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                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                   FORM 10-KSB

|X|      ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES  EXCHANGE ACT
         OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006 OR

|_|      TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES  EXCHANGE
         ACT OF 1934

                                   MPLC, INC.
                 (name of small business issuer in its charter)

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

                          42 CORPORATE PARK, SUITE 250
                                IRVINE, CA 92606
                    (Address of principal executive offices)
                                 (949) 777-3700
                           (Issuer's telephone number)

       Securities registered under Section 12(b) of the Exchange Act: None
         Securities registered under Section 12(g) of the Exchange Act:
                          Common Stock, $0.01 par value

         Check whether the issuer (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 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 last 90 days.
                                                                 Yes |X|  No |_|

         Check if there is no  disclosure  of  delinquent  filers in response to
Item 405 of  Regulation  S-B contained in this form,  and no disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. |_|

         Indicate by check mark whether the  registrant  is a shell  company (as
defined in Rule 12b-2 of the Exchange Act)                       Yes |_|  No |X|

The  issuer's  revenues  for the  fiscal  year  ended  December  31,  2006 were:
$18,721,000.

         The aggregate  market value of the voting and non-voting  common equity
held by  non-affiliates,  computed  using an average of the  closing bid and ask
price of $0.07, as of March 23, 2007, was $5,625,000.

         Check whether the issuer has filed all  documents and reports  required
to be  filed  by  Section  12,  13,  or  15(d) of the  Exchange  Act  after  the
distribution of securities under a plan confirmed by a court.    Yes |X|  No |_|

         As of March 23, 2007, the Issuer had 75,000,000  shares of common stock
issued and outstanding.

         Transitional Small Business Disclosure Format (Check one):
                                                                 Yes |_|  No |X|

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                                TABLE OF CONTENTS


PART I
ITEM 1  DESCRIPTION OF BUSINESS................................................1
ITEM 2  DESCRIPTION OF PROPERTY...............................................11
ITEM 3  LEGAL PROCEEDINGS.....................................................11
ITEM 4  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...................11

PART II
ITEM 5  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS..............12
ITEM 6  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.............13
ITEM 7  FINANCIAL STATEMENTS..................................................31
ITEM 8  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
           AND FINANCIAL DISCLOSURE...........................................32
ITEM 8A CONTROLS AND PROCEDURES...............................................32
ITEM 8B OTHER INFORMATION.....................................................32

PART III
ITEM 9  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND
           CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF THE
           EXCHANGE ACT.......................................................33
ITEM 10 EXECUTIVE COMPENSATION................................................36
ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
           AND RELATED STOCKHOLDER MATTERS....................................41
ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
           INDEPENDENCE.......................................................44
ITEM 13 EXHIBITS..............................................................46
ITEM 14 PRINCIPAL ACCOUNT FEES AND SERVICES...................................51


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                                     PART I

                SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

         This report, including the sections entitled "Cautionary Statements and
Risk Factors,"  "Management's  Discussion and Analysis or Plan of Operation" and
"Description of Business,"  contains  "forward-looking  statements" that include
information relating to future events, future financial performance, strategies,
expectations,  competitive environment, regulation and availability of resources
of MPLC, Inc. ("MPLC") and New Motion, Inc. ("New Motion")  (collectively,  MPLC
and New Motion are referred to herein as the  "Company" or  "Companies").  These
forward-looking  statements include,  without limitation,  statements regarding:
proposed  new  services;  our  expectations  concerning  litigation,  regulatory
developments or other matters;  statements concerning projections,  predictions,
expectations,  estimates or forecasts for our 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.  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 the forward-looking statements.  Important factors that could cause
these differences include, but are not limited to:

         o        our limited operating history;

         o        our  reliance  on  wireless   carriers  and   aggregators   to
                  facilitate billing and collections;

         o        the highly competitive market in which we operate;

         o        the rapidly changing wireless marketplace;

         o        our ability to develop new applications and services;

         o        protection of our intellectual property rights;

         o        hiring and retaining key employees;

         o        successful   completion,   and   integration   of,   potential
                  acquisitions;

         o        increased costs and requirements as a public company;

         o        limited trading and liquidity of our common stock.; and

         o        other factors  discussed  under the headings  "Risk  Factors,"
                  "Management's  Discussion  and Analysis or Plan of  Operation"
                  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


                         ITEM 1. DESCRIPTION OF BUSINESS

         With  respect to this  discussion,  the terms "we,"  "us,"  "our," "New
Motion" and the "Company"  refer to MPLC,  Inc., a Delaware  corporation and its
wholly-owned subsidiary New Motion, Inc., also a Delaware corporation.

         New Motion is a digital  entertainment company headquartered in Irvine,
California.  New Motion provides 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 in our three major product
lines: MobileSidewalk(TM), RingtoneChannel and Bid4Prizes. MobileSidewalk(TM) is
one of the largest U.S.-based mobile entertainment companies, RingtoneChannel is
a mobile storefront  provider,  and Bid4Prizes is a low-bid mobile auction game.
Other products include, among others, "MobileSidewalk's Music Trivia," "Ringtone
Club," "The Sports Page(R)," "Sigalert" and "RestaurantRow.com."

         We  publish  wireless  entertainment  applications,   including  games,
ringtones,  images and other entertainment  content. We publish  applications in
multiple categories designed to appeal to a broad range of wireless subscribers.
Our  customers  typically  purchase,  subscribe  and download  our  applications
through multiple websites including Mobilesidewalk.com,  RingtoneChannel.com and
through  their mobile  handset.  Our customers are charged a one-time or monthly
subscription fee


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for the  application  which  appears on their mobile  phone bills.  The wireless
carriers  retain a percentage of the fee and remit the balance to us through our
current billing aggregators Goldpocket Wireless,  Inc. ("GoldPocket  Wireless"),
and Mobile Messenger Pty Ltd. ("Mobile Messenger"). The wireless distribution of
our products eliminates traditional publishing complexities,  including physical
production, packaging, shipping, inventory management and return processing.

         We have  agreements to distribute our products in North America through
aggregators who have access to the majority of U.S-. and Canadian-based wireless
carriers,  whose networks serve  approximately  215 million  subscribers.  These
wireless  carriers  include  Cingular  /  AT&T  Wireless,  Nextel,  Sprint  PCS,
T-Mobile,  Verizon Wireless,  Alltel, and Dobson. Subscribers of Cingular / AT&T
and Sprint,  our largest and second largest  indirect  carrier  relationships by
revenue, accounted for approximately 30% and 25%, respectively,  of our revenues
during the year ended December 31, 2006.

         New Motion was formed in March,  2005 and  subsequently  purchased  the
business of RingtoneChannel Pty Limited, an Australian  developer and aggregator
of ringtones  ("RingtoneChannel"),  in June 2005. RingtoneChannel was originally
incorporated on February 23, 2004.

         In February,  2007, we completed an exchange  transaction to capitalize
the Company and to merge with a publicly traded company, MPLC, Inc., so that New
Motion became a publicly traded company,  trading under the ticker "MPNC" on the
OTC Bulletin Board. As part of the recapitalization, we raised gross proceeds of
approximately  $20 million in equity financing  through the sale of our Series A
Preferred Stock, Series B Preferred Stock and Series D Preferred Stock.

BACKGROUND

         MPLC,  Inc.   (formerly  known  as  The  Millbrook  Press,   Inc.)  was
incorporated  under the laws of the State of Delaware in 1994.  Until 2004, MPLC
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, MPLC 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,  MPLC sold
its imprints and  remaining  inventory  and by July 31, 2004,  MPLC had paid all
secured  creditors  100% of amounts owed.  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 its 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.

         On October 24, 2006, MPLC and certain of its stockholders  entered into
a Common  Stock  Purchase  Agreement  with  Trinad  Capital  Master  Fund,  Ltd.
("Trinad"),  pursuant to which MPLC agreed to redeem 23,448,870 shares of Common
Stock from the existing stockholders of MPLC and sell an aggregate of 69,750,000
shares of Common Stock, representing 93% of its issued and outstanding shares of
Common Stock, to Trinad in a private  placement  transaction for aggregate gross
proceeds to MPLC of $750,000.

         On November 22, 2006,  MPLC  executed a letter of intent  regarding the
proposed  acquisition  of New  Motion,  whereby  MPLC would  acquire  all of the
outstanding  capital stock of New Motion,  and in exchange,  the stockholders of
New Motion would acquire  approximately 83% of the outstanding  capital stock of
MPLC.


                                       2
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EXCHANGE TRANSACTION AND CAPITALIZATION

         On January 31, 2007, MPLC entered into an exchange agreement ("Exchange
Agreement")   with  New   Motion,   the   stockholders   of  New   Motion   (the
"Stockholders"),  and Trinad Capital Master Fund, Ltd.  ("Trinad").  The closing
(the "Closing") of the transactions  contemplated by the Exchange Agreement (the
"Exchange")  occurred on February 12, 2007.  At the Closing,  we acquired all of
the outstanding  shares of the capital stock of New Motion from the Stockholders
in exchange for 500,000 of our Series C Convertible  Preferred  Stock, par value
$0.10 per share (the  "Series C Preferred  Stock"),  which is  convertible  into
7,263,688 shares of our Common Stock (on a post-Reverse Split basis).

         We also assumed all of the  outstanding  options and warrants issued by
New Motion.  These  options and warrants now entitle  their  holders to purchase
1,712,778  shares  of  Common  Stock and  23,534  shares  of Common  Stock (on a
post-Reverse-Split basis),  respectively.  In addition, we assumed a convertible
promissory  note (the "IVG  Note"),  which  principal  amount may  increase to a
maximum of  $2,320,000,  issued by New Motion in favor of Index  Visual & Games,
Ltd.  pursuant to the terms of the Asset Purchase  Agreement  between New Motion
and IVG, on the same terms and  conditions as set forth in the IVG Note,  except
that the conversion price (on a post Reverse-Split  basis) was adjusted to equal
the price obtained by dividing the conversion price set forth in the IVG Note by
1.4527376, the exchange ratio.

