffix, the combined company may, at sometime in the near future qualify as an “accelerated filer” for reporting purposes under the Securities Exchange Act of 1934, which would require the Company to file periodic reports and other documents on an accelerated timetable. We currently anticipate the full attestation requirements to be effective for the year ending December 31, 2009. Also, as a result of the merger, we will no longer qualify as a small business issuer in subsequent reporting periods, and will be subject to more expanded and burdensome disclosure requirements with respect to any future reports or other documents filed with the Securities and Exchange Commission. Additionally, the merger significantly increases the complexity of the internal controls over financial reporting that the combined company will need, and significantly more resources will be required to ensure that these controls remain effective. Accordingly, as a result of the merger, the combined company will be subject to substantially more stringent and burdensome reporting and disclosure requirements, and complying with these requirements could be expensive and time consuming and could require significant management attention, which could substantially increase our expenses and harm our business.

The requirements of the Sarbanes-Oxley act, including section 404, are burdensome, and our failure to comply with them could have a material adverse affect on our business and stock price.

Effective internal control over financial reporting is necessary so we can provide reliable financial reports and effectively prevent fraud. Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate and report on our internal control over financial reporting beginning with our Annual Report on Form 10-KSB for the fiscal year ending December 31, 2007. Our independent registered public accounting firm will need to annually attest to our evaluation, and issue their own opinion on our internal control over financial reporting beginning with our Annual Report on Form 10-K for the fiscal year ending December 31, 2008. The process of complying with Section 404 is expensive and time consuming, and requires significant management attention. We cannot be certain that the measures we will undertake will ensure that we will maintain adequate controls over our financial processes and reporting in the future. Furthermore, if we continue to rapidly grow our business, the internal controls over financial reporting that we will need will become more complex, and significantly more resources will be required to ensure that our internal controls over financial reporting remain effective. Failure to implement required controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. If we or our auditors discover a material weakness in our internal control over financial reporting, the disclosure of that fact, even if the weakness is quickly remedied, could diminish investors’ confidence in our financial statements and harm our stock price. In addition, non-compliance with Section 404 could subject us to a variety of administrative sanctions, including the suspension of trading, ineligibility for listing on one of the NASDAQ Stock Markets or national securities exchanges, and the inability of registered broker-dealers to make a market in our common stock, which would further reduce our stock price.

48

Item 6. Exhibits

Exhibit Number	Description of Exhibit
10.1	Employment Agreement dated as of February 1, 2008, by and between New Motion, Inc. and Andrew Stollman.
10.2	Employment Agreement as of February 1, 2008 by and between New Motion, Inc. and Burton Katz.
10.3	Consulting Agreement dated as of January 31, 2008 by and between New Motion, Inc. and Jeffrey Schwartz.
10.4	Master Services Agreement effective as of January 1, 2008 by and between New Motion, Inc. and Motricity, Inc. (1)
31.1	Certification of Principal Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.	*
31.2	Certification of Principal Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.	*
32.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.	*

* Filed herewith.

(1) certain portions of this agreement have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for an order granting confidential treatment pursuant to Rule 24b-2 of the Rules and Regulations of the Commission under the Securities Exchange Act of 1934, as amended.

49

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has caused this report to be signed on its behalf by the undersigned, there unto duly authorized.

Dated: May 19, 2008		Dated: May 19, 2008
BY:	/s/ Burton Katz	BY:	/s/ Dan Harvey
Burton Katz		Daniel Harvey
Chief Executive Officer		Chief Financial Officer and Secretary
		(Principal Financial and Accounting Officer)

50

Exhibit Index

Exhibit Number	Description of Exhibit
10.1	Employment Agreement dated as of February 1, 2008, by and between New Motion, Inc. and Andrew Stollman.
10.2	Employment Agreement as of February 1, 2008 by and between New Motion, Inc. and Burton Katz.
10.3	Consulting Agreement dated as of January 31, 2008 by and between New Motion, Inc. and Jeffrey Schwartz.
10.4	Master Services Agreement effective as of January 1, 2008 by and between New Motion, Inc. and Motricity, Inc. (1)
31.1	Certification of Principal Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.	*
31.2	Certification of Principal Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.	*
32.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.	*

* Filed herewith.

(1) certain portions of this agreement have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for an order granting confidential treatment pursuant to Rule 24b-2 of the Rules and Regulations of the Commission under the Securities Exchange Act of 1934, as amended.

51

EX-10.2

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT, dated as of February 1, 2008 (this “Agreement”), by and between NEW MOTION, INC., a Delaware corporation (the “Company”), and BURTON KATZ (“Executive”).

WITNESSETH:

WHEREAS, the Company desires to employ Executive on the terms and subject to the conditions hereinafter set forth, and Executive desires so to be employed.

NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter set forth, the parties agree as follows:

1.Offices and Duties. During the Term (as hereinafter defined), Executive shall serve as the Chief Executive Officer of the Company and shall have such duties and responsibilities that are commensurate with such position and such other duties and responsibilities as are from time to time assigned to the Executive by the Company’s board of directors. The Company’s board of directors may elect or designate Executive to serve in such other corporate offices of the Company or a subsidiary or affiliate of the Company as the Company’s board of directors from time to time may reasonably deem necessary, proper or advisable and as the Executive shall accept. Executive hereby agrees that throughout the Term he shall faithfully, diligently and to the best of his ability, in furtherance of the business of the Company, perform the duties assigned to him or incidental to the offices assumed by him pursuant to this Section. Executive shall devote all of his business time and attention to the business and affairs of the Company and the performance of Executive’s duties and responsibilities hereunder. Executive may engage or participate in such other activities incidental to any other full-time employment or occupation as do not interfere or conflict with, or compromise his ability to perform, his duties hereunder, and do not create a potential business conflict, and with respect to which the Company’s board of directors has expressly consented and approved in advance in writing. Executive shall at all times be subject to the supervision, direction and control of the Company’s board of directors, and observe and comply with such rules, regulations, policies and practices as the Company’s board of directors may from time to time establish. Executive shall report to the Company’s board of directors. The Executive represents and warrants to the Company that the Executive has the legal right to enter into this Agreement and to perform all of the obligations on the Executive’s part to be performed hereunder in accordance with its terms and that the Executive is not a party to any agreement or understanding, written or oral, which could prevent the Executive from entering into this Agreement or performing all of the Executive’s obligations hereunder.

2.Term. The employment of Executive hereunder shall commence on the date hereof (the “Commencement Date”) and continue for a term ending on the third (3^rd) anniversary of the last day of the calendar month in which such commencement date occurs, subject to earlier termination upon the terms and conditions provided elsewhere herein (the “Term”); provided, however, that this Agreement shall become effective only upon consummation of the merger contemplated by that certain Agreement and Plan of Merger dated as of September 26, 2007, by and among, the Company, Traffix, Inc. and a wholly-owned subsidiary of the Company. As used herein, “Termination Date” means the last day of the Term. Subject to the provisions of Section 18 hereof, the Executive shall be an “at-will” employee of the Company such that the Company may terminate the Executive’s employment with the Company and the Term upon advance written notice at any time and for any reason (or no reason).

3.Compensation.

(a)As compensation for Executive’s services hereunder, the Company shall pay to Executive during the Term an annual salary (the “Base Salary”), which shall initially be equal to Four Hundred Twenty Five Thousand Dollars ($425,000.00), payable in accordance with the ordinary payroll practices of the Company. The Base Salary shall be subject to increase at the end of each year of the Term at the sole and complete discretion of the Company’s board of directors.

(b)As additional compensation for Executive’s services hereunder, upon the execution of this Agreement all options to purchase equity securities of the Company held by Executive at the time of such execution (other than stock options to purchase 81,250 shares of Common Stock issued to Executive in February 2007 and stock options issued to Executive pursuant to Section 4 hereof, which shall vest or continue to vest pursuant to their terms) shall automatically vest.

(c)Executive may also receive an annual bonus for each calendar year during the Term if the Company’s business operations meet or exceed certain financial performance standards to be determined by the Company’s board of directors in accordance with this Section, and as part of an annual incentive plan to be submitted for approval by the stockholders of the Company. No later than the end of the first calendar quarter of each calendar year, the Company’s board of directors (or the compensation committed thereof) shall adopt and approve: (i) financial goals (the “Goals”) for the Company with respect to such calendar year; and (ii) the bonus targets and other performance standards (collectively, the “Bonus Matrix”) to be used to determine Executive’s annual bonus for such calendar year. The Company shall deliver the Goals and the Bonus Matrix to Executive promptly after their adoption and approval by the board of directors (or the compensation committed thereof). The Goals and the Bonus Matrix for the calendar year ending December 31, 2008 are attached hereto as Exhibit A. Any amounts payable under this Section shall be calculated using the results reported in the Company’s audited financial statements for the applicable fiscal year and shall be payable the later of (A) within ninety (90) days after the end of the applicable fiscal year or (B) completion of the Company’s audited financial statements for such year. Until approval of this Agreement by the Company’s stockholders, in no event shall the amount payable to Executive under this Section in any fiscal year of the Company exceed an amount, which, when added to all other compensation (as such term is used in Section 162(m) of the Code) paid to Executive in such fiscal year results in the total of such compensation for such fiscal year to exceed One Million Dollars ($1,000,000).

(d)The Company shall use its commercially reasonable efforts to procure medical, hospitalization, dental and disability insurance (in the case of disability insurance, providing for $15,000 coverage per month) for the benefit of executive and his wife and children, and the Company shall pay all premiums and any other costs or expenses incurred to maintain such policies in effect during the Term, or as provided under Section 18, all consistent with the Company’s established practices and policies. As an alternative to procuring such policies, the Company may authorize Executive to procure such policies, and the Company shall reimburse Executive for the reasonable costs incurred by him in connection with the procurement of such policies.

(e)The Company shall use commercially reasonable efforts to procure a term policy of life insurance on the life of Executive with a death benefit of at least Five Million Dollars ($5,000,000) for a beneficiary or beneficiaries to be designated by Executive, and the Company shall pay all premiums and any other ordinary costs or expenses incident to maintaining such policy in effect during the Term, or as provided under Section 18. In connection with the procurement of such policy, Executive shall, at such time or times and at such place or places as the Company may reasonably direct, submit himself to such physical examinations and execute and deliver such documents as the Company may deem necessary or appropriate. As an alternative to procuring such policy, the Company may authorize Executive to procure such policy, and the Company shall reimburse Executive for the reasonable costs incurred by him in connection with the procurement of such policy. Upon the expiration or termination of the Term and until the earlier of the second anniversary of a termination by Executive for “good reason” under Section 16 or by the Company other than for “cause” under Section 15, Executive shall have the right to maintain such policy at Executive’s cost and expense.

(f)In addition to his Base Salary and other compensation provided herein, during the Term Executive shall be entitled to participate, to the extent he is eligible under the terms and conditions thereof, in any stock, stock option or other equity participation plan and any profit-sharing, pension, retirement, insurance, medical service or other employee benefit plan generally available to the executive officers of the Company, and to receive any other benefits or perquisites generally available to the executive officers of the Company pursuant to any employment policy or practice, which may be in effect from time to time during the Term. The Company shall be under no obligation hereunder to institute or to continue any such employee benefit plan or employment policy or practice.

(g)[RESERVED]

(h)During the Term, Executive shall not be entitled to additional compensation for serving in any office of the Company (or any subsidiary thereof) to which he is elected or appointed.

4.Stock Options.

(a)On the Commencement Date, the Company shall grant to Executive an option (the “Option”) to acquire Three Hundred Thousand (300,000) shares of the Company’s common stock, par value $.001 per share (the “Common Stock”), subject to the terms and conditions of the Company’s Stock Option Plan and the Stock Option Agreement substantially in the form annexed to this Agreement as Exhibit B (the “Stock Option Agreement”). As a condition to receiving the Option, Executive shall execute and deliver to the Company the Stock Option Agreement. As provided in the Stock Option Agreement, the Option shall be exercisable at an exercise price equal to the average closing price of the Common Stock reported for the ten (10) trading days immediately preceding the Commencement Date, at any time during the ten (10) year period following the Commencement Date. Additionally, as provided in the Stock Option Agreement, the Option shall be subject to the following vesting schedule:

(i)the Option shall first vest, with respect One Hundred Thousand (100,000) shares of Common Stock, on the first (1^st) anniversary of the Commencement Date;

(ii)thereafter, the Option shall next vest, with respect to Eight Thousand Three Hundred Forty One (8,341) shares of Common Stock, on the last day of the calendar month immediately following the first (1^st) anniversary of the Commencement Date (such vesting date, the “Second Vesting Date”); and

(iii)thereafter, the Option shall next vest, with respect to the remaining One Hundred Ninety One Thousand Six Hundred Fifty Nine (191,659) shares of Common Stock underlying the Option, in twenty three (23) equal installments of Eight Thousand Three Hundred Thirty Three (8,333) shares each on the last day of each calendar month during the period of twenty three (23) consecutive months commencing after the Second Vesting Date.