         As a  condition  to  the  Closing,  Trinad,  our  majority  stockholder
immediately prior to the Closing, and certain stockholders of New Motion entered
into a voting  agreement  whereby they agreed to vote their shares of our voting
securities:  (i) to elect one member to our board of directors to be  designated
by  Trinad  (the  "Trinad  Designate")  for a period of one year  following  the
Closing  and to vote for  such  other  persons  that  may be  designated  by the
Stockholders to fill any vacant  position on our board of directors  (other than
the Trinad  Designate),  and (ii) to approve a  1-for-300  reverse  split of our
Common Stock (the  "Reverse  Split"),  an increase in our  authorized  shares of
Common Stock from  75,000,000  shares to 100,000,000  shares,  the adoption of a
stock incentive plan, and the change of our corporate name.

         For   accounting   purposes   the   Exchange  has  been  treated  as  a
recapitalization  of New Motion with New Motion as the acquirer.  The historical
financial  statements prior to the merger are those of New Motion.  For purposes
of the  Exchange,  the cost of the  acquisition  to be reflected on New Motion's
balance  sheet is the value  MPLC's net  tangible  assets.  No goodwill or other
intangible  assets will be recorded  and no pro forma  information  is presented
because the recapitalization is not considered to be a business combination.

         In combination with the Exchange,  on January 24, 2007, we entered into
the Series A Convertible  Preferred  Stock  Purchase  Agreement  with Trinad and
received  gross  proceeds of $3.5  million in exchange for one share of Series A
Convertible  Preferred Stock, par value $0.10 per share (the "Series A Preferred
Stock"). On January 31, 2007, we entered into the Series B Convertible Preferred
Stock  Purchase   Agreement  with  Watchung  Road  Associates,   L.P.,   Lyrical
Opportunity  Partners II LP, Lyrical Opportunity Partners II Ltd. and Destar LLC
and  received  gross  proceeds of $6.5 million in exchange for 650 shares of our
Series B  Convertible  Preferred  Stock,  par value  $0.10 per share  ("Series B
Preferred  Stock").  The closing of the  purchase and sale of Series B Preferred
Stock occurred on February 12, 2007.

         On February 28, 2007, we entered into a Securities  Purchase  Agreement
with various  accredited  investors and received gross proceeds of approximately
$10  million  in  exchange  for  8,333  shares  of our  Series D 8%  Convertible
Preferred Stock, par value $0.10 per share (the "Series D Preferred Stock",  and
together with the Series A Preferred  Stock,  the Series B Preferred  Stock, and
the Series C Preferred Stock, the "Preferred Stock"). This financing transaction
closed on March 2, 2007.

         Sanders Morris Harris, Inc. acted as placement agent in connection with
the sale of our  Series  A, B and D  Preferred  Stock.  For  their  services  as
placement  agent,  we paid  Sanders  Morris  Harris  a fee  equal  to  7.5%,  or
approximately $1,500,000, of the gross proceeds from the financing and five year
warrants to purchase 290,909 shares of common stock at an average exercise price
of $5.50 per share (on a  post-Reverse  Split basis).  See Note 12,  "Subsequent
Events" in our financial statement footnotes, for additional information.

         We  intend to amend  our  restated  certificate  of  incorporation,  to
provide for an increase in our authorized shares of Common Stock from 75,000,000
to 100,000,000 and to effect the Reverse Split.  Upon the  effectiveness of such
amendment,  we will have a sufficient  number of  authorized  but  un-issued and
un-reserved  shares of Common Stock to allow for the full  conversion  of all of
the outstanding  shares of Preferred Stock convertible into Common Stock.  After
the Reverse Split,  all of the Preferred Stock will  automatically  be converted
into shares of our Common Stock (the "Mandatory Conversion"). On March 15, 2007,
we obtained the requisite vote from our stockholders to facilitate the amendment
of our restated certificate of incorporation, as amended.


                                       3
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         We  are  presently   authorized  under  our  Restated   Certificate  of
Incorporation, as amended, to issue 75,000,000 shares of common stock, par value
$0.01 per share,  and 1,000,000  shares of preferred  stock, par value $0.10 per
share. Of the 1,000,000 shares of preferred stock authorized, one share has been
designated as Series A Preferred Stock, 675 shares have been designated Series B
Preferred  Stock,  500,000  shares  have been  designated  as Series C Preferred
Stock,  and 8,333 shares have been designated as Series D Preferred  Stock.  The
following  table sets forth our classes of stock and the number of common  stock
and common  stock  equivalents  as March 15, 2007 and on a pro forma basis after
giving effect to the Reverse Split:

                                                   AS OF            POST-REVERSE
                                                MAR 15, 2007           COMMON
                                                PRE-REVERSE            STOCK,
                                                   COMMON            OPTIONS &
                                                   STOCK              WARRANTS
                                                EQUIVALENTS         OUTSTANDING
                                               -------------       -------------
MPNC Common Stockholders ...............          75,000,000             250,000
Series A Preferred Stock ...............         360,000,000           1,200,000
Series B Preferred Stock ...............         390,000,000           1,300,000
New Motion Stockholders
   (Series C Preferred Stock) ..........       2,179,106,500           7,263,688
Series D Preferred Stock ...............         500,010,000           1,666,700
Placement Agent Warrants ...............          87,272,700             290,909
Convertible Debt .......................          50,581,395             168,605
Assumed New Motion Options .............         472,614,900           1,575,383
Assumed New Motion Warrants ............           7,060,305              23,534
                                               -------------       -------------
Total (fully diluted) ..................       4,121,645,800          13,738,819


         The  shares of Common  Stock  received  in the  Reverse  Split  will be
subject to round up for fractional shares and our Board of Directors may, in its
discretion, provide special treatment to certain of our stockholders to preserve
round lot holders (i.e.,  holders owning at least 100 shares  pre-Reverse Split)
after the Reverse Split. The terms and conditions of special treatment  afforded
to our stockholders to preserve round lot  stockholders,  if any,  including the
record dates for determining which stockholders may be eligible for such special
treatment, will be established at the discretion of our board of directors.

         The holders of shares of Preferred  Stock are entitled to vote together
with the holders of Common Stock,  as a single class on an  as-converted  basis,
upon all matters  submitted to holders of Common Stock for a vote. Each share of
Preferred  Stock  carries  a  number  of  votes  equal  to the  number  of votes
attributable  to the shares of Common Stock issuable upon the conversion of such
share of  Preferred  Stock at the record  date.  The holders of shares of Common
Stock are  entitled  to one vote per share of Common  Stock held on all  matters
submitted to holders of Common Stock for a vote.

PURCHASE OF CERTAIN MOBLISS(R) ASSETS

         On January 19, 2007, we entered into an Asset  Purchase  Agreement with
Index Visual & Games Ltd., a Japanese corporation ("IVG"),  pursuant to which we
purchased from IVG certain  specified  assets of Mobliss(R),  Inc., a Washington
corporation  affiliated  with IVG.  Mobliss is involved in mobile  marketing and
messaging, mobile gaming, and mobile content delivery, and offers brand owners a
spectrum  of  proprietary  applications,  delivery  systems,  and  platforms  to
capitalize on the growing capabilities of wireless devices.  Mobliss' technology
powered the SMS campaigns for the television  phenomenon American Idol and it is
among  the  very  few  companies   that  have  direct   networking  and  billing
connectivity   with  carriers  for  executing   large-scale  SMS  campaigns  and
distributing  mobile  content  to an array of  mobile  devices  across  multiple
carrier  networks in the US and Canada.  In exchange for the assets specified in
the Asset Purchase Agreement,  we issued IVG a convertible  promissory note with
an aggregate maximum principal amount of up to $2,320,000 (the "IVG Note").  The
IVG Note bears  interest at the rate of five percent per annum accruing from the
initial issuance of the IVG Note and matures on the earlier of November 30, 2007
or 30 days after delivery by IVG of written notice to us demanding payment.

         On  January  19,  2007,  we  consummated  the  initial  closing  of the
acquisition  and issued the IVG Note in the  principal  amount of  $500,000  and
received  hardware and software  assets to be purchased under the Asset Purchase
Agreement.  As a  result  of the  assignment  of one  of  the  cellular  carrier
connection contracts listed in the Asset Purchase Agreement, on January


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26,  2007,  we  increased  the  principal  amount of the IVG Note by $580,000 to
$1,080,000.  On February 26, 2007,  we repaid  $500,000 of the IVG Note.  Unless
requested by us, we will have no  obligation  to purchase  any cellular  carrier
connection  contracts listed in the Asset Purchase Agreement and not assigned to
us by February 28, 2007.

         Prior to  repayment,  or  automatically  upon our listing on a national
stock  exchange,  IVG may convert the IVG Note into shares of Common  Stock at a
conversion  price of $3.44 per share (on a post-Reverse  Split basis),  the fair
market value on the date of issuance. We also granted IVG piggyback registration
rights for the shares  issuable upon  conversion of the IVG Note.  The ownership
interests of our  stockholders are subject to dilution by the IVG Note. Based on
the  value of the IVG  Note as of  February  28,  2007,  we will  issue up to an
aggregate of 168,605 shares of Common Stock (on a post-Reverse Split basis).

         The Company  intends to account for this note as short-term debt and is
currently  evaluating the conversion feature and registration  rights associated
with this note,  in  accordance  with EITF  98-5,  "Accounting  for  Convertible
Securities  with  Beneficial  Conversion  Features  or  Contingently  Adjustable
Conversion  Ratios,  and EITF 00-27,  "Application  of Issue No. 98-5 to Certain
Convertible Instruments."

MOBILE ENTERTAINMENT CHANNEL JOINT VENTURE

         Concurrent  with the signing of the Asset Purchase  Agreement with IVG,
we also entered into a Heads of Agreement with IVG, setting forth the terms of a
joint  venture with IVG to  distribute  IVG content  within North America and to
manage and service the assets acquired under the Asset Purchase  Agreement.  The
joint  venture,  The  Mobile  Entertainment  Channel  Corporation,  is a  Nevada
corporation  in which we will own a 49% stake and IVG will own a 51% stake.  The
joint  venture  is to be  managed  by a  three-member  board,  with  each  party
designating one member and both parties mutually designating the third member of
the board.  We will enter into a management  services  agreement  with the joint
venture  pursuant to which we will pay the joint venture a management  fee equal
to the purchase  price paid under the Asset Purchase  Agreement,  with a maximum
fee of $2,320,000,  for management services rendered to us by the joint venture.
The joint venture has been  established and we are in the process of evaluating,
with our Japanese  partner,  various  Asian-themed  content for placement in the
joint venture.  We made an advance  payment on the management fee of $500,000 on
March 12, 2007 and expect to make another  $500,000  advance payment on June 30,
2007,   with  the  remainder  of  the   management   fee  payable  in  quarterly
installments, through June 30, 2008. Each quarterly payment will equal to 10% of
the payments  (including the advance  payments)  actually  received by us during
such quarter from the cellular carrier connection contracts assigned to us under
the Asset Purchase Agreement. We are evaluating the impact of this joint venture
as it relates to Financial  Accounting  Standards Board ("FASB")  Interpretation
No. 46 (R),  "Consolidation  of Variable  Interest  Entities  (revised  December
2003)--an interpretation of ARB No. 51".

OUR PRODUCTS AND SERVICES

         New Motion provides 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  in our  three  major  product
lines:  MobileSidewalk(TM),   RingtoneChannel  and  Bid4Prizes.  We  design  our
products and services to be fun and innovative.  We believe  application quality
and diversity,  customer and carrier support,  and brand recognition are the key
components of a publisher's  success.  We focus on  selectively  increasing  our
application portfolio with high-quality,  innovative applications.  The fees for
our wireless  entertainment  products and services generally range from $3.99 to
$9.99.  Premium  downloads  offered on an  a-la-carte  basis range from $0.99 to
$5.99. Our product and service portfolio includes games, ringtones, screensavers
and wallpapers,  trivia applications,  fan clubs and voting services,  blogs and
information services.

         o        MOBILESIDEWALK(TM).  MobileSidewalkTM (www.mobilesidewalk.com)
                  is  one  of  the  largest   U.S.-based  mobile   entertainment
                  companies. Using state-of-the-art applications, MobileSidewalk
                  provides  highly targeted  direct-to-consumer  mobile content,
                  including sports,  entertainment,  games, lifestyle interests,
                  ringtones  and  wallpapers,  as well as  exclusive  fan clubs,
                  promotions   and   licenses.    Content    provided    through
                  MobileSidewalk   TM  includes   content  from  the   following
                  partners, among others:

                  SIGALERT. Provides general and personalized traffic, including
                  travel times, via the Web, email, or phone. restaurantrow.com.
                  RestaurantRow.com,  Inc.  operates  one of the largest "go to"
                  destination for restaurant  information and services with over
                  170,000  restaurants  covering  over  13,000  cities and towns
                  worldwide.  The company is the  on-line and  handheld/wireless
                  site of convenience where customers (consumers and businesses)
                  review proprietary  content (menus,  customer reviews,  survey
                  results and  digital  images  providing  a virtual  restaurant
                  tour)  and  ultimately  point  and  click  to make an  on-line
                  reservation   (real-time  and  concierge  style),  order  food
                  on-line  for  delivery  or  take-out  and  conveniently  order
                  products from the restaurant branded product e-commerce mall.


                                       5
<PAGE>


                  THESPORTSPAGE(R).  TheSportsPage(R)  is  one  of  the  largest
                  providers of sports  information via pager,  including scores,
                  breaking news,  injury and weather  reports,  time changes and
                  starting pitchers.  The service provides data on pro football,
                  college   football,   pro  basketball,   college   basketball,
                  baseball, hockey, Nascar, golf and boxing.

         o        RINGTONECHANNEL.  RingtoneChannel (www.ringtonechannel.com) is
                  a storefront service for companies that want to sell their own
                  content,  and / or earn  revenue from the sale of content from
                  New Motion's  library.  By  leveraging  New Motion's  in-house
                  capabilities, RingtoneChannel is able to offer a customizable,
                  turnkey  solution  to  businesses  of  any  size,  from  large
                  private-labeled  storefronts  for  major  consumer  brands  to
                  smaller niche  companies that want to add  additional  revenue
                  stream.

         o        BID4PRIZES.  Bid4Prizes  (www.bid4prizes.com)  is a  brand-new
                  concept in auction  games,  where the lowest  unique bid wins.
                  Using their cell phone,  or from their  desktop,  participants
                  "bid" on a wide  range  of  products,  including  automobiles,
                  consumer  electronics,   apparel,   trips,  games  and  mobile
                  content. Bidders can play for free on the web or sign up for a
                  premium  monthly  plan that  provides  them with  multiple bid
                  opportunities.  Mobile  tips  direct  them  in  their  bidding
                  decisions, letting them know if their current bid is unique or
                  the lowest,  and helping them  navigate  their way to win cash
                  and prizes.

         o        MOBLISS MOBILE MESSAGING ASSETS. The acquisition of certain of
                  the mobile messaging assets of Mobliss, the terms of which are
                  described  under  the  section,  "Index  Visual & Games  Asset
                  Purchase  Agreement,"  provides  New Motion  with a proven and
                  scalable   interactive   messaging  platform.   This  expanded
                  capability will provide New Motion with the ability to offer a
                  broader  range of  interactive  mobile  services  to media and
                  entertainment companies.

         o        MOBILE  ENTERTAINMENT  CHANNEL. The joint venture between IVG,
                  one of the largest  Internet,  mobile  technology  and digital
                  media holding companies  worldwide,  and New Motion, will form
                  The Mobile Entertainment Channel Corporation,  an Asian-themed
                  mobile entertainment Portal. This joint venture will be unique
                  in the North American  off-deck arena and will operate under a
                  consumer brand name to be announced at a later date.  This new
                  direct-to-consumer  service provides a unique  opportunity for
                  New Motion to tap into a new market with Asian-themed content,
                  delivering some of the most  sophisticated  mobile products in
                  the world.

THE WIRELESS ENTERTAINMENT MARKET

         The wireless  entertainment market has emerged as a result of the rapid
growth and significant  technological advancement in the wireless communications
industry.  Wireless  carriers  are  delivering  new handsets to new and existing
subscribers which have the capability to download rich media content. Due to the
increase in advanced  mobile phones with the  capabilities  to handle rich media
downloads,  the potential market for mobile entertainment services will increase
significantly in the coming years.

         We believe  that growth in the wireless  entertainment  market has been
positively  influenced  by a number of key  factors and trends that we expect to
continue in the near future,  including:

         o        GROWTH IN WIRELESS SUBSCRIBERS.  In 2005, the number of global
                  wireless  subscribers  surpassed  two billion  and  subscriber
                  growth is expected  to  continue  as  wireless  communications
                  increase  in  emerging  markets,  including  China and  India.
                  According  to  ITFacts  Mobile  Usage,  the  number  of global
                  wireless subscribers will grow from approximately 2 billion in
                  2005 to 2.3  billion  in 2009.  The  North  American  wireless
                  subscriber  base  currently  exceeds 219 million.  New handset
                  delivery and adoption is expected to continue to accelerate in
                  the U.S. market as current and new  subscribers  embrace newer
                  mobile technology and media.

         o        DEPLOYMENT OF ADVANCED  WIRELESS  NETWORKS.  Wireless carriers
                  are deploying high-speed,  next-generation digital networks to
                  enhance wireless voice and data  transmission.  These advanced
                  networks  have  enabled the  provisioning  and billing of data
                  applications  and  have  increased  the  ability  of  wireless
                  subscribers  to  quickly   download  large  amounts  of  data,
                  including games, music and video.

         o        AVAILABILITY  OF MOBILE PHONES WITH  MULTIMEDIA  CAPABILITIES.
                  Annual  mobile  phone  sales  are  expected  to grow  from 520
                  million  units  in 2003 to over  one  billion  units  in 2009,
                  according  to Gartner Inc. In recent  years,  the mobile phone
                  has evolved  from a voice-only  device to a personal  data and
                  voice  communications  device that enables  access to wireless
                  content and data  services.  Mobile  phone  manufacturers  are
                  competing  for consumers by designing  next-generation  mobile
                  phones  with  enhanced  features  including  built-in  digital
                  cameras,   color   screens,   music  and  data   connectivity.
                  Manufacturers are also embedding application environments such
                  as  BREW,  Java and  Symbian  into  mobile  phones  to  enable
                  multimedia  applications,  including  gaming.  We believe  the
                  availability of these next-generation mobile phones is driving
                  demand  for   wireless   entertainment   applications   taking
                  advantage of these advanced multimedia capabilities.

         o        OFF  PORTAL  DIRECT  TO  CONSUMER  MARKET  DYNAMICS.  Prior to
                  November 2004, all U.S. carriers  maintained a "walled garden"
                  approach  that  prevented  any direct to  consumer  off portal
                  sites  from  succeeding,  while in Europe  and  Asia,  a large
                  percentage of mobile entertainment  revenue came from off deck
                  direct to consumer portals. Witnessing the


                                       6
<PAGE>


                  huge   success  of  direct  to   consumer   portals  in  those
                  geographies,  specific U.S.  carriers opened the walled garden
                  in late 2004 and early 2005.  By allowing  premium SMS billing
                  to direct-to-consumer off portal sites, the carriers opened up
                  a potential multi-billion dollar industry opportunity.

         o        DEMAND FOR WIRELESS ENTERTAINMENT. Wireless carriers and other
                  off-deck  content  providers  are  increasingly  launching and
                  promoting wireless entertainment applications to differentiate
                  their  services and  increase  average  revenue per user.  The
                  delivery of games,  ringtones,  images and other entertainment
                  content to subscribers  enables wireless  carriers to leverage
                  both the increasing  installed base of next-generation  mobile
                  phones  and  their  investment  in   high-bandwidth   wireless
                  networks.  Consumers are  downloading  and paying for wireless
                  entertainment  content  offered by the  carriers  and off-deck
                  providers.  According to eMarketer,  the mobile  entertainment
                  industry in the U.S.  will grow from $1.3B in 2005 to $7.8B in
                  2010, or a compound annual growth rate of 43%.

         o        GROWTH IN OUR CORE MARKET - NORTH  AMERICA.  According to IDC,
                  the  wireless  messaging  market is forecast to grow from 54.6
                  billion messages in 2004 to 387.9 billion  messages  exchanged
                  in 2009, and Juniper  Research expects the North American user
                  base to increase  steadily  with a  compounded  growth rate of
                  around 28%, which is roughly twice that of Europe. Even though
                  Asia and Europe are expected to remain the largest  market for
                  mobile entertainment, the North American market will represent
                  the highest growth  potential.  According to Juniper Research,
                  North  America  will  represent  a total of 12% of the  mobile
                  entertainment industry in 2006 and growing to 19% in 2009.