(b)As provided in the Stock Option Agreement, except (as provided herein) in the event of a termination of the Executive’s employment by the Company without “cause” (as such term is used in Section 15 hereof) and except in the event of a termination of the Executive’s employment by Executive for “good reason” (as contemplated under Section 16 hereof), any portion of the Option that remains unvested at the time of termination of Executive’s employment (and/or upon termination or expiration of the Term) (the “Unvested Portion”) shall be extinguished and cancelled and Executive shall have no rights or benefits whatsoever with respect to the Unvested Portion. Executive represents and warrants that he is acquiring the Option and the shares of Common Stock issuable upon exercise thereof for investment purposes only, and not with a view to distribution thereof. Executive is aware that the Option and such shares may not be registered under the federal or any state securities laws and that, in addition to the other restrictions, the Option and such shares issuable upon exercise thereof will not be able to be transferred unless an exemption from registration is available or the option or such shares become registered.

5.Restricted Stock.

(a)On the Commencement Date, the Company shall issue to Executive Two Hundred Seventy Five Thousand (275,000) shares of Common Stock (the “Restricted Shares”), pursuant to the terms of a Restricted Stock Purchase Agreement in a form acceptable to the Company (the “Restricted Stock Purchase Agreement”). Executive shall execute and deliver to the Company the Restricted Stock Purchase Agreement as a condition to the Company’s obligation to issue the Restricted Shares. The Restricted Shares shall be subject to forfeiture under the terms of the Restricted Stock Purchase Agreement. The Restricted Shares shall be subject to vesting as provided in the Restricted Stock Purchase Agreement, in accordance with and subject to the following vesting schedule:

(i)the first One Hundred Thousand (100,000) Restricted Shares shall vest after the closing of trading on the date that the average per share trading price of the Common Stock during any period of ten (10) consecutive trading days (following the Commencement Date) equals or exceeds the greater of (a) Fifteen Dollars ($15) or (b) One Hundred Fifty Percent (150%) of the per share trading price of the Common Stock on the Commencement Date. The per share trading price of the Common Stock that causes such Restricted Shares to vest shall be referred to herein as the “First Vesting Price”.

(ii) the remaining One Hundred Seventy Five Thousand (175,000) Restricted Shares shall vest after the closing of trading on the date that the average per share trading price of the Common Stock during any period of ten (10) consecutive trading days equals or exceeds the greater of (a) Twenty Dollars ($20) or (b) One Hundred Thirty Three and One-Third Percent (133 1/3%) of the First Vesting Price.

(b)As provided in the Restricted Stock Purchase Agreement, except (as provided herein) in the event of a termination of the Executive’s employment by the Company without “cause” (as such term is used in Section 15 hereof) and except in the event of a termination of the Executive’s employment by Executive for “good reason” (as contemplated under Section 16 hereof), any and all of the Restricted Shares that remain unvested at the time of termination of Executive’s employment (and/or upon termination or expiration of the Term) (the “Unvested Restricted Stock Portion”) shall be subject to forfeiture and Executive’s entire ownership interest in to the Unvested Restricted Stock Portion shall be forfeited, extinguished and cancelled and Executive shall have no rights or interest in the Unvested Restricted Stock Portion. Subject to the terms of the Restricted Stock Purchase Agreement, the Company may issue stock certificates or otherwise evidence the Executive’s interest in the Restricted Shares by using a book entry account, and may maintain physical possession or custody of such stock certificates until such time as the Restricted Shares are vested in accordance with this Section, and may place a legend on the stock certificate(s) restricting the transferability of such certificates and referring to the terms and conditions (including forfeiture) of this Agreement. Executive represents and warrants that he is acquiring the Restricted Shares for investment purposes only, and not with a view to distribution thereof. Executive is aware that the Restricted Shares may not be registered under the federal or any state securities laws and that, in addition to the other restrictions on the Restricted Shares, the Restricted Shares will not be able to be transferred unless an exemption from registration is available or the Restricted Shares become registered.

(c)If the Company’s stockholders adopt a restricted share plan, the Restricted Shares shall be deemed issued in accordance therewith and subject thereto.

6.Long Term Performance Unit Plan. Promptly after the Commencement Date, the Company shall establish and maintain a long-term executive compensation plan (the “LTEC Plan”) for the benefit of Executive and other senior executives of the Company. LTEC Plan shall provide for the payment of additional compensation to Executive based upon the Company’s achievement of certain performance standards to be determined by the Company’s board of directors. Such performance standards shall be based upon a three to five year strategic plan for the Company. In addition, the terms of the LTEC Plan shall include the nature of the compensation to be awarded, the number of units to be awarded and vesting.

7.Expense Allowance. The Company shall pay directly, or advance funds to Executive or reimburse Executive for, all out-of-pocket expenses reasonably incurred by him in connection with the performance of his duties hereunder and the business of the Company, in each case subject to and in accordance with the Company’s standard policies (including, without limitation, expense verification policies) regarding the reimbursement of business expenses, as in effect from time to time. Without limiting the foregoing, the Company shall reimburse Executive for the reasonable legal costs incurred by him (up to a maximum of Ten Thousand Dollars ($10,000)) in connection with the preparation and execution of this Agreement.

8.Location; Office. Except for routine travel and temporary accommodation reasonably required to perform his services hereunder, Executive shall not be required to perform his services hereunder at any location other than the office of the Company located in Pearl River, New York, or, if relocated, at a location within a distance of fifty (50) miles from its location in Pearl River, New York, or at such other office, including the Company’s Irvine, California office, or site to which Executive may, in his sole discretion, consent; nor shall he be required to relocate his principal residence to, or otherwise to reside at, any location specified by the Company. The Company shall provide Executive with suitable office space, furnishings and equipment, secretarial and clerical services and such other facilities and office support as are commensurate with the position of Executive, in all cases consistent with and subject to the practices of the Company.

9.Vacation. Executive shall be entitled to four (4) weeks paid vacation during each year of his employment hereunder (as pro rated for partial years), such vacation to be taken at such time or times as shall be agreed upon by Executive and the Company with due regard to the needs of the Company. Vacation time shall be cumulative from year to year, except that Executive shall not be entitled to take more than six (6) weeks vacation during any period of twelve (12) consecutive months during the Term; and provided further that at no time shall Executive be entitled to accrue more than six (6) weeks of vacation time under this Agreement; and provided further that the rights of Executive to vacation shall be otherwise subject to the Company’s policies on vacation as in effect from time to time.

10.Key-Man Insurance. The Company shall have the right from time to time to purchase, increase, modify or terminate insurance policies on the life of Executive for the benefit of the Company in such amounts as the Company may determine in its sole discretion. In connection therewith, Executive shall, at such time or times and at such place or places as the Company may reasonably direct, submit himself to such physical examinations and execute and deliver such documents as the Company may deem necessary or appropriate.

11.Ancillary Agreements. As a material inducement to the Company for entering into this Agreement and as a condition to the obligations of the Company hereunder, Executive is hereby executing and delivering that each of the following: (a) that certain Non-Competition, Non-Solicitation and Proprietary Information Agreement dated of even date herewith, by and between Executive and the Company in the form of Exhibit C attached hereto (the “Non-Competition Agreement”), and (b) that certain General Release date of even date herewith, by and between Executive and the Company in the form of Exhibit D attached hereto (together with the Non-Competition Agreement, the “Ancillary Agreements”). Each of the Company and Executive hereby agrees and acknowledges that the rights and obligations of the parties under the Non-Competition Agreement and the terms and provisions thereof are an integral part of this Agreement and hereby are incorporated in this Agreement as if fully set forth herein. Without limiting any other rights that the Company may have, if Executive breaches any provision of the Non-Competition Agreement, any right that Executive may have to receive any compensation or payments from the Company hereunder shall be forfeited by Executive and extinguished in all respects.

12.[RESERVED]

13.[RESERVED]

14.Termination of Employment. Executive’s employment and the Term will terminate on the first of the following to occur:

(a)Automatically upon Executive’s death.

(b)Upon written notice by the Company to Executive of termination due to Disability (as defined below). For the purposes of this Agreement, “Disability” shall mean a condition that entitles Executive to benefits under an applicable Company long-term disability plan or, if no such plan exists, a physical or mental disability which, in the reasonable judgment of the Company’s board of directors, is likely to render Executive unable to perform his duties and obligations under this Agreement for 180 days in any 12-month period.

(c)Upon written notice by the Company to the Executive of a termination for “cause” under Section 15 of this Agreement.

(d)Upon termination for “good reason” under Section 16 of this Agreement.

(e)Upon written notice by the Company to the Executive of an involuntary termination without “cause”, other than for death or Disability.

(f)Upon “voluntary termination” by Executive under Section 17 of this Agreement.

15.Termination for Cause.

(a)In addition to any other rights or remedies provided by law or in this Agreement, the Company may terminate Executive’s employment under this Agreement for “cause” if:

(i)Executive is convicted of, or enters a plea of guilty or nolocontendere to, a felony offense (unless, in the case of a conviction, the conviction shall have been reversed on appeal); or

(ii)the Company’s board of directors determines that Executive has:

(A)committed fraud against, or embezzled or misappropriated funds or other assets of, the Company (or any subsidiary thereof);

(B)violated, or caused the Company (or any subsidiary thereof) or any officer, employee or other agent thereof, or any other person to violate, any material law, regulation or ordinance or, repeatedly violated, or caused the Company (or any subsidiary thereof) or any officer, employee or other agent thereof, or any other person to violate, any material rule, regulation, policy or practice established by the Company’s board of directors;

(C)willfully, or because of gross or persistent negligence, (A) failed to properly perform his duties hereunder or (B) acted in a manner detrimental to, or adverse to the interests of, the Company, and such failure or action has caused, or is likely to cause, the Company (or any subsidiary thereof) to suffer or incur casualty, loss, penalty, expense or other liability or cost;

(D)violated, or failed to perform or satisfy any material covenant, condition or obligation required to be performed or satisfied by Executive; or

(E)habitually used illegal drugs or consumed alcohol and such consumption has caused material damage to the Company.

(b)The Company may effect such termination for cause by giving Executive written notice to such effect, setting forth in reasonable detail the factual basis for such termination (the “Cause Notice”); provided, however, that Executive may avoid such termination if the termination is based on any occurrence, act or event described in clauses (A) to (E) of paragraph (ii) of Section 15(a) (each, a “For Cause Event”), if the matters giving rise to such termination (including without limitation, any breach or violation by Executive) are remedied or cured, if capable of remedy or cure, within 30 days after receipt of the Cause Notice (“30-Day Executive Cure Period”). For the avoidance of doubt, Executive’s employment hereunder and the Term shall be terminated immediately upon delivery of the Cause Notice if Executive’s employment is being terminated due to the occurrence, act or event described in paragraph (i) of Section 15(a), and Executive’s employment hereunder and the Term shall be terminated immediately upon expiration of the 30-Day Executive Cure Period if Executive’s employment is terminated due to the occurrence, act or events described in clauses (A) to (E) of paragraph (ii) of Section 15(a) (assuming the matters, violations or conditions giving rise to such termination are capable of being cured or remedied, provided that if they are incapable of being so cured or remedied, then such termination shall be immediate upon delivery of the Cause Notice).

(c)In making any determination pursuant to paragraph (ii) of Section 15(a) based on or due to any For Cause Event, the board of directors may take into account each and all of the following:

(i)if Executive is made a party to, or target of, any Proceeding arising under or relating to any For Cause Event, Executive’s failure to defend against such Proceeding or to answer any complaint filed against him therein, or to deny any claim, charge, averment, or allegation thereof asserting or based upon the occurrence of a For Cause Event;

(ii)any judgment, award, order, decree or other adjudication or ruling in any such Proceeding finding or based upon the occurrence of a For Cause Event (that is not reversed or vacated on appeal); or

(iii)any settlement or compromise of, or consent decree issued in, any such Proceeding in which Executive expressly admits the occurrence of a For Cause Event; provided that the Company’s board of directors shall not be required to treat any of the foregoing as dispositive or giving rise to an irrebuttable presumption of the occurrence of such For Cause Event; and providedfurther that the Company's board of directors may rely on any other factor or event as convincing evidence of the occurrence of a For Cause Event.