WIRELESS ENTERTAINMENT PUBLISHER CHALLENGES

         We  believe  the  major  challenges  faced  by  wireless  entertainment
publishers, like us, include:

         o        DEPENDENCE  ON  WIRELESS  CARRIERS.   Wireless   entertainment
                  publishers  are highly  reliant on wireless  carriers  for the
                  successful delivery,  billing and revenue collection for their
                  products and services.  Many factors outside our control could
                  impair our ability to deliver our  applications  and  services
                  through wireless carriers. Wireless carriers heavily influence
                  and  control  our  ability  to create,  promote  and price our
                  products and  services to  consumers.  In  addition,  wireless
                  carriers  directly  determine  the amount of revenue share and
                  subsequent   margin  for  alternative   retail  price  points.
                  Cultivating  strong  relationships  with wireless  carriers is
                  critical to the success of a publisher's business.

         o        DEPENDENCE ON AGGREGATORS.  Wireless  entertainment  companies
                  are  frequently  reliant  on  third-party  aggregators  (i.e.,
                  billing service  providers) to successfully  report,  bill and
                  collect revenue for their products and services.

         o        NEED TO CREATE  COMPELLING  CONTENT.  Customers  are demanding
                  increasingly   sophisticated   and  compelling   applications.
                  Publishers must be able to develop or license content that can
                  satisfy  ever-changing  customer  needs. To meet these demands
                  for new and  compelling  content,  publishers  must license or
                  acquire externally developed  applications,  including brands,
                  or if they have the  necessary  resources,  invest in research
                  and  development  in order to enhance their current  offerings
                  and internally develop new applications.

         o        RAPIDLY EVOLVING MARKET. The wireless  entertainment market is
                  evolving  rapidly and publishers  must have the management and
                  technical  expertise to respond  adequately to the  increasing
                  technological  sophistication  and complexity of mobile phones
                  and wireless networks. To succeed, publishers must possess not
                  only  technological  skills  but also the  ability  to  manage
                  large, technically complex application development, deployment
                  and distribution efforts.

         o        INTENSE  COMPETITION.  It is critical to a publisher's ability
                  to effectively  compete in the wireless  entertainment  market
                  that  it  establishes  efficient  media  buying  capabilities,
                  adequate  working  capital  and  differentiated   applications
                  targeted at unique market segments.

         o        SALES,  MARKETING  AND  SUPPORT  REQUIREMENTS.  The  size  and
                  complexity  of  the  global  wireless   entertainment   market
                  requires    publishers   to   have   sophisticated    business
                  development,  marketing and customer support organizations. To
                  succeed in this market,  publishers  must develop and maintain
                  strong  relationships with wireless carriers.  The publisher's
                  business   development  and  marketing  teams  must  have  the
                  resources to track and understand  customers and  competitors,
                  and  successfully  reach a large  customer base while ensuring
                  the cost per acquisition is within an efficient price range to
                  ensure profitability.  In addition, off deck marketers such as
                  us will continue to assume the majority share of the marketing
                  cost of wireless entertainment applications to consumers.

OUR COMPETITIVE STRENGTHS

         We believe that our competitive strengths include:

         o        IN DEPTH KNOWLEDGE OF ACQUIRING CUSTOMERS  EFFECTIVELY ONLINE.
                  Over  the  past  two  years,  we  have  continued  to  acquire
                  customers online at an effective cost per acquisition. We have
                  continued to maintain a relatively low cost per acquisition in
                  the face of growing  competition within our industry and other
                  online media advertisers.

         o        EARLY  STAGE  INNOVATIVE   MOBILE  CONTENT.   We  develop  our
                  applications  with an emphasis  on  innovation,  quality,  and


                                       7
<PAGE>


                  speed to market.  We were one of the first  companies to bring
                  mobile trivia applications to U.S. consumers.

         o        DIVERSE PORTFOLIO OF ORIGINAL  AND  LICENSED  PROPERTIES.   We
                  initially  focused on  licensing  lower cost  content  for our
                  subscription  services.  In  anticipation  of consumer  tastes
                  shifting towards higher quality mobile content, we initiated a
                  new  licensing  strategy to acquire  branded  content.  Recent
                  signings   include    Sigalert    realtime   traffic   alerts,
                  TheSportsPage  real time sports and odds  information  service
                  and RestaurantRow restaurant information service. We publish a
                  diverse portfolio of wireless entertainment applications.  Our
                  applications span multiple  categories and are based primarily
                  on  identifiable  content that we license from third  parties.
                  During the period  from our  inception  through  December  31,
                  2006,  we  derived  the  majority  of our  revenues  from  New
                  Motion-branded applications,  including MobileSidewalk's Music
                  Trivia  and  Scavenger  Hunt.  Our  licensors   include  Music
                  Publishers, RestaurantRow, Sigalert and TheSportsPage.

         o        EXISTING SUBSCRIBER BASE. We believe that the time, complexity
                  and working  capital  necessary to build a broad  distribution
                  network  and large  subscriber  base,  such as ours,  forms an
                  entry barrier for prospective competitors.

         o        EXPERIENCED  MANAGEMENT  TEAM. Our senior  management team and
                  advisors  bring  deep  digital  experience  and a  history  of
                  substantial   success  in  accelerating   electronic   content
                  businesses.  This broad expertise allows us to design, develop
                  and deliver  increasingly  advanced  applications that satisfy
                  the  demands  of all  the  key  constituents  in  our  market,
                  including   wireless   carriers,   brand   licensors  and  our
                  customers.  We believe our  management  team's  expertise  and
                  continuity  is a  significant  competitive  advantage  in  the
                  increasingly complex wireless entertainment publishing market.

OUR 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:

         o        PUBLISH HIGH-QUALITY  ENTERTAINMENT  APPLICATIONS.  We believe
                  that  publishing  a  diversified   portfolio  of  the  highest
                  quality,  most  innovative  applications  is  critical  to our
                  business. We intend to:

                  DEVELOP  INNOVATIVE  APPLICATIONS.  We will 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.

                  EMPHASIZE  NEW  MOTION  BRANDED   APPLICATIONS.   We  plan  to
                  emphasize  the  creation  of New Motion  branded  applications
                  which  typically  generate higher margins for us. We intend to
                  develop   sequels   to  our   more   successful   New   Motion
                  applications,  such as Music  Trivia.  These types of products
                  and   services   differentiate   us  from   our   competitors,
                  particularly those acting as aggregators or distributors,  who
                  generally do not own or control intellectual properties.

                  LICENSE  WORLD  CLASS  BRANDS.  We will  continue  to  license
                  well-known,  third-party  brands  and  collaborate  with major
                  media companies,  professional  sports leagues and other brand
                  holders  to  introduce   third-party   branded   products  and
                  services.  We believe  that  familiar  titles  facilitate  the
                  adoption of our products and services by wireless  subscribers
                  and   wireless   carriers,   and   create   strong   marketing
                  opportunities.

         o        ENHANCE OUR DISTRIBUTION CHANNELS. Strengthening and expanding
                  our distribution channels is critical to our business. We will
                  continue to:

                  STRENGTHEN  OUR  WIRELESS  CARRIER  RELATIONSHIPS.  We plan to
                  strengthen our existing  relationships  with wireless carriers
                  by  continuing  to  support  their   strategic  needs  and  by
                  launching new, high-quality, innovative products and services.
                  We also intend to build relationships with additional wireless
                  carriers to reach a larger subscriber base. Where appropriate,
                  we intend to enter new  markets  to  leverage  our  expertise,
                  brands, product and service portfolio and technologies.

                  EXPAND  CURRENT  SALES AND  MARKETING  CHANNELS.  We intend to
                  expand our  existing  channels to market and sell our products
                  and services online and explore alternative marketing mediums.
                  Our own Internet storefronts also enable us to market and sell
                  our applications directly to wireless customers.

                  BUILD  WHOLLY-OWNED  DISTRIBUTION  CHANNELS.   Leveraging  our
                  unique online affiliate  management system, we intend to drive
                  a portion of our consumer traffic directly to our products and
                  services  without  the use of  third-party  media  outlets and
                  media publishers.

         o        BUILD NEW MOTION BRANDS.  We intend to build the family of New
                  Motion  properties  into widely  recognized  brands within the
                  wireless  entertainment  market. We believe that the decisions
                  of wireless carriers and our customers are influenced by brand
                  recognition. We intend to continue building our brands through
                  product and service  quality,  customer  and carrier  support,
                  advertising  campaigns,  public  relations and other marketing
                  efforts.

         o        GAIN SCALE THROUGH SELECT  ACQUISITIONS.  We believe there may
                  be future  opportunities  to acquire  content  developers  and
                  publishers  in  the  mobile   entertainment  or  complementary
                  industries and we intend, where appropriate, to take advantage
                  of these opportunities.


                                       8
<PAGE>


DISTRIBUTION CHANNELS

         We currently distribute the majority of our entertainment  products and
services directly to consumers,  or "off-deck,"  primarily through the Internet,
which is  independent  of the  carriers.  We bill and collect  revenues  for our
products and services through  third-party  aggregators who are connected to the
majority of U.S.  wireless  carriers  and their  customers.  We have  agreements
through  multiple  aggregators  who have  direct  access  to U.S.  carriers  for
billing.  Our  customers  download  products or  subscribe  to services on their
mobile phones and are billed monthly through their wireless carrier. Through our
aggregators,  the carrier  agreements  establish  the fees to be retained by the
carrier for access and billing our products and services to their customer base.
Our aggregator agreements are not exclusive and generally have a limited term of
one or two years, with evergreen or automatic renewal provisions upon expiration
of the initial term.  The  agreements  generally do not obligate the carriers or
aggregators  to  market or  distribute  any of our  products  and  services.  In
addition, any party can terminate these agreements early and, in some instances,
without cause.

         For the year ended  December 31, 2006, we received  indirectly  through
our aggregators  approximately 30% of our revenue from subscribers of Cingular /
AT&T and 25% of our revenue from  subscribers  of Sprint.  In 2005,  we received
approximately  52% of our revenue from subscribers of Cingular / AT&T and 16% of
our revenue from subscribers of Verizon.

         For the year ended  December 31, 2006, we billed  approximately  34% of
our revenue  through Mobile  Messenger and we billed 60% of our revenue  through
GoldPocket Wireless. In 2005, we billed approximately 78% of our revenue through
Buongiorno  USA,  Inc.  ("Buongiorno")  and 22% of our revenues  through  Mobile
Messenger.

SALES AND MARKETING

         Our sales and marketing organization works closely with our development
and media teams to ensure the best  possible  product  and  service  offering is
deployed. Their primary focus is creating specific media campaigns to market and
sell our offering  through our network of websites and search  engine  channels.
Further,  the  team is  focused  on  creating  viable  alternative  distribution
channels for our products and  services.  Our sales and  marketing  organization
works closely with our development, creative and licensing teams to identify and
evaluate wireless distribution opportunities for new products and services.

TECHNOLOGY

         We have developed a tool which allows us to monitor and analyze in real
time our marketing costs associated with any advertising  campaign.  This allows
us to be more  efficient and effective in our media buys. We believe we have one
of the lowest cost per  acquisition  rates in the  industry in large part due to
this software.  The software measures, in real time, our effective buys on a per
campaign  basis  which  allows us to adjust our  marketing  efforts  immediately
towards the most effective campaigns and mediums.

COMPETITION

         The  development,  distribution  and  sale  of  wireless  entertainment
applications is a highly competitive business. We compete primarily on the basis
of marketing  acquisition  costs,  brand strength,  and carrier and distribution
breadth. We also compete for experienced and talented individuals to support our
growth.

         The wireless  entertainment  applications  market is highly competitive
and characterized by frequent product introductions, evolving wireless platforms
and new  technologies.  As demand for  applications  continues to  increase,  we
expect new competitors to enter the market and existing  competitors to allocate
more  resources  to develop  and  market  applications.  As a result,  we expect
competition in the wireless entertainment market to intensify.

         The current and  potential  competition  in the wireless  entertainment
applications  market  includes  major media  companies,  traditional  video game
publishing companies,  wireless carriers,  wireless software providers and other
pure-play wireless entertainment  companies.  Larger, more established companies
are increasingly  focused on developing and distributing  wireless  applications
that directly compete with us.

         Currently,  we consider  our primary  competitors  in the U.S. off deck
mobile market to be Jamster,  Buongiorno / Blinko,  Flycell,  Thumbplay and Dada
Mobile.  We believe that our  extensive  experience in Internet  marketing,  our
existing  subscriber  base and our range of products and  services  enable us to
compete effectively against all current and potential new entrants.


                                       9
<PAGE>


INTELLECTUAL PROPERTY

         Other than  proprietary  software  code, we do not possess any material
intellectual property.  During the course of operations, we have filed trademark
applications for the following marks: Life For Your Phone,  MobileSidewalkTM and
the RingtoneChannel.

EMPLOYEES

         As of March 15, 2007, we had 38 employees and full-time  consultants in
the United  States.  We have never had a work stoppage and none of our employees
is  represented  by a labor  organization  or under  any  collective  bargaining
arrangements. We consider our employee relations to be good.


                                       10
<PAGE>


                         ITEM 2. DESCRIPTION OF PROPERTY

         Our corporate  headquarters is located at 42 Corporate Park, Suite 250,
Irvine, California 92606, where we lease approximately 5,176 square feet under a
lease that expires in September 2008. We also lease  approximately  2,190 square
feet  located  in Suite  100 of the same  building  where we have our  corporate
headquarters under a sublease that expires in August 2008. In addition, we lease
approximately 500 square feet in Los Angeles under a short term lease agreement.
We  believe  our space is  adequate  for our  current  needs  and that  suitable
additional or substitute  space will be available to accommodate the foreseeable
expansion of our operations. Our telephone number is (949) 777-3700.


                            ITEM 3. LEGAL PROCEEDINGS

         On August 24, 2006,  New Motion and Burton Katz filed an action against
Buongiorno  in the Superior  Court of  California,  County of Orange,  seeking a
declaration  that the  non-competition,  non-solicitation  and  non-interference
provisions of the Employment Agreement dated April 11, 2005, between Burton Katz
and Buongiorno,  are void and  unenforceable  under the California  Business and
Professions  Code.  The  action  also  sought  an  order  permanently  enjoining
Buongiorno from enforcing the above referenced provisions, reasonable attorneys'
fees,  and other costs related to the action.  Subsequent to filing,  Buongiorno
threatened to withhold  payments due to New Motion for previous  sales  totaling
approximately $340,000.

         On October 24, 2006, New Motion filed a Demand for Arbitration with the
American  Arbitration  Association against Buongiorno,  pursuant to the terms of
the  Marketing  Agreement  dated  January  10,  2006,  between  New  Motion  and
Buongiorno, whereby New Motion agreed to market certain of Buongiorno's services
and the parties agreed to share revenue generated from such services. New Motion
sought payment of revenues in excess of $340,000 and  attorneys'  fees and other
costs related to the action.  Subsequently,  New Motion settled the dispute with
Buongiorno  for $384,000,  which was received in the first quarter of 2007.  New
Motion is not liable for any additional costs related to this dispute.

         In addition to the  foregoing,  from time to time we may be involved in
other  litigation  relating  to  claims  of  alleged  infringement,   misuse  or
misappropriation  of intellectual  property rights of third parties. We may also
be subject  to claims  arising  out of our  operations  in the normal  course of
business.  As of this date, we are not a party to any such other litigation that
would have a material adverse effect on us.

           ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         There were no matters  submitted to a vote of security  holders  during
the fourth fiscal quarter covered by this report.


                                       11
<PAGE>


                                     PART II

         ITEM 5. MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS

         Our  Common  Stock is quoted  on the  Over-The-Counter  Bulletin  Board
("OTCBB")  under the symbol  "MPNC.OB" The following  table sets forth,  for the
periods  indicated,  the high and low bid information for our Common Stock, on a
pre-Reverse  Split basis,  as determined from OTCBB  quotations.  For the period
prior to August 2006,  our Common Stock was quoted on the OTCBB under the symbol
"MILB". The following  quotations reflect  inter-dealer  prices,  without retail
mark-up, mark-down or commission and may not represent actual transactions.

                                                   HIGH          LOW
                                               ------------- ------------
YEAR ENDED DECEMBER 31, 2006:
First Quarter                                     $0.25         $0.04
Second Quarter                                    $0.05         $0.04
Third Quarter                                     $0.10         $0.05
Fourth Quarter                                    $0.40         $0.04

YEAR ENDED DECEMBER 31, 2005:
First Quarter                                     $0.22         $0.18
Second Quarter                                    $0.30         $0.18
Third Quarter                                     $0.35         $0.30
Fourth Quarter                                    $0.55         $0.02

         As of March 15, 2007,  there were  approximately  34 record  holders of
Common Stock.  As of March 15, 2007, the closing sales price of our common stock
as  reported on the  Over-The-Counter  Bulletin  Board was $0.07 per share.  Our
transfer  agent is  Continental  Stock  Transfer & Trust Company and their phone
number is (212) 509-4000.

DIVIDEND POLICY

         In December 2005, MPLC paid a one-time  dividend of $0.464 per eligible
share of common stock as directed by the Bankruptcy Administrator.

         We do not  anticipate  paying any dividends on our Common Stock for the
foreseeable  future. We intend to retain our future earnings to re-invest in our
ongoing  business.  The  declaration  of cash  dividends  in the future  will be
determined  by our  board  of  directors  based  upon  our  earnings,  financial
condition, capital requirements and other relevant factors.

RECENT SALES OF UNREGISTERED SECURITIES

         During the 2006 fiscal year,  other than as disclosed in our  Quarterly
reports on Form 10-QSB or in our Current  Reports on Form 8-K, as filed with the
Securities and Exchange Commission, we have not sold unregistered securities.

PURCHASES  OF EQUITY  SECURITIES  BY THE SMALL  BUSINESS  ISSUER AND  AFFILIATED
PURCHASERS

<TABLE>
<CAPTION>
                                                                         TOTAL NUMBER OF
                                                    AVERAGE PRICE      SHARES PURCHASED AS      MAXIMUM NUMBER OF
         PERIOD               TOTAL NUMBER OF       PAID PER SHARE       PART OF PUBLICLY      SHARES THAT MAY YET
                             SHARES PURCHASED        (PRE-REVERSE       ANNOUNCED PLANS OR     BE PURCHASED UNDER
                            (PRE-REVERSE SPLIT)         SPLIT)               PROGRAMS         THE PLANS OR PROGRAMS
-------------------------- ---------------------- ------------------- ----------------------- ----------------------
<S>                             <C>                      <C>                    <C>                     <C>
October 1 through               23,448,870               0.02                   -                       -
    October 31, 2006
November 1 through                   -                    -                     -                       -
    November 30, 2006
December 1 through                   -                    -                     -                       -
    December 31, 2006
Total                           23,448,870               0.02                   -                       -
</TABLE>


                                       12
<PAGE>


         On October 24, 2006, we entered into a Common Stock Purchase  Agreement
with Trinad Capital Master Fund, Ltd. and certain of our stockholders,  pursuant
to which we agreed  to sell an  aggregate  of  69,750,000  shares of our  common
stock,  representing 93% of our issued and outstanding shares of Common Stock on
the closing date,  to Trinad in a private  placement  transaction  for aggregate
gross  proceeds  to us of  $750,000,  $547,719.75  of which  was used to  redeem
23,448,870  shares of Common Stock from certain  stockholders of the Company for
an aggregate purchase price of $547,719.75.

 ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
                                 OF OPERATIONS

         THIS  DISCUSSION  SUMMARIZES  THE  SIGNIFICANT  FACTORS  AFFECTING  THE
OPERATING  RESULTS,  FINANCIAL  CONDITION  AND  LIQUIDITY  AND CASH FLOWS OF NEW
MOTION  AND  ITS   SUBSIDIARY   (WHICH   INCLUDES  THE   OPERATING   RESULTS  OF
RINGTONECHANNEL PRIOR TO ITS ACQUISITION BY NEW MOTION, INC. FROM A COMPANY WITH
COMMON  OWNERSHIP,  AS DISCUSSED  HEREAFTER) FOR THE FISCAL YEARS ENDED DECEMBER
31, 2005 AND 2006.  THE  DISCUSSION  AND ANALYSIS  THAT  FOLLOWS  SHOULD BE READ
TOGETHER  WITH THE  FINANCIAL  STATEMENTS  OF NEW  MOTION  AND THE  NOTES TO THE
FINANCIAL  STATEMENTS  INCLUDED  ELSEWHERE IN THIS ANNUAL REPORT ON FORM 10-KSB.
EXCEPT FOR HISTORICAL  INFORMATION,  THE MATTERS  DISCUSSED IN THIS MANAGEMENT'S
DISCUSSION  AND ANALYSIS OF FINANCIAL  CONDITION AND RESULTS OF  OPERATIONS  ARE
FORWARD LOOKING  STATEMENTS THAT INVOLVE RISKS AND  UNCERTAINTIES  AND ARE BASED
UPON JUDGMENTS CONCERNING VARIOUS FACTORS THAT ARE BEYOND OUR CONTROL.

OVERVIEW

         We provide 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 in several three major product
lines: MobileSidewalk(TM), RingtoneChannel and Bid4Prizes. MobileSidewalk(TM) is
one of the largest U.S.-basED mobile entertainment companies, RingtoneChannel is
a mobile storefront  provider,  and Bid4Prizes is a low-bid mobile auction game.
Other products include, among others, "MobileSidewalk's Music Trivia," "Ringtone
Club," "The Sports  Page(R),"  "Sigalert" and  "RestaurantRow.com."  Our growing
portfolio  of  applications  and  services is based  primarily  on  identifiable
content  licensed  from  third  parties.  In 2004,  we  began to sell  ringtones
internationally and then launched our first ringtone subscription service in the
U.S. in February  2005.  In August 2005, we launched our first  successful  text
message campaign incorporating music trivia. In March of 2006, we partnered with
GoldPocket  Wireless,  Inc.  ("GoldPocket  Wireless"),  the leading  provider of
mobile technology  solutions for media and entertainment  companies,  to enhance
the proficiency and performance of our mobile service offering.

         New Motion was formed in 2005 by the  stockholders of BroadSpring  with
the  intent of  exploring  mobile  opportunities  in the U.S.  and the  eventual
possibility of  transferring  the mobile  business out of  BroadSpring.  In June
2005, BroadSpring  transferred the business of RingtoneChannel to New Motion and
RingtoneChannel  continued  operations  as a  legal  subsidiary  of New  Motion.
Ringtone  Channel  was  originally  incorporated  on  February  23, 2004 and was
acquired by  BroadSpring  in June 2004 as a  wholly-owned  subsidiary to explore
mobile opportunities in the United States market.

         On January 19, 2007, we entered into an agreement  with IVG to purchase
certain  specified  assets of Mobliss,  a provider of proprietary  applications,
delivery  systems,  and  platforms  for  wireless  devices.  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 US and Canada.  The primary  strategic
objective  of this  purchase  is to  allow  us to more  efficiently  manage  our
business and  operations by enabling us 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  will also  enable us to better  serve our  customers  and end users by
expediting the time in which we react to changes in the marketplace.

         Also on January 19,  2007,  we 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  is to be  registered  under the name The Mobile  Entertainment  Channel
Corporation  and will assist New Motion in  expanding  its service  offerings by
partnering with IVG, a leading global player in the interactive games and mobile
space.

         In February,  2007, we completed an exchange  transaction to capitalize
the Company and to merge with a publicly traded company, MPLC, Inc., so that New
Motion became a publicly traded company,  trading under the ticker "MPNC" on the
OTC Bulletin Board. As part of the recapitalization, we raised gross proceeds of
approximately  $20 million in equity financing  through the sale of our Series A
Preferred  Stock,  Series B Preferred  Stock and Series D Preferred  Stock.  For
further  information,  please  see the  discussion  on page 3  called  "Exchange
Transaction and Capitalization," the contents of


                                       13
<PAGE>


which are incorporated herein by reference.

KEY BUSINESS FACTORS

         In managing and  evaluating  our  business,  we  consider,  among other
factors the following:

CONSISTENT MONITORING OF OPERATIONAL METRICS.
         Our business  model,  regardless  of the product  sold,  is primarily a
subscription  based business.  To that end, we frequently monitor a range of key
metrics that have a direct impact on our ability to retain existing  subscribers
and our efficiency in acquiring new subscribers. These metrics include: cost per
acquisition,  churn  rate of  existing  subscribers,  churn  rate  of  recurring
subscribers,   average  revenue  per  user,   billability  of  new  subscribers,
billability of existing  subscribers and refund rates among others.  Our ability
to receive  daily,  weekly,  and  monthly  information  accurately,  in essence,
supplying data inputs to our  operational  metrics,  is critical to successfully
running our business.

COMPOSITION OF OUR PRODUCTS AND SERVICES.
         Our  strategy is to publish a  diversified  and  balanced  portfolio of
high-quality  products and services  based on both New Motion  brands and brands
that we license from third  parties.  We aim to provide a range of products that
leverage the fixed  Internet,  where U.S.  consumers  increasingly  purchase and
redeem  our  services,  alongside  mobile  delivery.  We believe  that  creating
innovative  Internet  storefronts  where online content is wrapped around mobile
products  provides a richer  experience  to the consumer and a higher  retention
rate.

         Our third party license  agreements for  third-party  brands  typically
require that we pay a small advance or guaranteed payment. However, the majority
of our licensed content deals are based on revenue share so that our exposure to
high  priced,  up front  licenses is  limited.  We  generally  recoup all of the
advances we have paid from royalties earned from sales of the application before
the licensor  receives any further royalty  payments from us. We also distribute
applications for other publishers,  developers and licensors. When we distribute
applications,  we generally do not assume the cost or responsibility  associated
with  application  development,  which  ultimately  results in a higher  royalty
payment  to the  third  party  and  therefore  a lower  gross  margin  for us on
distributed products.

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 recognize  revenue from the sale or subscription of our applications
to wireless subscribers under distribution agreements with wireless carriers and
aggregators in the period in which the applications  are purchased,  or over the
period in which the applications  are subscribed,  assuming that: fees are fixed
and determinable;  we have no significant obligations remaining;  and collection
of the related receivable is reasonably assured.

         We principally  derive  revenues from the licensing of our products and
services  to  wireless  subscribers  for a  one-time  purchase  fee or a monthly
subscription  fee.  Substantially  all of these  fees  appear on our  customers'
monthly mobile phone bill. In accordance  with our  third-party  aggregators and
carrier agreements, the aggregators and carriers, collectively,  perform billing
and collection  functions and remit a percentage of the fees to us. We recognize
the net amount of revenues due to us from the  wireless  carrier net of any fees
or other charges.  In addition,  we make  estimates on  chargebacks  and returns
based on historical trends and book this amount as a reduction in gross revenue.
Our  customers  initiate the  purchase of our  products  and  services  from our
website (www.mobilesidewalk.com), various Internet portal sites or through other
delivery  mechanisms and carriers are  responsible  for billing,  collecting and
remitting to us a percentage of those fees. We also  generate  limited  revenues
from third-party brands who wish to leverage the mobile channel.

         In  accordance  with  Emerging  Issues  Task  Force,  EITF,  No  99-19,
"Reporting  Revenue  Gross as a Principal  Versus Net As an Agent," we recognize
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  aggregator.  We have  evaluated  our wireless  carrier and
aggregator agreements and have determined that we are acting as an agent, not as
principal when selling our applications through wireless carriers.


                                       14
<PAGE>


         We estimate  revenues  from  carriers  and  aggregators  in the current
period when reasonable  estimates of these amounts can be made. Several carriers
and  aggregators  provide  reliable  sales data within a  reasonable  time frame
following  the end of each  month,  both of which  allow  us to make  reasonable
estimates of revenues and therefore to recognize  revenues  during the reporting
period  when  the end  user  subscribes  to our  service.  Determination  of the
appropriate amount of revenue  recognized  involves judgments and estimates that
we believe are  reasonable,  but it is possible  that actual  results may differ
from our estimates.  When we receive the final aggregator  reports broken out by
carrier,  to the extent these reports were not received within a reasonable time
frame  following  the end of each  month,  we  record  any  differences  between
estimated  revenues  and actual  revenues in the next  reporting  period once we
determine the actual amounts.

         Revenues earned from certain carriers may not be reasonably  estimated.
If we are unable to  reasonably  estimate the amount of revenue to be recognized
in the  current  period,  we  recognize  revenues  upon the receipt of a carrier
revenue report.  In order to mitigate the risk of a material  misstatement,  our
management reviews the revenues 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 our aggregators.

         We make  estimates  for future  refunds,  charge backs or credits,  and
create reserves  netted against  recorded  revenue,  in the period for which the
sale  occurs  based  on  analyses  of  previous  rates  and  trends  which  have
historically  varied  between  10% and 17% of Gross  Revenue.  This  reserve  is
reconciled  once  a  carrier  remits  total  payment  to  our  aggregator,   who
subsequently remits payment to us usually between 90-180 days after billing.