(d)In determining and assessing the detrimental effect of any For Cause Event on the Company and whether such For Cause Event warrants the termination of Executive’s employment hereunder, the Company's board of directors may take into account each and all of the following:

(i) whether the Company's Board of Directors directed or authorized Executive to take, or to omit to take, any action involved in such For Cause Event, or approved, consented to or acquiesced in his taking or omitting to take such action;

(ii)any award of damages, penalty or other sanction, remedy or relief granted or imposed in any Proceeding based upon or relating to such For Cause Event, and whether such sanction, remedy or relief is sufficient to recompense the Company or any other injured person, or to prevent or to deter the recurrence of such For Cause Event;

(iii)whether any lesser sanction would be appropriate and effective; and

(iv)any adverse effect that the loss of Executive's services would have, or be reasonably likely to have, upon the Company.

Nothing contained in this Section 15 shall be construed in any way to limit or restrict the right and ability of the board of directors of the Company to consider or base its determination on any other factors that the board of directors deems to be relevant in connection with any determination or assessment under this Section 15.

16.Termination by Executive for Good Reason.

(a)In addition to any other rights or remedies provided by law or in this Agreement, Executive may terminate his employment hereunder for “good reason” if (A) the Company violates, or fails to perform or satisfy any material covenant, condition or obligation required to be performed or satisfied by it hereunder, (B) as a result of any action or failure to act by the Company, there is a material adverse change in the nature or scope of the duties, obligations, rights or powers of Executive’s employment (including any such material adverse change resulting from a Change of Control, as hereinafter defined), or (C) the Company moves its headquarters more than fifty (50) miles from its location in Pearl River, New York, in each case subject to the terms set forth in this Section 16.

(b)Executive may effect such termination for good reason by giving the Company written notice to such effect, setting forth in reasonable detail the factual basis for such termination (the “Good Reason Notice”); provided, however, that the Company may avoid such termination, if the matters giving rise to such termination (including without limitation, any breach or violation by the Company) are remedied or cured, within 30 days after receipt of the Good Reason Notice (“30-Day Company Cure Period”). For the avoidance of doubt, Executive’s employment hereunder and the Term shall be terminated immediately upon expiration of the 30-Day Company Cure Period in the case of a termination for “good reason” under this Section 16.

17.Voluntary Termination by Executive. In addition to any other rights or remedies provided by law or in this Agreement, Executive may terminate his employment hereunder at any time by giving the Company written notice to such effect at least ninety (90) days prior to the date of termination set forth therein, such termination to be irrevocable upon receipt of such notice by the Company.

For the avoidance of doubt, the termination by Executive of his employment hereunder for “good reason” pursuant to Section 16 of this Agreement shall not constitute or be deemed to constitute for any purpose a "voluntary termination" of his employment under this Section 17.

18.Compensation and Benefits upon Termination.

(a)If Executive’s employment is terminated as a result of his death or Disability, the Company will pay or provide to Executive any (i) Accrued Benefits (as hereinafter defined) and (ii) a sum equal to a prorated portion of the annual bonus to which Executive would have been entitled if his employment had continued until the end of the employment year in which his death or disability occurred (the “Pro Rated Bonus Amount”). For the purposes of this Agreement, “Accrued Benefits” means: 1) any unpaid Base Salary through the date of termination; (2) reimbursement for any unreimbursed expenses incurred through the date of termination; (3) any unused vacation time accrued (through the date of termination) in accordance with Company policy; and (4) any other payments, benefits or fringe benefits to which the Executive may be entitled under the terms of any applicable compensation arrangement or benefit plan or program or this Agreement, in all cases only through the date of termination (collectively items (1) through (4) shall be hereafter referred to as “Accrued Benefits”). The Pro Rated Bonus Amount shall be calculated by multiplying the total amount of the corresponding annual bonus by a fraction, the numerator of which is the number of days served by Executive during such employment year, and the denominator shall be three hundred sixty five (365) days.

(b)If Executive’s employment is terminated for cause under Section 15, or if Executive’s employment is terminated by Executive voluntarily under Section 17 or voluntarily other than for good reason pursuant to Section 16 hereof, the Company will pay or provide to Executive any Accrued Benefits.

(c)If Executive’s employment is terminated by Executive for good reason pursuant to Section 16 or by the Company other than for cause under Section 15, the Company will pay or provide the Executive with (i) any Accrued Benefits, (ii) subject to Executive’s compliance with the obligations herein, (A) a one time payment equal to the sum of (x) two (2) times his Base Salary and (y) two (2) times the Average Bonus Amount (as hereinafter defined); and (B) coverage under the employee benefit plans described in Section 3 until the earlier of the second (2^nd) anniversary of such termination or Executive’s eligibility to receive similar benefits from a new employer; and (iii) all stock options and other awards granted hereunder (other than options and awards that vest upon the achievement of performance objectives) shall automatically vest and shall remain exercisable for a period of one (1) year after such termination. For the purposes hereof, the “Average Bonus Amount” means, in the case of a termination of Executive’s employment, an amount equal to the average of the annual bonus amounts received by Executive under this Agreement for the two (2) years prior to such termination. If the terms of any such employee benefit plans do not permit such coverage after termination of employment, the Company shall reimburse Executive in full for the cost reasonably incurred by Executive in obtaining similar coverage. Any amount due to Executive under clause (i) and (ii)(A) of this Section shall be payable as follows: fifty percent (50%) of such amount shall be payable in a lump sum within thirty (30) days of termination of employment, and the balance shall be payable in twenty four (24) equal monthly installments over the period of twenty four (24) months following such termination; provided, however, that if such amounts due to Executive become payable under this Section as a result of a termination of Executive’s employment occurring at any time before the first (1^st) anniversary of the date of any Change of Control, such amounts shall be paid in a single lump sum payment within thirty (30) days of termination of employment, except as provided in Section 19 hereof. Amounts payable to Executive under this Section 16(c), if any, are hereinafter referred to as the “Parachute Amount.”

(d)Except as expressly set forth herein, any amount payable to Executive upon termination of his employment hereunder shall be paid promptly, and in any event within thirty (30) days, after the Termination Date.

19.Change of Control.

(a)For the purposes of this Section 19:

(i)The "Act" is the Securities Exchange Act of 1934, as amended.

(ii)A "person" includes a "group" within the meaning of Section 13(d)(3) of the Act.

(iii)"Control" is used herein as defined in Rule 12b-2 under the Act.

(iv)"Beneficially owns" and "acquisition" are used herein as defined in Rules 13d-3 and 13d-5, respectively, under the Act.

(v)"Non-Affiliated Person" means any person, other than Executive, an employee stock ownership trust of the Company (or any trustee thereof for the benefit of such trust), or any person controlled by Executive, the Company or such a trust.

(vi)"Voting Securities" includes Common Stock and any other securities of the Company that ordinarily entitle the holders thereof to vote, together with the holders of Common Stock or as a separate class, with respect to matters submitted to a vote of the holders of Common Stock; provided, however, that securities of the Company as to which the consent of the holders thereof is required by applicable law or the terms of such securities only with respect to certain specified transactions or other matters, or the holders of which are entitled to vote only upon the occurrence of certain specified events (such as default in the payment of a mandatory dividend on preferred stock or a scheduled installment of principal or interest of any debt security), shall not be Voting Securities.

(vii)"Right" means any option, warrant or other right to acquire any Voting Security (other than such a right of conversion or exchange included in a Voting Security).

(viii) The "Code" is the Internal Revenue Code of 1986, as amended.

(ix) "Base amount," "present value" and "parachute payment" are used herein as defined in Section 280G of the Code.

(b)A "Change of Control" occurs when:

(i)a Non-Affiliated Person acquires control of the Company; or

(ii)upon an acquisition of Voting Securities or Rights by a Non-Affiliated Person or any change in the number or voting power of outstanding Voting Securities, such Non-Affiliated Person beneficially owns Voting Securities or Rights entitling such person to cast a number of votes (determined in accordance with Section 19(g)) equal to or greater than twenty five percent (25%) of the sum of (A) the number of votes that may be cast by all other holders of outstanding Voting Securities and (B) the number of votes that may be cast by such Non-Affiliated Person (determined in accordance with Section 19(g)).

(c)It is intended that the present value of any payments or benefits to Executive, whether hereunder or otherwise, that are includible in the computation of the Parachute Amount shall not exceed 2.99 times the Executive's base amount. Accordingly, if Executive receives any payment or benefit from the Company prior to payment of the Parachute Amount which, when added to the Parachute Amount, would subject any of the payments or benefits to Executive to the excise tax imposed by Section 4999 of the Code, the Parachute Amount shall be reduced by the least amount necessary to avoid such tax. The Company shall have no obligation hereunder to make any payment or provide any benefit to Executive after the payment of the Parachute Amount which would subject any of such payments or benefits to the excise tax imposed by Section 4999 of the Code.

(d)Any other provision hereof notwithstanding, Executive may, prior to his receipt of the Parachute Amount pursuant to Section 18(c), waive the payment thereof, or, after his receipt of the Parachute Amount thereunder, treat some or all of such amount as a loan from the Company which Executive shall repay to the Company within one hundred eighty (180) days after the receipt thereof, together with interest thereon at the rate provided in Section 7872 of the Code, in either case, by giving the Company notice to such effect.

(e)Any determination of the Executive's base amount, the Parachute Amount, any liability for excise tax under Section 4999 of the Code or other matter required to be made pursuant to this Section 19, shall be made by the Company's regularly-engaged independent certified public accountants, whose determination shall be conclusive and binding upon the Company and Executive; provided that such accountants shall give to Executive, on or before the date on which payment of the Parachute Amount or any later payment or benefit would be made, a notice setting forth in reasonable detail such determination and the basis therefor, and stating expressly that Executive is entitled to rely thereon.

(f)The number of votes that may be cast by holders of Voting Securities or Rights upon the issuance or grant thereof shall be deemed to be the largest number of votes that may be cast by the holders of such securities or the holders of any other Voting Securities into which such Voting Securities or Rights are convertible or for which they are exchangeable or exercisable, determined as though such Voting Securities or Rights were immediately convertible, exchangeable or exercisable and without regard to any anti-dilution or other adjustments provided for therein.

20.Other Termination Provisions. The Company shall defend, indemnify and hold Executive harmless from any and all liabilities, obligations, claims or expenses which arise in connection with or as a result of Executive's service as an officer or director of the Company to the greatest extent now provided in the Company's Certificate of Incorporation and Bylaws and as otherwise allowed by law. During the Term and for a period of at least ten (10) years thereafter, or for a seven (7) year period commencing on the date of the termination of Executive’s employment hereunder, Executive shall be entitled to the same directors and officers' liability insurance coverage that the Company provides generally to its other directors and officers, as may be amended from time to time for such directors and officers.

21.Limitation of Authority. Except as expressly provided herein, no provision hereof shall be deemed to authorize or empower either party hereto to act on behalf of, obligate or bind the other party hereto.

22.IRC 409A. This Agreement is intended to satisfy the requirements of Section 409A(a)(2), (3) and (4) of the Code, including current and future guidance and regulations interpreting such provisions. To the extent that any provision of this Agreement fails to satisfy those requirements, the provision shall automatically be modified in a manner that, in the good-faith opinion of the Company, brings the provisions into compliance with those requirements while preserving as closely as possible the original intent of the provision. Notwithstanding anything to the contrary in this Agreement, no severance payments or benefits shall be paid to Executive during the six (6) month period following Executive's separation from service to the extent that the Company and Executive mutually determine in good faith that paying such amounts at the time or times indicated in this Agreement would cause Executive to incur an additional tax under Section 409A of the Code, in which case such amounts shall be paid at the time or times indicated in this Section. If the payment of any such amounts are delayed as a result of the previous sentence, then on the first day following the end of such six (6) month period, the Company will pay Executive a lump-sum amount equal to the cumulative amount that would have otherwise been payable to Executive during such six (6) month period.

23.Notices. All notices which are required by or may be given pursuant to the terms of this Agreement must be in writing and must be delivered personally; sent by certified mail, return receipt requested, postage prepaid; sent by facsimile (with written confirmation of transmission), provided that notice is also sent via first class mail, postage prepaid; or sent for next business day delivery by a nationally recognized overnight delivery service as follows:

If to the Company at:

___________________________

___________________________

Attn: ______________________

Fax: _______________________

with copies to:

Stubbs Alderton & Markiles LLP

15260 Ventura Blvd., 20^th Floor

Sherman Oaks, California 91403

Attn: Scott Galer, Esq.

Fax: (818) 444-6313

If to Executive at:

5700 La Gorce Drive

Miami Beach, Florida 33140

Any of the addresses and other contact information set forth above may be changed from time to time by written notice (delivered in accordance with this Section) from the party requesting the change.

Such notices and other communications will be treated for all purposes of this Agreement as being effective immediately if delivered personally or by facsimile (with written confirmation of transmission) during normal business hours, or five (5) days after mailing by certified mail, return receipt requested, first class postage prepaid, or one business day after deposit for next business day delivery by a nationally recognized overnight delivery service.

24.Amendment. Except as otherwise provided herein, no amendment of this Agreement shall be valid or effective, unless in writing and signed by or on behalf of the parties hereto.

25.Waiver. No course of dealing or omission or delay on the part of either party hereto in asserting or exercising any right hereunder shall constitute or operate as a waiver of any such right. No waiver of any provision hereof shall be effective, unless in writing and signed by or on behalf of the party to be charged therewith. No waiver shall be deemed a continuing waiver or waiver in respect of any other or subsequent breach or default, unless expressly so stated in writing.

26.Governing Law. This Agreement shall be governed by, and interpreted and enforced in accordance with, the laws of the State of New York without regard to principles of choice of law or conflict of laws.

27.Arbitration. Any dispute or controversy arising out of or related to this Agreement or any breach hereof shall be settled by binding arbitration by the American Arbitration Association (or any organization successor thereto) in New York, New York in accordance with its Employment Arbitration Rules then prevailing. Judgment and the award rendered by the arbitration panel may be entered in any court or tribunal of competent jurisdiction. This provision encompasses all disputes relating to Executive’s employment, this Agreement, the termination of Executive’s employment, and the amounts paid to the Executive upon termination, regardless of whether such dispute arises during or after the Executive’s employment. In any arbitration proceeding conducted pursuant to this Section 27, both parties shall have the right to discovery, to call witnesses and to cross-examine the other party’s witnesses (through legal counsel, expert witnesses, or both). All decisions of the arbitration panel shall be final, conclusive and binding upon the parties, and not subject to judicial review. The arbitration panel shall have no power to change any of the provisions hereof in any respect or make an award of reformation, and the jurisdiction of the arbitrators is expressly limited accordingly. All statutes of limitations that would otherwise be applicable shall apply to any arbitration proceeding hereunder. Any arbitration shall be conducted by an arbitration plan consisting of one or more arbitrators jointly selected by the parties hereto; provided, however, that if the parties are unable to agree on an arbitrator or arbitrators, the arbitrator or arbitrators shall be selected in accordance with the aforementioned Employment Arbitration Rules then prevailing. Each of the parties hereto shall pay the fees and expenses of its counsel, accountants and other experts incident to any such arbitration. The fees and expenses of the arbitrator shall be paid fifty percent (50%) by the Company and fifty percent (50%) by Executive. Any notice or other process relating to any such arbitration may be effected in the manner provided by Section 23.

28.Remedies. In the event of any actual or prospective breach or default by either party hereto, the other party shall be entitled to seek equitable relief, including remedies in the nature of rescission, injunction and specific performance. All remedies hereunder are cumulative and not exclusive, and nothing herein shall be deemed to prohibit or limit either party hereto from pursuing any other remedy or relief available at law or in equity for such actual or prospective breach or default, including the recovery of damages.

29.Severability. The provisions hereof are severable and in the event that any provision of this Agreement shall be determined to be invalid or unenforceable in any respect by a court of competent jurisdiction, the remaining provisions hereof shall not be affected, but shall, subject to the discretion of such court, remain in full force and effect, and any invalid or unenforceable provision shall be deemed, without further action on the part of the parties hereto, amended and limited to the extent necessary to render the same valid and enforceable.

30.Counterparts. This Agreement may be executed in counterparts, including, without limitation, by facsimile, each of which shall be deemed an original and which together shall constitute one and the same agreement.

31.Assignment. This Agreement, and each right, interest and obligation hereunder, may not be assigned by either party hereto without the prior written consent of the other party hereto, and any purported assignment without such consent shall be void and without effect, except that this Agreement shall be assigned to, and assumed by, any person with or into which the Company merges or consolidates, or which acquires all or substantially all of its assets, or which otherwise succeeds to and continues the Company’s business substantially as an entirety. Except as otherwise expressly provided herein or required by law, Executive shall not have any power of anticipation, assignment or alienation of any payments required to be made to him hereunder, and no other person may acquire any right or interest in any thereof by reason of any purported sale, assignment or other disposition thereof, whether voluntary or involuntary, any claim in a bankruptcy or other insolvency proceeding against Executive, or any other ruling, judgment, order, writ or decree.

32.Withholding. The Company may withhold from any and all amounts payable under this Agreement such federal, state and local taxes, as may be required to be withheld pursuant to any applicable law or regulation, and all other applicable withholdings.

33.Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Agreement is not intended, and shall not be deemed, to create or confer any right or interest for the benefit of any person not a party hereto.

34.Titles and Captions. The titles and captions of the Articles and Sections of this Agreement are for convenience of reference only and do not in any way define or interpret the intent of the parties hereto or modify or otherwise affect any of the provisions hereof.

35.Grammatical Conventions. Whenever the context so requires, each pronoun or verb used herein shall be construed in the singular or the plural sense and each capitalized term defined herein and each pronoun used herein shall be construed in the masculine, feminine or neuter sense.

36.References. The terms “herein,” “hereto,” “hereof,” “hereby,” and “hereunder,” and other terms of similar import, refer to this Agreement as a whole, and not to any Article, Section or other part hereof.

37.No Presumptions. Each party hereto acknowledges that it has had an opportunity to consult with counsel and has participated in the preparation of this Agreement. No party hereto is entitled to any presumption with respect to the interpretation of any provision hereof or the resolution of any alleged ambiguity herein based on any claim that the other party hereto drafted or controlled the drafting of this Agreement.

38.Certain Definitions. As used herein:

(a)“Person” includes, without limitation, a natural person, corporation, joint stock company, limited liability company, partnership, joint venture, association, trust, government or governmental authority, agency or instrumentality, or any group of the foregoing acting in concert.

(b)A “Proceeding” is any suit, action, arbitration, audit, investigation or other proceeding before or by any court, magistrate, arbitration panel or other tribunal, or any governmental agency, authority or instrumentality of competent jurisdiction.

39.Entire Agreement. This Agreement embodies the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes any prior or contemporaneous agreement, commitment or arrangement relating thereto, written or oral, if any, which shall terminate immediately upon the commencement of the Term, except that each party thereto shall (a) remain required to perform any act and to satisfy any obligation or condition that such party is required to perform or satisfy thereunder with respect to any event occurring or circumstance existing prior to the commencement of the Term hereof (including, without limitation, the payment or delivery to Executive of any compensation, reimbursable expense or employee benefit or perquisite to which he may be entitled, but which has not yet been paid to him, on account of his employment under any such prior arrangement) that has not been so performed or satisfied, and (b) retain his or its right under any such prior assignment to assert or to allege any claim or cause of action relating to or based upon, or otherwise to enforce, any provision thereof with respect to any event occurring or circumstance existing during the term thereof.

IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as of the day and year first above written.

NEW MOTION, INC.

By:

Name:

Title:

Burton Katz

EX-10.3

CONSULTING AGREEMENT

THIS CONSULTING AGREEMENT, dated as of January 31, 2008 (this “Agreement”), by and between New Motion, Inc., a Delaware corporation (“New Motion” or the “Company”) with its offices at 42 Corporate Park, Suite 250, Irvine, CA 92606 and Jeffrey Schwartz., an individual residing at 6 Glen Eagles Court, New City, NY 10956 (“Consultant”). The parties to the Agreement are sometimes referred to collectively as the “Parties” or simply as a “Party.”

WITNESSETH:

WHEREAS, the Company and NM Merger Sub, a Delaware corporation and Traffix, Inc., a Delaware corporation (“Traffix”) are parties to that certain Agreement and Plan of Merger, dated as of September 26, 2007 (the “Merger Agreement”);

WHEREAS, it is a condition to the Merger contemplated by the Merger Agreement (the “Merger”) that Consultant terminate his employment as Chairman and Chief Executive Officer of Traffix and thereafter provide consulting services to the Company; and

WHEREAS, Consultant is willing to act as a consultant to the Company and Company wishes to retain Consultant to perform consulting services for the Company, all on the terms set forth herein.

NOW, THEREFORE, in consideration of the foregoing, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Consultant hereby agree as follows:

1.Effective Date. This Agreement shall become effective at the Effective Time of the Merger under the Merger Agreement. Prior to the Effective time, none of the parties hereto shall have any rights or obligations hereunder. The date on which this Agreement becomes effective shall be referred to herein as the “Effective Date”.

2.Term. The term of this Agreement (the “Term”) shall end on the second anniversary of the Effective Date, unless sooner terminated pursuant to the terms hereof. The date on which the Term ends (or the date on which Consultant’s retention hereunder is terminated) is sometimes referred to as the “Termination Date”.

3.Consulting Services. During the Term, Consultant hereby agrees to consult with Burton Katz, the Chief Executive Officer of the Company (or any successors) and any other executive officers of the Company reasonably designated by the Chief Executive Officer regarding the general strategic direction of the Company and the marketing and development of the Company’s products and services. Consultant agrees to devote up to three (3) business days per week or up to twelve (12) business days per month to the performance of said consulting services. The precise schedule for the performance of consulting services hereunder shall be developed from to time by the Company giving reasonable regard to Consultant’s schedule, and subject to Consultant’s reasonable approval. Consultant shall perform said consulting services from such locations as the Company and Consultant shall reasonably agree.

4.Consulting Fee. Company shall pay to Consultant during the Term a consulting fee of $200,000.00 per annum (the “Base Fee”), such Base Fee to be paid in arrears in substantially equal installments no less often than twice per month during the Term.

5.Benefits. Company shall provide Consultant with the same benefits he enjoyed as Chairman and CEO of Traffix, including a non-accountable monthly allowance for business expenses (of up to $1,000 per month), automobile allowance (up to $2,000 per month, including all insurance and maintenance costs), reimbursement for professional fees for legal and accounting fees and tax planning of $10,000 per year, and reimbursement of fees for maintenance of American Express black credit card. Company shall reimburse Consultant during the Term (up to $10,000 per annum) for the cost of maintaining health and dental insurance substantially equivalent to the coverage he enjoyed as Chairman and CEO of Traffix.

6.Expenses. In accordance with the Company’s established practices applicable to its most senior executives, Company shall pay directly, or advance funds to Consultant or reimburse Consultant for, all expenses reasonably and actually incurred by him in connection with the performance of his consulting services hereunder in excess of the monthly expense allowance specified under Section 5 hereof.

7.Independent Contractor. Consultant agrees and understands that under this Agreement he is an independent contractor and not an employee, partner, or joint venturer of Company. Company will not pay, or withhold, any federal, state, local, city or other payroll or employment taxes, including, but not limited to, FICA, state and federal income taxes, state disability insurance taxes, or state unemployment insurance taxes relating to income received by Consultant from Company pursuant to this Agreement. The Consultant shall be liable for his own debts, obligations, acts and omissions and agrees to indemnify and hold the Company harmless against any claim related to any such taxes made by any such governmental authority.

8.Proprietary Information and Restrictive Covenants; Termination Agreement. As a condition to the obligations of the Company hereunder, concurrently with the execution and delivery of this Agreement, Consultant is hereby executing and delivering to the Company the Non-Competition, Non-Solicitation and Confidentiality Agreement in the form attached hereto as Exhibit A (the “Non-Competition Agreement”) and the Termination of Employment Agreement and General Release attached hereto as Exhibit B (the “Termination Agreement”).

9.Termination Upon Death or Disability. Consultant’s retention as a consultant hereunder shall terminate automatically upon his death. In the event that Consultant is unable to perform his material duties hereunder by reason of any disability or incapacity (due to any physical or mental injury, infirmity, incapacity, illness or defect) for an aggregate of 120 days in any consecutive 12-month period, Company shall have the right to terminate Consultant’s retention as a consultant hereunder within 60 days after the 120th day of his disability or incapacity by giving Consultant notice to such effect at least 30 days prior to the date of termination set forth in such notice, and on such date such retention shall terminate.

10.Termination for Cause by Company.