         Reserves recorded based on this estimation  process for the years ended
December  31,  2005  and  2006,  amounted  to  15%  and  13% of  gross  revenue,
respectively.   Historically,  differences  between  our  estimates  and  actual
revenues have not been materially  different and, as a private company,  we have
had adequate  time to adjust our  estimated  revenues to actual  results once we
receive final sales data. On a going forward basis, our quarterly  revenues will
include a reserve allowance based on historical trends regarding chargebacks.

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.

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.

         We provide a valuation  allowance against a portion of our deferred tax
assets.  In  assessing  the  realization  of deferred  tax assets,  we weigh the
positive and  negative  evidence to determine if it is more likely than not that
some  or  all of  the  deferred  tax  assets  will  be  realized.  The  ultimate
realization  of deferred tax assets is dependent  upon the  generation of future
taxable income in the appropriate tax jurisdiction.  A decrease in our valuation
allowance would result in an immediate material income tax benefit,  an increase
in total assets and stockholder's  equity and could have a significant impact on
earnings in future periods.

         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


                                       15
<PAGE>


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. Uncertainties are recorded in accordance
with SFAS No. 5, "Loss Contingencies."

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.

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.


                                       16
<PAGE>


RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED DECEMBER 31, 2006 AND 2005

         Our summary  historical  financial  data is presented in the  following
table to aid you in your analysis. You should read this data in conjunction with
this  section  entitled  Management's   Discussion  and  Analysis  of  Financial
Condition and Results of Operations,  our consolidated  financial statements and
the related notes to those consolidated  financial statements included elsewhere
in this report. The selected  consolidated  statement of operations data for the
fiscal year ended  December  31,  2006,  and the fiscal year ended  December 31,
2005,  are derived  from our  financial  statements  included  elsewhere in this
report. Dollars in the table are reported in thousands.

                                                          FISCAL YEAR ENDED
                                                     DECEMBER 31,   DECEMBER 31,
(in thousands except share and per share amounts)        2006           2005
                                                     ------------   ------------
STATEMENT OF OPERATIONS DATA:
Net sales ........................................   $     18,721   $      5,867
Cost of sales ....................................            597            267
                                                     ------------   ------------
Gross profit .....................................         18,124          5,600
Selling and marketing ............................         11,971          3,618
General and administrative .......................          4,679          1,289
Other expense, net ...............................             89             36
                                                     ------------   ------------
Income before provision for income taxes .........          1,385            657
Provision for income taxes .......................            708            270
                                                     ------------   ------------
Net income .......................................   $        677   $        387
                                                     ------------   ------------

Shares used in computing basic and diluted net
   income per common share .......................      7,263,688      7,263,688
Basic and diluted net income per common share ....   $       0.09   $       0.05

                                                                    DECEMBER 31,
                                                                        2006
                                                                    ------------
BALANCE SHEET DATA:
Cash ...........................................................    $        544
Working capital ................................................             694
Total assets ...................................................           5,494
Total liabilities ..............................................           4,271
Common stock ...................................................              73
Additional paid-in capital .....................................              84
Retained earnings ..............................................           1,066
Stockholders' equity ...........................................    $      1,223

         Net sales increased 219% to $18,721,000 for the year ended December 31,
2006,  from  $5,867,000  for the year ended  December 31, 2005.  The increase in
sales was due to  12-months of sales of our Music  Trivia  application  in 2006,
compared  to only six  months in 2005,  and  higher  average  monthly  marketing
expense in 2006,  which directly  translates  into a larger pool of subscribers.
This sales  increase was offset by a higher  allowance  for returns for the year
ended  December  31, 2006  compared to the year ended  December  31,  2005.  The
increase in returns is directly  correlated with our higher sales volume for the
year ended December 31, 2006. Our full year 2006 returns and allowances reserve,
as a percentage of gross  revenue,  decreased  when compared to the 2005 reserve
percentage and remains within historical  bands.  During the year ended December
31, 2006, our average monthly billable  customer base increased 103% compared to
our average  monthly  billable  customer base during the year ended December 31,
2005.  Notwithstanding  this increase in our billable customer base, our average
revenue per customer  increased by 57% for the year ended December 31, 2006 when
compared to average  revenue per customer for the year ended  December 31, 2005.
These dual benefits were the result of greater rates of customer acquisition and
a change in our billing  cycle,  whereby we billed  subscribers  on a full-month
subscription-basis  (billing $9.99 once per month) starting in late 2005, from a
partial-month  subscription-basis  (billing  $0.99  approximately  10-times  per
month).  Thus, for the full year of 2006, we experienced the compounding  effect
of a larger number of users under the full-month subscription model, compared to
only nine  months  of  activity  in 2005,  most of which  was  billed  under the
partial-month subscription model.

         Cost of sales  increased  124% to $597,000 for the year ended  December
31, 2006, from $267,000 for the year ended


                                       17
<PAGE>


December 31, 2005. The increase in cost of sales is primarily attributable to an
increase in content licensing fees - a direct result of higher sales of licensed
content - and higher managed hosting fees, a result of our comparatively  larger
customer base in 2006 compared to 2005.

         Gross profit  increased 224% to $18,124,000 for the year ended December
31, 2006, from $5,600,000 for the year ended December 31, 2005. Our gross profit
margin  increased to 97% for the year ended December 31, 2006,  from 95% for the
year ended  December 31, 2005.  This  increase in gross profit margin was due to
several  factors,  including a relatively  larger  subscriber  base for the year
ended December 31, 2006 compared to the year ended  December 31, 2005,  allowing
us to spread our cost of sales over a larger number of subscribers. The increase
in gross profit margin is the result of higher average  revenue per customer for
the year ended  December 31, 2006  compared to the year ended  December 31, 2005
and a relatively constant low level of cost of sales.

         Total selling and marketing  expense  increased 231% to $11,971,000 for
the year ended December 31, 2006 from $3,618,000 for the year ended December 31,
2005.  We launched  our U.S.  text  services in July of 2005 and  marketed  very
sparingly as we evaluated our product offerings. The substantial increase is due
to having a full year of concentrated marketing in 2006 versus only eight months
in 2005. As a percentage of net sales,  selling and marketing  expense increased
to 64% for the year ended  December 31, 2006  compared to 62% for the year ended
December 31, 2005.

         Our  total  general  and   administrative   expenses   include  product
development,  customer  technical  support  and  general  expenses.  General and
administrative  expense increased 263% to $4,679,000 for the year ended December
31, 2006 from  $1,289,000 for the year ended December 31, 2005. This increase in
general  and  administrative  expense  was  due  to  our  larger  headcount  and
associated payroll and consulting fees, higher accounting and legal fees, higher
travel and entertainment  expense,  higher  telecommunications  expense, and bad
debt expense in 2006,  compared to no bad debt expense in 2006.  As a percentage
of net sales,  general and administrative  expense increased to 25% for the year
ended December 31, 2006 compared to 22% for the year ended December 31, 2005.

         Income before  provision for income taxes  increased 111% to $1,385,000
for the year ended  December 31, 2006 from $657,000 for the year ended  December
31, 2005.  Our income before  provision for income taxes margin  decreased to 7%
for the year ended December 31, 2006 compared to 11% for the year ended December
31, 2005.  This  decrease in pretax  income as a percentage  of net sales is the
result of a scaling up of our operations to meet  anticipated  future demand for
our products and meet sales  growth.  In  particular,  while our 2006 sales grew
219% over 2005,  selling and  marketing and general and  administrative  expense
grew at a faster rate over the same period.

         Net income increased 75% to $677,000,  or $0.09 per share, for the year
ended December 31, 2006, compared to $387,000,  or $0.05 per share, for the year
ended  December 31,  2005.  Our net income  margin  decreased to 4% for the year
ended December 31, 2006 compared to 7% for the year ended December 31, 2005 as a
result of the combination of the factors discussed above.

         We believe that as we continue to grow our sales, over time the rate of
our sales  growth  will  moderate  in line with the growth in the  overall  U.S.
mobile entertainment market (see "The Wireless Entertainment Market" on page 6).
In the  future,  we do not  expect  that  we  will  increase  our  sales  at our
historical  growth  rate and  furthermore,  there is no  assurance  that we will
continue to meet our sales  growth  objectives,  or those of the overall  mobile
entertainment market.

LIQUIDITY AND CAPITAL RESOURCES

         New Motion's cash requirements are principally for working capital.  In
fiscal year 2006, net cash provided by operating  activities  was $931,000.  Our
primary use of operating funds related to marketing  expenses incurred to obtain
new subscribers.

         Investing activities during fiscal year 2006 were the result of capital
expenditures, primarily for office, computer and video equipment and $123,000 of
expenditures  related to the subsequent  event  acquisition of certain assets of
Mobliss.  Net cash used in  investing  activities  was  $200,000 for fiscal year
2006.

         In January 2007,  we sold one share of our Series A Preferred  Stock to
Trinad Capital Management, Ltd. for aggregate gross proceeds of $3.5 million. In
February 2007, we sold 650 shares of our Series B Preferred  Stock to the Series
B Investors for aggregate gross proceeds of $6.5 million. Also in February 2007,
we sold  8,333  shares of our  Series D  Preferred  Stock to  institutional  and
accredited  investors for aggregate gross proceeds of approximately $10 million.
These funds will be used for general working capital purposes and for the growth
of our business.