(a)In addition to any other rights or remedies provided by law or in this Agreement, the Company may terminate Consultant’s retention as a consultant for “cause” under this Agreement if:

(i)Consultant is indicted for, convicted of, or enters a plea of guilty or nolo contendere (which plea is not withdrawn prior to its approval by the court) to (x) a felony or crime involving moral turpitude, or (y) any other acts involving the matters identified in clauses (1) through (3) of paragraph (ii) below; or

2

(ii)the Company’s Board of Directors (“Board”) determines, after due inquiry, that Consultant has:

(1) committed fraud against, or embezzled or misappropriated funds or other assets of, Company or any Affiliate (as defined below) thereof; or

(2) committed any other act or omission involving dishonesty or fraud with respect to the Company or any Affiliate thereof;

(3) violated, or caused Company or any Affiliate or any of their officers, employees or other agents, or any other person to violate, any material law, regulation or ordinance, which violation has or would reasonably be expected to have a significant detrimental effect on Company or its Affiliates, or any material rule, regulation, policy or practice established by the Board and communicated to Consultant, which violation has or would reasonably be expected to have a significant detrimental effect on Company or its Affiliates;

(iii)the Consultant’s willful misconduct or gross negligence with respect to the Company or any Affiliate thereof;

(iv)repeated failure of the Consultant to follow established reasonable and lawful directions of the Company; or

(v)any violation or breach of this Agreement, the Non-Competition Agreement or any established Company policy, procedure or guideline;

provided, however, that the Consultant’s violation or breach of paragraphs (ii), (iii), (iv) or (v) shall not constitute Cause if such violation or breach is remedied or cured, if capable of remedy or cure, within five days after receipt of written notice from the Company specifying the violation or breach, except that no such cure period shall apply if facts exist that give Company a right of termination for Cause on more than two occasions in any 12 month period during the Term.

(b)Company may effect such termination for cause under Section 10(a) of this Agreement by giving Consultant written notice to such effect, setting forth in reasonable detail the factual basis for such termination before the date of termination set forth therein; provided, however, that in the case of any termination under paragraphs (iii), (iv) or (v) of Section 10(a), such written notice shall be given at least ten (10) days prior to the date of termination set forth therein.

(c)For the purposes of this Agreement, (i) the term “Affiliate” of a Person means another Person directly or indirectly controlling, controlled by, or under common control with, such Person; for this purpose, “control” of a Person means the power (whether or not exercised) to direct the policies, operations or activities of such Person by virtue of the ownership of, or right to vote or direct the manner of voting of, securities of such Person, or pursuant to agreement or law or otherwise; and (ii) the term “Person” includes without limitation a natural person, corporation, joint stock company, limited liability company, partnership, joint venture, association, trust, governmental authority, or any group of the foregoing acting in concert.

3

11.Termination by Consultant for Good Reason.

(a)In addition to any other rights or remedies provided by law or in this Agreement, Consultant may terminate his retention as a consultant under this Agreement for “good reason” if:

(i)Company violates, or fails to perform or satisfy any material covenant, condition or obligation required to be performed or satisfied by it hereunder, including without limitation, making payments in accordance with Sections 4, 5 and 6 of this Agreement; or

(ii)without Consultant’s express written consent, Company requires services that are not consistent with Consultant’s former position as Chairman and Chief Executive Officer of Traffix.

(b)Consultant shall give Company notice of termination for good reason, setting forth in reasonable detail the factual basis for such termination, at least ten (10) days prior to the date of termination set forth therein; provided however, that Company may avoid such termination if it, prior to the date of termination set forth in such notice, cures the factual basis for termination set forth therein, except that no such cure period shall apply if facts exist that give Consultant a right to give notice of termination on more than two occasions in any 12 month period during the Term.

12.Voluntary Termination. Notwithstanding anything to the contrary contained hereinabove, Company shall be entitled to terminate this Agreement without restriction at any time upon written notice to Consultant, and Consultant shall be entitled to terminate this Agreement without restriction upon sixty (60) day written notice to the Company.

13.Consequences of Termination.

(a)Upon termination of Consultant’s retention as a consultant under this Agreement for any reason, except for any termination under Section 9 and except for any termination by Consultant pursuant to Section 12 hereof, Consultant shall be entitled to receive any compensation or other amounts due to him pursuant to Sections 4, 5 and 6 in respect of his retention prior to the Termination Date, and from and after the Termination Date, except as otherwise provided in Sections 13(b) of this Agreement, the Company shall have no further obligation to Employee hereunder.

(b)If Company terminates Consultant’s retention as a consultant under this Agreement other than upon his disability or incapacity pursuant to Section 9 and other than for “cause” pursuant to Section 10, subject to the terms hereof and Consultant’s compliance with the obligations set forth in the Non-Competition Agreement, the Company shall pay to Consultant the amounts payable to Consultant under Sections 4 and 6 (in accordance with the payment schedule set forth in Sections 4 and 6, as applicable) and provide him with the benefits and perquisites to be provided under Section 5 of this Agreement during the period from the Termination Date until the second anniversary of the Effective Date.

4

(c)The amounts payable pursuant to Section 13(b) shall only be payable if the Consultant delivers to the Company and does not revoke a general release of all claims in a form substantially the same as that made by Consultant in the Termination Agreement.

14.Limitation of Authority. Except as expressly provided herein, no provision hereof shall be deemed to authorize or empower either party hereto to act on behalf of, obligate or bind the other party hereto.

15.Notices. Any Notice or demand required or permitted to be given or made hereunder to or upon any party hereto shall be deemed to have been duly given or made for all purposes if (a) in writing and sent by (i) messenger or an overnight courier service against receipt, or (ii) certified or registered mail, postage paid, return receipt requested, or (b) sent by telegram, telecopy (confirmed orally), telex or similar electronic means, provided that a written copy thereof is sent on the same day by postage-paid first-class mail, to such party at their respective addresses first set forth above or to such other address as any party hereto may at any time, or from time to time, direct by notice given to the other parties in accordance with this Section. Except as otherwise expressly provided herein, the date of giving or making of any such notice or demand shall be, in the case of clause (a) (i) of this Section 14, the date of the receipt; in the case of clause (a) (ii) of this Section 14, three Business Days after such notice or demand is sent; and, in the case of clause (b) of this Section 14, the Business Day next following the date such notice or demand is sent.

16.Amendment. Except as otherwise provided herein, no amendment of this Agreement shall be valid or effective, unless in writing and signed by or on behalf of the parties hereto.

17.Waiver. No course of dealing or omission or delay on the part of either party hereto in asserting or exercising any right hereunder shall constitute or operate as a waiver of any such right. No waiver of any provision hereof shall be effective, unless in writing and signed by or on behalf of the party to be charged therewith. No waiver shall be deemed a continuing waiver or waiver in respect of any other or subsequent breach or default, unless expressly so stated in writing.

18.Mitigation. Consultant shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking any other employment, consulting engagement or otherwise.

19.Governing Law. This Agreement shall be governed by, and interpreted and enforced in accordance with, the laws of the State of New York without regard to principles of choice of law or conflict of laws. Each party to this Agreement submits to the jurisdiction of the courts of the State of New York, located in New York County, New York, and to the jurisdiction of the United States District Court for the Southern District of New York, with respect to any matter arising out of this Agreement, waives any objection to venue in the County of New York, State of New York, or such District, and agrees that service of any summons, complaint, Notice or other process relating to such proceeding may be effected in the manner provided by Section 14 of this Agreement.

20.Indemnification. In addition to any rights that Consultant may have under the Company’s certificate of incorporation or under any liability insurance policy maintained by the Company with respect to the indemnification of Consultant, the Company hereby agrees to indemnify and hold harmless the Consultant from and against any and all damages, claims, liabilities, expenses and losses incurred or initiated by any third party and arising from the performance of services by Consultant under and in accordance with this Agreement.

5

21.Code Section 409A.

(a)This Agreement is intended to satisfy the requirements of Section 409A(a)(2), (3) and (4) of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder (collectively, the “Code”), including current and future guidance and regulations interpreting such provisions. To the extent that any provision of this Agreement fails to satisfy those requirements, the provision shall automatically be modified in a manner that, in the good-faith opinion of the Company, brings the provisions into compliance with those requirements while preserving as closely as possible the original intent of the provision. In particular, and without limiting the preceding sentence, if Consultant is a “specified employee” under Section 409A(a)(2)(B)(i) of the Code, then any payment under this Agreement that is treated as deferred compensation under Section 409A of the Code shall be delayed until the date which is six months after the date of separation from service (without interest or earnings).

(b)If any payments made to Consultant under this Agreement constitute “nonqualified deferred compensation” under Section 409A of the Code, such payments will be grossed up to make Consultant whole for any tax, penalty or other assessment imposed by reason of such payments under Section 409A of the Code.

22.Severability. The provisions hereof are severable and in the event that any provision of this Agreement shall be determined to be invalid or unenforceable in any respect by a court of competent jurisdiction, the remaining provisions hereof shall not be affected, but shall, subject to the discretion of such court, remain in full force and effect, and any invalid or unenforceable provision shall be deemed, without further action on the part of the parties hereto, amended and limited to the extent necessary to render the same valid and enforceable.

23.Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original and which together shall constitute one and the same agreement.

24.Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Agreement is not intended, and shall not be deemed, to create or confer any right or interest for the benefit of anyone not a party hereto.

25.Assignment. Consultant shall not assign Consultant’s obligations under this Agreement, and any purported assignment without such consent shall be void and without effect.

26.Titles and Captions. The titles and captions of the Articles and Sections of this Agreement are for convenience of reference only and do not in any way define or interpret the intent of the parties or modify or otherwise affect any of the provisions hereof.

27.No Presumptions. Each party hereto acknowledges that it has had an opportunity to consult with counsel and has participated in the preparation of this Agreement. No party hereto is entitled to any presumption with respect to the interpretation of any provision hereof or the resolution of any alleged ambiguity herein based on any claim that the other party hereto drafted or controlled the drafting of this Agreement.

28.Entire Agreement. This Agreement embodies the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements, commitments or arrangements relating thereto.

(Signature page follows)

6

IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as of the day and year first above written.

NEW MOTION, INC.

By: 

Name:

Title:

Jeffrey Schwartz

7

EX-10.4

CONFIDENTIAL TREATMENT REQUESTED

Master Services Agreement

Client Name:	New Motion, Inc.
Attention:	Burton Katz
Address:	42 Corporate Park Second Floor Irvine, CA 92606
Phone Number:	949.777.3700
Fax Number:	949.777.3707
Email Address:	burtonk@newmotioninc.com
Effective Date:	January 1, 2008

This Master Services Agreement is made as of the Effective Date between Motricity, Inc., a Delaware corporation having its principal place of business at 210 West Pettigrew Street, Durham, NC 27701 (“Motricity”), and the Client identified above.

1.Definitions

(a)Affiliate. “Affiliate” means any entity that directly or indirectly controls, is controlled by, or is under common control with Motricity or Client, as the case may be. For purposes of this definition, “control” means the power to direct the management and policies of an entity, directly or indirectly, or the ownership of more than 50% of the voting securities of such entity.

(b)Agreement. “Agreement” means this Master Services Agreement and all Schedules.

(c)Client Care Incident. “Client Care Incident” means any inquiry by phone or email by a wireless subscriber concerning Client Content or Client’s use of the Motricity Services.

(d)Client Content. “Client Content” means any Content that Client makes available through or transmits via or in connection with the Motricity Services.

(e)Content. “Content” means applications and other content and services for mobile devices, including but not limited to games, ringtones, wallpaper, electronic books, music, videos, applications, and textual data (including SMS and other types of text messages), and also including both subscription-based and a la carte content.

(f)Gross Premium Messaging Revenue. “Gross Premium Messaging Revenue” means the total revenue from premium messages delivered through Client’s use of the Motricity Services.

(g)Motricity Services. “Motricity Services” means the Motricity products and services provided to Client hereunder as described in one or more Schedules.

(h)Net Premium Messaging Revenue. “Net Premium Messaging Revenue” means the total amount received by Motricity from the wireless carriers in respect of premium messages delivered through Client’s use of the Motricity Services, less any amounts paid to any third party content providers.

(i)Schedule. “Schedule” means a mutually-executed written a description of Motricity Services to be provided, which must include a schedule of any applicable key dates, a term, each party’s account managers for that schedule, a listing of any applicable roles and responsibilities, a fee and payment schedule, and any additional terms applicable to that Schedule.

2.Motricity Services.

(a)General. Motricity shall provide the Motricity Services in accordance with this Agreement and the applicable Schedules. If there is a conflict between this Agreement and a Schedule, the terms of the applicable Schedule prevail with respect to that Schedule.

(b)Technical Requirements. Client shall comply with Motricity’s minimum technical and connectivity requirements for use of the Motricity Services, which currently requires that Clients who license Campaign Manager (i) use a Windows operating system (at least Windows 2000 or later), (ii) access Campaign Manager by means of Microsoft Internet Explorer 6.0 or later, and (iii) users can download, install, and operate Microsoft Windows Smart Client. Client is solely responsible for configuring its firewall, proxy server, or other Client network configuration in Client’s environment so as to enable access to and use of the Campaign Manager. For gateway aggregation services, Client is solely responsible for installing any necessary hardware and completing the integration coding in order to properly access Motricity’s APIs, SMPP connection, VPN, or other connectivity-related services. Motricity shall provide comprehensive documentation and standard technical support to assist Client in facilitating gateway connectivity, but is not responsible for writing any programming code or configuring software or hardware for Client.

(c)Additional Integrations. Motricity shall support a single integration to Client’s systems, but may support additional integrations (“Additional Integrations”) either to Client’s systems or to a Client-designated third party’s systems, subject to Client’s payment of the additional fees as agreed between the parties.

(d)Client Cooperation. Client acknowledges that Motricity requires certain technical information and other cooperation from Client in order to provide the Motricity Services and meet the projected delivery dates. Client shall provide such information and cooperation in a timely manner. Motricity is not responsible for any delays caused by Client’s failure to provide such information and cooperation in a timely manner.

- 1 -

(e)Limited Content License. Client hereby grants Motricity a limited, non-exclusive license to use, modify and distribute Client Content solely to the extent necessary to provide the Motricity Services.

(f)Short Code Provisioning. Motricity shall provision the Client’s SMS short code(s) with the applicable wireless carriers and use its reasonable efforts to facilitate SMS campaign approval and/or certification by the wireless carriers as required. Motricity cannot guarantee that a wireless carrier will approve and/or certify any particular campaign. Motricity shall submit to each carrier the appropriate documentation for short code provisioning and campaign approvals within one week of receiving all the necessary documentation, set-up fees, and campaign submission fees from Client.

(g)Campaign Approvals. Client acknowledges that each wireless carrier may have unique requirements or standards for the approval and/or certification of campaigns and that these standards may change from time to time with or without notice. Motricity has no control over such requirements or standards or a carrier’s timing for providing approval and/or certification of campaigns.

(h)Short Code Leases. Client is responsible for securing, and paying for, its own SMS short code lease(s) (“Short Code Lease”) through the Common Short Code Administration (“CSCA”) whose website is www.usshortcodes.com.

(i)Account Management. Motricity shall provide an account support team, led by a primary account manager, to assist the Client in deployment and operation of the Motricity Services described hereunder. Motricity shall provide this support during Motricity’s normal business hours. If Client requires support after hours, Client shall notify Motricity in advance. The parties shall agree in advance in writing to the requirements, any additional costs, and any other special arrangements that will be needed to meet Client’s after hours support requirements.

(j)Reporting. Motricity shall make available to Client all of its standard reports with respect to the applicable Motricity Services. If Client requires additional custom or manual reporting (“Custom Reporting”), Client shall notify Motricity in advance. The parties shall agree in advance in writing to the requirements, any additional costs, and any other special arrangements that will be needed to meet Client’s Custom Reporting requirements.

3.Delivery and Content of Messages

(a)Responsibility for Content. Client is solely responsible for the Client Content, and Client shall not use the Motricity Services to send any Unsuitable Content (as defined below). Client acknowledges that each wireless carrier has the right to review and block any or all Client Content prior to the delivery of such content to its subscribers, including the right to block all Content from particular subscribers. In addition, Motricity has the right, but is under no obligation to, block any Client Content that in its reasonable opinion would be considered by a wireless carrier to be Unsuitable Content. Notwithstanding the foregoing, Motricity’s or a wireless carrier’s failure to block Client Content is not an approval or other endorsement of the suitability of such Client Content.

(b)Unsuitable Content. “Unsuitable Content” means any Content that is unlawful, harmful, threatening, defamatory, obscene, harassing, private, or racially, ethically or otherwise objectionable, that facilitates illegal activity, promotes violence or discrimination, incorporates any materials that infringe or assist others to infringe on any copyright, trademark, or other intellectual property rights, or contains or will contain any virus or computer code the purpose of which is to damage or interfere with the operation of any computer (including any software) or to misappropriate private information.

(c)Solicitation; Opt-in; Opt-out. Client shall not (i) transmit “spam” or distribute any other unsolicited information, or (ii) contact wireless subscribers via other means, including telemarketing, unless the wireless subscriber provides prior express consent. Client shall only send Content to wireless subscribers who have affirmatively expressed a desire to receive such Content. Client shall provide a method for wireless subscribers to terminate their receipt of any Content. Client shall at all times ensure that Client’s messaging and content campaigns and Client’s use of the Motricity Services adheres to the then-current guidelines set forth by both the Mobile Marketing Association (“MMA”) and all participating carriers.

(d)No Switchover Marketing. Client shall not use the Motricity Services, or any wireless subscriber information collected under this Agreement, to market to any carrier’s wireless subscribers (as a targeted group) to attempt to persuade them to use any other wireless carrier.

(e)Premium Content. Client acknowledges that premium Content (meaning any Content for which a wireless subscriber is required to pay an additional fee over and above standard text messaging rates) is not available on all wireless phones, and that carriers have the right to impose limitations or prohibitions on certain wireless subscribers with respect to their purchase of premium Content.

(f)Undelivered Messages. Client acknowledges that (a) Motricity does not guaranty that 100% of Client Content will be delivered by the carrier to the intended wireless subscribers; (b) neither Motricity nor any carrier is liable to Client for any messages deleted or not delivered, regardless of the reason for deletion or nondelivery including, without limitation, message processing or transmission errors.

- 2 -

4.Fees and Payment Terms.

(a)Fees Generally. Client shall pay Motricity the fees in the amounts and on the due dates specified herein and on the Schedules for the applicable Motricity Services.

(b)General Expenses. Client shall reimburse Motricity for its direct out-of-pocket expenses incurred in connection with providing the Motricity Services, provided that such expenses (i) have been approved by the appropriate Client account manager, and (ii) if requested by Client, Motricity has submitted reasonable supporting documentation for the expense.

(c)Carrier Expenses. Client shall pay Motricity any additional fees charged by any wireless carrier directly relating to Client’s use of the Motricity Services, including but not limited to (i) Short Code set-up and provisioning, (ii) promotional content delivery (e.g., free ringtones), (iii) program brief fees, or (iv) technical support (collectively, “Miscellaneous Carrier Fees”), and including an administrative fee of 10%. Client acknowledges that the wireless carriers modify the Miscellaneous Carrier Fees from time to time, including at times without notice to Motricity, and Motricity has no control over these fees or their application to Client campaigns.

(d)Payment Terms. Client shall pay Motricity all fees and expenses owing hereunder or under any Schedule within 30 days of the invoice date or, if a specific payment date is designated in the applicable Schedule, on or before that date. Client shall pay interest at a rate of 1½% per month or the highest amount permitted by law, whichever is less, on any overdue amount that is Client has not disputed in good faith by written notice. In addition, Client shall reimburse Motricity for all reasonable costs and expenses incurred by Motricity in connection with the collection of overdue amounts, including attorneys’ fees. If payments are more than 15 days overdue, then Motricity has the right to suspend all Motricity Services on 15 days notice until the overdue amounts are paid in full.

(e)Taxes. Client shall pay or reimburse Motricity for all sales taxes and other taxes, however characterized by the taxing authority, based upon the fees or other charges under this Agreement or otherwise incurred on account of Customer’s use of the Motricity Services, except for any taxes based upon Motricity’s net income.

5.Term and Termination

(a)Term. This Agreement commences on the Effective Date and will continue in effect until terminated as provided below.

(b)Termination after Completion of Schedules. Either party has the right to terminate this Agreement on 30 days written notice if there are no Schedules then in effect. This Agreement automatically terminates if no Schedules have been in effect for one entire year.

(c)Termination for Cause. Either party has the right to terminate this Agreement immediately by written notice:

(i)if the other party has committed a material breach of its obligations under this Agreement and has failed to cure such breach (or, if such breach is not reasonably curable within 30 days, has failed to begin and continue to work diligently and in good faith to cure such breach) within 30 days of notice by the other party of such breach; or

(ii)upon the institution of bankruptcy or state law insolvency proceedings against a party, if such proceedings are not dismissed within 30 days of commencement.

6.Indemnification.

(a)Generally. Each party (an “Indemnifying Party”) shall defend, indemnify and hold harmless the other party (an “Indemnified Party”) from and against any third party action, claim or suit brought against the Indemnified Party arising out of, or in any way connected to, any allegation of (i) breach by the Indemnifying Party of its obligations hereunder or (ii) any gross negligence or willful misconduct of the Indemnifying Party. Each Indemnified Party shall (a) promptly notify the Indemnifying Party of any third party claim subject to indemnification hereunder, (b) give the Indemnifying Party the right to control and direct the preparation, defense and settlement of any such claim and (c) give full cooperation to the Indemnifying Party for the defense of same. The Indemnified Party may participate in such defense at such party's own expense. The Indemnifying Party is not liable for any amounts paid in settlement of any claim or litigation covered by this Paragraph if such settlement is effected without the consent of the Indemnifying Party, which consent shall not be unreasonably withheld.

(b)Intellectual Property. Subject to the foregoing, each party shall indemnify and the other party harmless against any third party claims for damages, costs and expenses (including reasonable attorneys’ fees), and court awards arising from (i) in the case of Motricity, the infringement by the Motricity Services, and (ii) in the case of Client, the infringement by any Client Content of any intellectual property right of any third party, except where, the case of the Motricity Services, such infringement is caused by Client’s unauthorized modification of the Motricity Services or unauthorized combination of the Motricity Services with third party products or services where the Motricity Services would not have been infringing without such modification or combination. If the Motricity Services become, or if Motricity reasonably believes they may become, the subject of any claim for infringement or are adjudicatively determined to infringe, then Motricity may, at its option and expense, either (i) procure for Client the right to continue to use the Motricity Services or (ii) replace or modify the Motricity Services with other suitable and reasonably equivalent services, so that the Motricity Services noninfringing. If neither (i) nor (ii) are reasonably possible on commercially reasonable terms as determined by Motricity in its reasonable discretion, then either party may terminate this Agreement.

7.Disclaimers

(a)Disclaimer of Warranties. EXCEPT AS EXPRESSLY PROVIDED ELSEWHERE HEREIN, MOTRICITY DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, WITH RESPECT TO THE CONTENT OR SERVICES PROVIDED TO CLIENT HEREUNDER OR THE FUNCTIONALITY, PERFORMANCE OR RESULTS OF USE THEREOF. WITHOUT LIMITING THE FOREGOING, MOTRICITY DISCLAIMS ANY WARRANTY THAT THE CONTENT OR SERVICES PROVIDED TO CLIENT HEREUNDER OR THE OPERATION THEREOF ARE OR WILL BE ACCURATE, ERROR-FREE OR UNINTERRUPTED. MOTRICITY DISCLAIMS ANY AND ALL IMPLIED WARRANTIES, INCLUDING WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY, NON-INFRINGEMENT, FITNESS FOR ANY PARTICULAR PURPOSE OR ARISING BY USAGE OF TRADE, COURSE OF DEALING OR COURSE OF PERFORMANCE.

(b)Disclaimer of Consequential Damages. NEITHER PARTY HAS ANY LIABILITY WITH RESPECT TO ITS OBLIGATIONS UNDER THIS AGREEMENT OR OTHERWISE FOR CONSEQUENTIAL, EXEMPLARY, SPECIAL, INCIDENTAL, OR PUNITIVE DAMAGES EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

- 3 -

(c)Limitation of Liability. EXCEPT FOR (i) ANY CLAIMS SUBJECT TO INDEMNIFICATION HEREUNDER, (ii) ANY CLAIMS FOR DIRECT DAMAGES TO REAL OR TANGIBLE PERSONAL PROPERTY OR DEATH OR BODILY INJURY PROXIMATELY CAUSED BY A PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, (iii) EACH PARTY’S TOTAL, AGGREGATE LIABILITY TO THE OTHER FOR ANY REASON AND UPON ANY CAUSE OF ACTION INCLUDING WITHOUT LIMITATION, BREACH OF CONTRACT, NEGLIGENCE, STRICT LIABILITY, MISREPRESENTATIONS, AND OTHER TORTS, IS LIMITED TO ALL REVENUE SHARE AMOUNTS PAID TO CLIENT BY MOTRICITY IN RESPECT OF THE CONTENT AND SERVICES DURING THE ONE YEAR IMMEDIATELY PRECEDING THE EVENTS GIVING RISE TO THE LIABLITY.

8.General

(a)Compliance with Laws. Each party is responsible for complying with all laws and regulations applicable to its obligations hereunder, including but not limited to any privacy laws and any laws concerning unsolicited communications.

(b)Confidentiality. Each party shall keep confidential, and not use for any purpose detrimental to the disclosing party, any non-public information disclosed by the other party, including, but not limited to, the terms of this Agreement and any non-public technical information relating to the Services provided hereunder.

(c)Force Majeure. “Force Majeure Event” means any act or event that (a) prevents a party (the “Nonperforming Party”) from performing its obligations or satisfying a condition to the other party’s (the “Performing Party”) obligations under this Agreement, (b) is beyond the reasonable control of and not the fault of the Nonperforming Party, and (c) the Nonperforming Party has not, through commercially reasonable efforts, been able to avoid or overcome. “Force Majeure Event” does not include economic hardship, changes in market conditions, and insufficiency of funds. If a Force Majeure Event occurs, the Nonperforming Party is excused from the performance thereby prevented and from satisfying any conditions precedent to the Performing Party’s performance that cannot be satisfied, in each case to the extent limited or prevented by the Force Majeure Event. When the Nonperforming Party is able to resume its performance or satisfy the conditions precedent to the other party’s obligations, the Nonperforming Party shall immediately resume performance under this Agreement. The relief offered by this paragraph is the exclusive remedy available to the Performing Party with respect to a Force Majeure Event.

(d)Approvals. All references to a party having a right of approval include an implied obligation on the part of the approving party not to unreasonably withhold or delay its approval.

(e)Publicity. Motricity has the right to use Client’s name in a press release and to use Client’s logo only for the purpose of communicating that the Client is a customer of Motricity. Client shall not use the names of any wireless carriers in association with the Motricity Services without first obtaining Motricity’s prior written consent.

(f)Assignment. Neither party may assign any of its rights under this Agreement, except with the prior written consent of the other party, except that either party may assign this Agreement to an affiliate or in connection with a change of control transaction, provided that the acquirer has agreed in writing to comply with and be bound by all of the acquiree’s obligations hereunder. Any purported assignment of rights in violation of this Section is void.

(g)Governing Law; Venue. The laws of the State of North Carolina (without giving effect to its conflict of laws principles) govern all matters arising out of or relating to this Agreement and the transactions it contemplates, including, without limitation, its interpretation, construction, performance, and enforcement. The parties expressly agree that neither the Uniform Computer Information Transactions Act, or any state’s version thereof, nor the United Nations Convention on Contracts for the International Sale of Goods apply to this Agreement. Except as set forth in the following paragraph, any claims or actions regarding or arising out of this Agreement must be brought exclusively in a court of competent jurisdiction sitting in Raleigh, North Carolina, and each party to this Agreement submits to the jurisdiction of such courts for the purposes of all legal actions and proceedings arising out of or relating to this Agreement. Each party waives, to the fullest extent permitted by law, any objection that it may now or later have to (i) the laying of venue of any legal action or proceeding arising out of or relating to this Agreement brought in any state or federal court sitting in Raleigh North Carolina; and (ii) any claim that any action or proceeding brought in any such court has been brought in an inconvenient forum.

(h)Arbitration. Any controversy or claim arising out of or relating to this Agreement, or any breach thereof, must be resolved by confidential binding arbitration in Raleigh, North Carolina in accordance with the Commercial Arbitration Rules of the American Arbitration Association (including, where applicable, the Supplementary Procedures for International Commercial Arbitration), and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. Either party may, without inconsistency with this agreement to arbitrate, seek from a court any provisional remedy that may be necessary to protect trademarks, copyrights, or other rights or property pending the establishment of the arbitral tribunal or its determination of the merits of the controversy. The parties agree that the arbitrator has the power to award all costs of the arbitration, including reasonable attorneys fees and expenses, to the prevailing party.

(i)Independent Relationship. The relationship between the parties is that of an independent contractor. Nothing in this Agreement shall be deemed to create an employer/employee, principal/agent, partnership or joint venture relationship. Neither party shall have the authority to enter into any contract on behalf of the other party without that party’s express written consent. Neither party shall make any representation or incur any obligation in the name of or on behalf of the other party. Nothing in this Agreement shall be construed as or constitute an appointment of either party as the agent for the other.

- 4 -

(j)Notices. Each party giving or making any notice, request, demand or other communication (each, a “Notice”) pursuant to this Agreement must give the Notice in writing and use one of the following methods of delivery, each of which for purposes of this Agreement is a writing: personal delivery, registered or certified U.S. Mail (in each case, return receipt requested and postage prepaid), or nationally recognized overnight courier (with all fees prepaid). Any party giving a Notice must address the Notice to the appropriate person at the receiving party (the “Addressee”) at the address listed on the signature page of this Agreement or to another Addressee or another address as designated by a party in a Notice pursuant to this Section. Except as provided elsewhere in this Agreement, a Notice is effective only if the party giving the Notice has complied with this paragraph.

(k)Entire Agreement. This Agreement constitutes the final and complete agreement between the parties with respect to the matters contained herein. All prior and contemporaneous negotiations and agreements between the parties on the matters contained in this Agreement are expressly merged into and superseded by this Agreement. The provisions of this Agreement cannot be explained, supplemented or qualified through evidence of trade usage or a prior course of dealings.

(l)Amendments. The parties can amend this Agreement only by a written agreement of the parties that identifies itself as an amendment to this Agreement.

(m)Survival of Certain Provisions. Each party hereto covenants and agrees that the provisions in Sections 6, 7, and 8, in addition to any other provision that, by its terms, is intended to survive the expiration or termination of this Agreement, will survive the expiration or termination of this Agreement.

The parties are signing this Master Services Agreement on the date stated in the introductory clause.

Motricity, Inc.	New Motion, Inc.
By:	By:
Name:	Name:
Title:	Title:

- 5 -

CONFIDENTIAL TREATMENT REQUESTED

MESSAGING GATEWAY AND CAMPAIGN MANAGER SERVICES SCHEDULE

Client Name:	New Motion, Inc.
Effective Date:	January 1, 2008

This Messaging Gateway Services Schedule is a Schedule to that certain Master Services Agreement dated as of January 1, 2008 between Motricity and the Client identified above, and is made as of the Effective Date. Capitalized terms used and not defined herein have the meaning set forth in the Master Services Agreement.

1.Scope of Work. Pursuant to this Schedule, Motricity shall provide the Content delivery and billing gateway Service and the Motricity Campaign Manager Service solely for use by the Client identified above, including, in each case, connections with applicable U.S. wireless carriers for bi-directional mobile content delivery and integration for direct billing via premium SMS. Motricity shall provide the Service in accordance with the Service Level Agreement attached hereto as Exhibit 3.

2.Technical Support. Motricity shall provide Client with reasonable assistance, if applicable, in connecting to the Motricity Gateway and with on-going support, if applicable, for the Motricity Gateway and associated APIs.

3.Timing. Motricity shall provide technical configurations and account login (consisting of a unique user name and password) upon execution of this Schedule and receipt of all applicable Set-Up Fees and first applicable license fee payments, if applicable.

4.Fees.

(a)Non-Premium Message Fees. For each non-premium message sent or received, whether mobile-originated (“MO”) or mobile-terminated (“MT”), by Client during each calendar month, Client shall pay Motricity a per-message fee of $***, except that, for each $1.00 of Gross Premium Messaging Revenue, Motricity shall give Client *** free non-premium MO or MT messages.

(b)Premium Messaging Revenue Share.  For premium messages that Client delivers hereunder, Client shall pay Motricity a percentage of Net Premium Messaging Revenue equal to ***%. For any month for which Motricity’s share of Net Premium Messaging Revenue does not exceed $***, the percentage will automatically increase to ***% for that month.

(c)Monthly Minimum Fees. Motricity’s share of Net Premium Messaging Revenue must be at least $*** each month, less any service level credits applied pursuant to the Service Level Agreement. For any month in which Motricity’s share falls below that threshold, Client shall pay Motricity the shortfall amount.

(d)Short Code Lease Administration Fees. If Client requests that Motricity secure a Short Code Lease on Client’s behalf, Client shall reimburse Motricity for the direct costs associated with the Short Code Lease, and Client shall pay Motricity an additional fee of 10% of that direct cost in consideration of Motricity’s agreement to procure, setup, administer, and maintain Client short code(s). Unless Client notifies Motricity in writing at least 60 days prior to the applicable Short Code Lease renewal date, Motricity shall continue to renew and manage the Short Code Leases on Client’s behalf for the duration of the applicable Schedules, subject to Client’s payment of the fees and expenses described above.

(e)Customer Service Fees. For each Client Care Incident, Client shall pay to Motricity a fee of $10.00 (the “Customer Service Fee”). Motricity shall send Client an invoice at the end of each calendar month for the Customer Service Fees incurred in such calendar month. However, Motricity shall waive this Customer Service Fee for the first 25 Client Care Incidents in each calendar month.

(f)Promotional or Free Content Fees. If Client offers any binary Content (e.g. wallpaper, ring tones, etc.) through the Services for free or on a promotional basis, where there would otherwise be a premium content charge to the wireless subscriber for that Content, then Client shall pay Motricity a fee of $0.25 per download, plus any associated fees charged by the wireless carriers for such free or promotional Content.

(g)Monthly Statements for Content Fees. Motricity shall deliver monthly statements, based upon its records to Client, indicating the traffic volume (number of MO and MT messages) for the preceding month along with an invoice for any fees owed and a statement of Client’s share of any Net Premium Messaging Revenue. Generally, Motricity receives statements from the carriers 45 - 90 days after the month in which the traffic was generated. In the event of a dispute, the carrier statements and payments received from the carriers are used to determine the final traffic volume.

(h)Standard Payment Terms. Motricity shall pay Client (or shall apply to outstanding invoices, if any) the Client’s share of Net Premium Messaging Revenue within 30 days of Motricity receiving the corresponding payment from the carriers; provided, however, that if the total amount owed to Client is less than $500, Motricity shall carry that amount over to the following month.

*** Terms represented by this symbol are considered confidential. These confidential terms have been omitted pursuant to a Confidential Treatment Request filed with the Securities and Exchange Commission (“SEC”) and have been filed separately with the SEC.

- 6 -

(i)Advance Payment Terms. If Client and Motricity mutually agree, Motricity shall pay Client an advance payment of Client’s share of Net Premium Messaging Revenue (“Advance Payment”), subject to the terms and conditions set forth on Exhibit 1 to this Schedule. The parties shall in good faith negotiate with Silicon Valley Bank to provide a first security interest to Client in the underlying receivables related to Client’s account.  In the event that the security interest is achieved, the advance payment program will cease. In the event the security interest is no longer in place other than on account of the Client terminating the securitization agreement, and Motricity has not instituted a comparable arrangement with another bank within 60 days, then Client has the right to terminate this Agreement on 30 days prior written notice, which notice must be delivered to Motricity within 15 days following the end of that 60 day period. In addition, Client may, until a comparable arrangement has been instituted, reinstate the Advance Payment program on 5 days prior written notice to Motricity.

(j)Annual License Fee for Campaign Manager. Client shall pay Motricity an annual license fee of $***, payable in 4 equal quarterly installments at the beginning of each quarter, commencing on the Effective Date.

5.Carrier Look-up Service.

(a)Scope. Pursuant to this Schedule, Motricity shall also provide the carrier look-up service. The carrier look-up service is a solution to access and query a database by mobile phone number to determine the wireless carrier which is associated with that number (necessitated by Wireless Number Portability in the United States) for the purposes of wireless message routing. The Carrier Look-up Service only provides information about U.S.-based carriers who are part of the North American Number Portability Administration Center. As such, the service as defined and priced only provides carrier look-up support for messages destined for domestic (United States based) mobile phone subscribers.

(b)Traffic Forecasts. If requested by Motricity, Client shall provide Motricity with a written good-faith traffic forecast every 60 days. Each forecast must include total expected monthly query volume, and peak hour query volume.

(c)No Resale. The Carrier Look-up Service is for use by the Client only, solely for Client’s internal business purposes in connection with Motricity Services being provided under this Schedule and the Master Agreement. Client shall not under any circumstance offer the Carrier Look-up Service for resale to any third party, including by way of a service bureau.

(d)Transaction Fees. Client shall pay Motricity a transaction fee for the Carrier Look-up Service in accordance with one of the three options indicated below. In each case, Client shall pay Motricity a transaction fee for the Carrier Look-up Service equal to the greater of (i) $*** minimum monthly commitment, and (ii) the total Transaction Fees determined by multiplying the total number of queries per month by the Per Query Fee of $***. For clarification, a query containing multiple telephone numbers will be considered multiple queries, according to the number of telephone numbers being looked up.

(e)Disclaimer. CLIENT UNDERSTANDS AND ACKNOWLEGES THAT MOTRICITY DOES NOT MAINTAIN THE CARRIER LOOK-UP SERVICE DATABASE AND THEREFORE CANNOT MAKE ANY GUARANTEES AS TO THE AVAILABILITY OR RELIABILITY OF THE SERVICE OR THE ACCURACY OF THE INFORMATION OBTAINED BY THE SERVICE AND MOTRICITY IS NOT LIABLE IN ANY WAY IN CONNECTION WITH CLIENT’S USE OF THE CARRIER LOOK-UP SERVICE.

6.Professional Services. Client may request enhancements to Motricity’s platforms or products such as reports, features, customizations or other services not listed above. These requests may include custom features development, system enhancements (API, Reporting, etc) or other changes. When Client makes a request, the Motricity Account Manager will work with the Motricity Professional Services organization to evaluate the request. If both parties agree to move forward based on the initial evaluation, Motricity will prepare a Statement of Work (“SOW”) documenting the requested work, and once signed, the work will be scheduled and performed. Client shall pay 50% upon the execution of SOW, and the balance upon acceptance of the deliverables in accordance with Motricity’s acceptance testing procedures to be specified in the SOW. The following table outlines the professional services rates that will apply for any requested work.

Function	Rate/Hour
Project / Program Management	$	200
Engineering Services	$	200
Quality Assurance Services	$	130
Production/Operations Support	$	175

*** Terms represented by this symbol are considered confidential. These confidential terms have been omitted pursuant to a Confidential Treatment Request filed with the Securities and Exchange Commission (“SEC”) and have been filed separately with the SEC.

- 7 -

7.Contacts.

MOTRICITY
	Agreement-Related	Account Management & Support	Finance & Billing
1st Level Contact	Steve Leonard Tel: (919) 595-2735 Mobile: (617) 460-5208 Steve.leonard@motricity.com	Phil Speers Account Manager Tel: (919)-595-2667 Mobile : Phil.Speers@motricity.com	Melanie Robinson-Loper Settlements Analyst Tel: (919) 287-7400 ext. 7459 Melanie Robinson-Loper@Motricity.com

CLIENT
	Agreement-Related	Account Management & Support	Finance & Billing
1st Level Contact	Name: Sue Swenson Title: COO Tel:    949.777.3700x220 Mobile: 213.219.4031 Fax:        949.777.3707 Email:      sues@newmotioninc.com	Name: Will Dixon Title: Director of Messaging & Billing Operations Tel: 206.224.2618 Mobile: 206.915.5745 Email: willd@newmotioninc.com	Name: Jerome Torresyap Title: Director of Strategic Planning & Analytics Tel: 949.777.3700x214 Mobile: 310-698-2218 Fax:        949.777.3707 Email: Jerome@newmotioninc.com

8.Term of this Schedule. The initial Term of this Schedule is 2 years commencing on the Schedule Effective date, and automatically renews for additional one year terms, unless either party indicates their intent not to renew by providing the other party at least 30 days prior written notice before the end of the then current Term.

The parties have executed this Messaging Gateway Services Schedule effective as of the Effective Date.

Motricity, Inc.	New Motion, Inc.
By:	By:
Name:	Name:
Title:	Title:

- 8 -

CONFIDENTIAL TREATMENT REQUESTED

EXHIBIT 1 TO MOTRICITY GATEWAY SERVICES SCHEDULE

ADVANCED PAYMENT TERMS

1.Election. For each calendar month, Client may elect to receive Advance Payment provided that such election is made in a signed writing received by Motricity at least 30 days prior to the commencement of such quarter. The election made for a calendar month renews automatically for each subsequent month unless a signed writing rescinding such election is received by Motricity prior to the commencement of the month (“Election Period”).

2.Determination. The Advance Payment amount must be determined solely in accordance with Motricity’s billing transaction report. It is understood by Client that there may be inconsistencies between Motricity’s billing reports and Client’s billing reports, but for the purposes of this Section, Motricity’s billing transaction reports are deemed accurate and final.

3.Monthly Advance. For each calendar month during the Election Period, Motricity shall advance to Client ***% of the Client’s share of Net Premium Messaging Revenue as if Motricity had received such payment from the applicable carrier (the “Monthly Advance”), net of the Motricity Fee, as defined below (the “Net Advance”). Such Net Advance shall be paid within fifteen (15) or thirty (30) days of the end of such applicable month as designated by Client. Further, the Monthly Advance is subject to a limit of $***.

4.Holdback Amount. If Motricity makes any Advance Payments to Client, then each month, Motricity shall holdback ***% (or a greater amount if the maximum Monthly Advance is paid) of the Client’s share of Net Premium Messaging Revenue generated during the preceding month (“Holdback Amount”). Motricity shall pay the Holdback Amount, subject to adjustment based upon actual carrier receipts, within 30 days of the end of the month in which it receives such payment from the carriers.

5.Motricity Fee. In consideration for providing the Monthly Advance as set forth herein, Motricity shall retain, as a fee, ***% of the aggregate Monthly Advance and such fee shall be deducted from the Monthly Advance to be made by Motricity (the “Motricity Fee”).

6.Right to Offset. The Parties agree that in the event that any of the applicable carriers hold back any fees or levy a charge back or an adjustment to Motricity related to Net Premium Messaging Revenue (“Adjustment”) and Motricity has paid Client the Monthly Advance, then Motricity may offset against any future amounts owed by Motricity to Client by the amount of any such Adjustment. In addition, the parties acknowledge that if Motricity has made a payment hereunder and Motricity is subsequently charged an Adjustment by a carrier related to such payment and the amount of such Adjustment is greater than the amounts owed by Motricity to Client, then Motricity may in its sole discretion elect to require Client to refund the portion on such payment which can not be fully offset as described above. Client shall make such refund payment within 30 days of such request.

*** Terms represented by this symbol are considered confidential. These confidential terms have been omitted pursuant to a Confidential Treatment Request filed with the Securities and Exchange Commission (“SEC”) and have been filed separately with the SEC.

- 9 -

EXHIBIT 2 TO MOTRICITY GATEWAY SERVICES SCHEDULE

PACKAGE DESCRIPTIONS

Definition of Products and Services:

Messaging Gateway

General Overview - The Messaging Gateway provides nation-wide mobile content delivery to millions of consumers through its relationship with all the major wireless carriers in the U.S. This includes a connection for bi-directional mobile content delivery and integration for direct billing via Premium SMS. Customers may choose to connect to Motricity’s gateway through one of two protocols, Short Messaging Peer to Peer (SMPP) v3.4, Hypertext Transfer Protocol (HTTP).

Campaign Manager

Subscription Registration System - Enables a customer to create and manager groups of subscribers. The system will allow the addition and deletion of subscribers to specific categories. Included in the subscriber management is the ability to set and bill users on a 30 day cycle for service associated with each subscription.

Alerting - Enables a customer to create and schedule the delivery of an MT SMS message to be sent to a registered subscriber or group of subscribers. Both standard and premium billing are supported.

Polling - Enables a customer to create and schedule a poll to run for a pre-determined amount of time. The poll will allow users to respond back with their choice and the results will be aggregated together. Both standard and premium billing is supported.

Trivia - Enables a customer to create and schedule a trivia game to run for a pre-determined amount of time. Users may respond to the trivia question and will be notified if their answer is correct or incorrect. Both standard and premium billing is supported.

Profiling - Enables the creation of a profile for the ability to group subscribers. The groupings are created by adding categories to the profile. Subscribers who are registered for that profile will be added into the profile to receive content targeted to them.

MO Keyword Registration - Enables the creation of logic to allow a subscriber to text in a specific message and be registered into the subscription management system.

Application Programming Interfaces

Subscriber API - The Subscriber API exposes the functionality of the subscription management system and enables the creation, deletion, or update of subscriber data.

Content API - The Content API supports the delivery of both ringtones and graphics to one or more users. Both standard and premium rate billing is supported.

Messaging API - The Messaging API provides the ability for a customer to send and receive an SMPP message to or from a specific MSISDIN via HHTP.

Event Notifications- These event notifications are designed to notify customers via HTTP of the following events:

·Notification will be posted upon the activation of a subscriber in the Subscription Registration System.

·Notification will be posted upon the deactivation of a subscriber in the Subscription Registration System.

·Notifications will be posted upon the failure or refund of a billing transaction for carriers who support real-time billing information.

Custom External Notifications -Our External Notification System allows the development of custom plug-ins for various events that are generated by our system or the carrier systems. 

- 10 -

Wireless Messaging Routing Service (Carrier Look-up API)

General Overview - WMRS allows our clients to use an http post or soap/xml web service to determine the correct mobile operator for a given phone number.  This service has been fully integrated into our existing APIs so that it can be used inline with other API calls, minimizing the overhead.  It is also available through a separate API call which will simply return the operator without performing any additional action.

Billing

Retry Billing - Enables a further billing attempt for failed billing transactions which are not permanent failures. The service, which is managed by Motricity, is based on the logic supported by individual carrier and may change from time to time. This service will also unsubscribe registered users in the Subscription Registration Logic if the resubmission of the billing is not successful.

- 11 -

EXHIBIT 3 TO MOTRICITY GATEWAY SERVICES SCHEDULE

SERVICE LEVEL AGREEMENT

1.0 Motricity shall use commercially reasonable efforts to provide Customer with Gateway Availability (defined below) and Subscriber Provisioning (defined below).

2.0 Motricity may, from time to time, schedule planned maintenance or may require an emergency maintenance window (“Planned Maintenance”). Motricity will provide Client at least two (2) days advance notice of any Planned Maintenance, except for emergency maintenance

3.0 In the event of Downtime (defined below) in any given calendar month, Motricity shall provide a reduction to the Customer monthly minimum to be calculated as follows:

Motricity shall provide Customer a reduction of the monthly minimum fee equivalent to $*** for each hour during the downtime for each incident, subject to a maximum reduction not to exceed $***.  The availability of the reduction of the monthly minimum fee is contingent upon Client having opened a trouble ticket with Motricity’s service center within two (2) hours after the particular incident of Downtime occurs.  Notwithstanding any other provision of this Agreement, a Reduction of the monthly minimum fee shall be Client’s sole and entire remedy for any downtime arising under this Agreement.  Customer is restricted to one Downtime reduction within a 24 hour period.

Example:  If the Motricity Gateway were unavailable for *** consecutive hours the monthly minimum reduction for that month would be $***.

4.0 “Downtime” means the period of time greater than *** consecutive hours affecting Gateway Availability or Subscriber Service Availability such that Customer cannot use the Service for normal business purposes or operations. Availability does not include periods of time during which the Service is unavailable as a result of (a) Motricity’s Planned Maintenance, (b) the acts, negligence or willful misconduct of Customer or Customers employees, agents, vendors, contractors or other representatives, (c) events of force majeure (as set forth in the Agreement), or (d) failures caused by links, facilities or equipment not maintained or provisioned by Motricity.

5.0 “Gateway Availability” - Motricity Gateway will be available to receive or deliver messages to and from all major carriers (ATT, Verizon, Alltel, Sprint, and T-Mobile) and to customer’s system. This does not include failures caused by carrier links, facilities or equipment not maintained or provisioned by Motricity.

6.0 “Subscriber Service Availability” - Motricity subscriber Application Programming Interfaces will respond within ***for the following calls:

· Get Subscriber

· Create Subscriber

· Send Optin

7.0   Any problem experienced by Client with the Services shall be reported to Motricity. Should Client plan to have an interruption within its own network or facilities, Client shall promptly notify Motricity.

*** Terms represented by this symbol are considered confidential. These confidential terms have been omitted pursuant to a Confidential Treatment Request filed with the Securities and Exchange Commission (“SEC”) and have been filed separately with the SEC.

- 12 -

All Downtime issues should be called into the NOC: 919-595-2700. All other severity levels may either be called in or submitted to our trouble ticket system via e-mail (Noc@motricity.com)

8.0 Motricity’s Network Operations Center (NOC) will coordinate incident isolation, testing and repair work within Motricity and all third party systems that are within the Motricity’s control. During the incident isolation and troubleshooting process, Motricity’s NOC will communicate incident resolution progress to Client

9.0 Motricity’s obligations under this SLA are only to Client, not to Client’s customers or end users. In the event of a service impairing event Motricity will communicate only with Client unless Motricity agrees otherwise. Client’s customers and end users may not report service events directly to Motricity.

10.0 Service level credits in accordance with this SLA are Client’s sole and exclusive remedy for any Downtime.

- 13 -

EX-31.1

EX-31.2

EXHIBIT 31.2

Certification of CFO Pursuant to

Securities Exchange Act Rules 13a-14 and 15d-14

as Adopted Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, Daniel Harvey, certify that:

1.I have reviewed this quarterly report on Form 10-Q of New Motion, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 19, 2008

/s/ Daniel Harvey

Daniel Harvey

Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in connection with the filing of the Quarterly Report on Form 10-Q for the Quarter Ended March 31, 2008 (the "Report") by New Motion, Inc. ("Registrant"), each of the undersigned hereby certifies that:

1. to the best of our knowledge, the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. to the best of our knowledge, the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Registrant.

Date: May 19, 2008	/s/ Burton Katz
	Burton Katz
	Chief Executive Officer
Date: May 19, 2008	/s/ Daniel Harvey
	Daniel Harvey
	Chief Financial Officer