                                       18
<PAGE>


         We had Secured Convertible Promissory Notes outstanding in 2006, in the
principal amounts of $15,000,  $100,000 and $50,000,  which were issued to Scott
Walker,  our then Chief  Executive  Officer and  President and our current Chief
Marketing Officer. In addition, in 2006, we had Secured Convertible Notes in the
principal  amounts of $35,000,  $50,000 and $20,000  which were issued to SGE, a
fictitious  business name for SGTI, Inc., a corporation  owned by Allan Legator,
our then and current Chief  Financial  Officer and Secretary.  All notes to both
Scott  Walker  and SGE were  repaid in full with  interest  in  September  2006.
Pursuant to the terms of the Secured Convertible Notes, each of Scott Walker and
SGE were  granted a right to receive a warrant to purchase a number of shares in
a qualified financing. On January 26, 2007, New Motion agreed with each of Scott
Walker and SGE that the warrants  would entitle  Scott Walker to purchase  9,900
and SGE to purchase 6,300 shares, respectively,  of New Motion's common stock at
an exercise  price of $5.00 per share.  After the Exchange and on a post-Reverse
Split basis,  Scott Walker's  warrant and SGE's warrant entitle them to purchase
14,384 and 9,153 shares,  respectively,  of Common Stock at an exercise price of
$3.44 per share.

         In connection with The Mobile  Entertainment  Channel Corporation joint
venture  with IVG, we are  obligated to pay the joint  venture a management  fee
equal to the purchase  price paid for  hardware and software  assets we acquired
from IVG, up to a maximum fee of $2,320,000, for management services rendered to
us by the joint  venture.  We made an advance  payment on the  management fee of
$500,000 on March 12, 2007 and expect to make another  $500,000  advance payment
on June 30, 2007,  with the remainder of the management fee payable in quarterly
installments, through June 30, 2008. Each quarterly payment will equal to 10% of
the payments (including the advance payment) actually received by us during such
quarter from the assets assigned to us.

         We paid cash of $213,000  for the fiscal year ended  December  31, 2006
for expenses  related to the February  12, 2007  Exchange  with MPLC and related
financing transactions.

         Our management  expects that with our present cash flows from operating
activities  and our current  level of cash,  we may require  additional  working
capital in order to continue to grow our  operations,  develop our products,  or
pursue acquisitions. As a result, we may seek both debt and equity financings in
order to satisfy these working  capital  needs.  There can be no assurance  that
external  financing will be available if needed in the future,  or if available,
that it would be available on terms acceptable to our management.

ON-BALANCE SHEET CAPITAL RESOURCES
         As of December 31, 2006, we did not have any notes payable or debt.

         On  September  7, 2006 we loaned our Chief  Executive  Officer,  Burton
Katz,  $286,000 under a secured  promissory  note for the purpose of helping Mr.
Katz acquire stock  options  vested in a prior  employer.  This amount was fully
repaid, with interest, on November 21, 2006.

         On January 19, 2007, we issued IVG a convertible  promissory  note with
an aggregate maximum principal amount of up to $2,320,000.  Concurrent with this
date, we  consummated  the initial  closing of the  acquisition  of hardware and
software assets from IVG and issued the IVG Note in the initial principal amount
of $500,000.  The IVG Note bears  interest at the rate of five percent per annum
accruing from the initial issuance of the IVG Note and matures 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,  we  increased  the  principal  amount  of the  IVG  Note by  $580,000  to
$1,080,000.  On February 26, 2007,  we repaid  $500,000 of the IVG Note.  Unless
requested by us, we will have no  obligation  to purchase  any cellular  carrier
connection  contracts listed in the Asset Purchase Agreement and not assigned to
us by February 28, 2007.

OFF-BALANCE SHEET CAPITAL RESOURCES
         Due to the payment terms of the carriers requiring in excess of 90 days
from the date of billing or sale, we utilize factoring facilities offered by our
aggregators.  This  factoring  feature  allows  for  payment of 70% of the prior
month's billings 15-20 days after the end of the month. For this feature, we pay
an  additional  fee of 2.5% - 5% of the  amount  factored.  For the  year  ended
December 31,  2006,  the gross  amount of invoices  subject to factoring  totals
approximately  $19,832,000.  The total factored  amount of these invoices equals
approximately  $14,823,000.  As  of  December  31,  2006,  we  had  reserves  of
approximately $2,727,000 against these factored amounts. This factoring facility
is  offered  to us on a  recourse  basis.  Our gross  sales  for each  month are
reported net of any of these  factoring  fees. We are currently  evaluating  the
best use of our cash assets relating to our factoring facility or to alternative
uses  of  cash,  such as  enhancing  our  infrastructure  and  making  selective
acquisitions.

         We have operating leases with future minimum lease payments of $298,000
in 2007 and $188,000 in 2008.


                                       19
<PAGE>


RECENT ACCOUNTING PRONOUNCEMENTS

         In  September   2006,   the  FASB  issued  SFAS  No.  157,  FAIR  VALUE
MEASUREMENTS.  SFAS No. 157 establishes a framework for measuring the fair value
of assets and  liabilities.  This  framework  is intended  to provide  increased
consistency  in how fair value  determinations  are made under various  existing
accounting  standards that permit,  or in some cases require,  estimates of fair
market  value.  SFAS No. 157 is  effective  for  fiscal  years  beginning  after
November 15, 2007,  and interim  periods  within  those  fiscal  years.  Earlier
adoption is  encouraged,  provided that the reporting  entity has not yet issued
financial  statements for that fiscal year,  including any financial  statements
for an interim  period  within that fiscal year. We are currently in the process
of  evaluating  the  impact  of  SFAS  No.  157  on our  consolidated  financial
statements.

         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  financials
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.  We will  adopt  this  provision  in the  first  quarter  of 2007  and are
currently evaluating the impact of this provision on our consolidated  financial
position, results of operations and cash flows.

         In September 2006, the Securities and Exchange  Commission issued Staff
Accounting  Bulletin  ("SAB")  No.  108,  CONSIDERING  THE EFFECTS OF PRIOR YEAR
MISSTATEMENTS   WHEN   QUANTIFYING   MISSTATEMENTS  IN  CURRENT  YEAR  FINANCIAL
STATEMENTS,  or SAB No. 108,  which  provides  interpretive  guidance on how the
effects of the  carryover  or  reversal  of prior year  misstatements  should be
considered in  quantifying a current year  misstatement.  We will be required to
adopt the  provisions  of SAB No. 108 in our fiscal year 2006. We do not believe
the  adoption  of SAB No.  108 will have a material  impact on our  consolidated
financial position, results of operations or cash flows.

QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

         We currently have limited or no financial  market risks from changes in
foreign  currency  exchange  rates or changes in  interest  rates and do not use
derivative financial instruments.  In the future, we may enter into transactions
in other  currencies.  An adverse  change in exchange  rates  would  result in a
decline in income before taxes, assuming that each exchange rate would change in
the same  direction  relative  to the U.S.  dollar.  In  addition  to the direct
effects of changes in exchange rates,  such changes  typically affect the volume
of sales or foreign currency sales price as competitors' products become more or
less attractive.


                                       20
<PAGE>


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 FACING US. ADDITIONAL RISKS
AND UNCERTAINTIES  THAT WE ARE UNAWARE OF, OR THAT WE CURRENTLY DEEM IMMATERIAL,
ALSO MAY BECOME IMPORTANT  FACTORS THAT AFFECT US. IF ANY OF THE FOLLOWING RISKS
OCCUR,  OUR  BUSINESS,  FINANCIAL  CONDITION OR RESULTS OF  OPERATIONS  COULD BE
MATERIALLY AND ADVERSELY AFFECTED. IN THAT CASE, THE TRADING PRICE OF OUR COMMON
STOCK  COULD  DECLINE,  AND YOU MAY LOSE  SOME OR ALL OF THE  MONEY  YOU PAID TO
PURCHASE OUR COMMON STOCK.

RISKS RELATING TO OUR BUSINESS.

     WE HAVE A LIMITED OPERATING  HISTORY IN AN EMERGING MARKET,  WHICH MAY MAKE
IT DIFFICULT FOR YOU TO EVALUATE OUR  BUSINESS.  We were  incorporated  in March
2005 and immediately began offering entertainment products and services directly
to consumers  through our  acquisition  of  RingtoneChannel.  These services and
products are billed through wireless carriers to their subscribers. Accordingly,
we have a limited  history of generating  revenues,  and the future  revenue and
income  potential  of our  business  is  uncertain.  As a  result  of our  short
operating history in the emerging mobile entertainment industry, we have limited
financial data that you can use to evaluate our business.  Any evaluation of our
business and our prospects must be considered in light of our limited  operating
history and the risks and  uncertainties  often  encountered by companies in our
stage of  development.  Some of these  risks  and  uncertainties  relate  to our
ability to do the  following:

     o    maintain  our current and  develop  new  wireless  carrier and billing
          aggregator relationships upon which our business currently depends;

     o    respond effectively to competitive pressures;

     o    increase brand awareness and consumer recognition;

     o    attract and retain qualified management and employees;

     o    continue to source or develop premium content for distribution;

     o    continue to upgrade our technology;

     o    continue to upgrade our information processing systems;

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

     o    maintain and grow our off-deck distribution, including through our web
          sites and third-party direct-to-consumer distributors; and

     o    execute our business and marketing strategies successfully.

     If we are unable to address these risks, our operating results may not meet
the expectations of investors,  which would likely cause the price of our common
stock to decline.

     OUR  BUSINESS  CURRENTLY  RELIES ON WIRELESS  CARRIERS AND  AGGREGATORS  TO
FACILITATE BILLING AND COLLECTIONS IN CONNECTION WITH OUR ENTERTAINMENT PRODUCTS
SOLD AND  SERVICES  RENDERED,  AND 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 currently generate, and we expect
to continue to  generate,  the  majority  of our  revenues  from the sale of our
products and services  directly to consumers  which are billed through  wireless
aggregators and carriers. For the fiscal year ended December 31, 2006, we billed
approximately  34% of our revenues  through our aggregator  Mobile Messenger and
60%  of  our  revenues  through  aggregation  services  provided  by  Goldpocket
Wireless.  In  2005,  we  billed  approximately  78%  of  our  revenues  from  a
partnership  with Buongiorno USA and  approximately  22% of our revenues through
our aggregator Mobile  Messenger.  We expect that we will continue to generate 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.

     Our  aggregator  agreements  are not exclusive and generally have a limited
term of one or two years with  evergreen or automatic  renewal  provisions  upon
expiration  of the  initial  term.  These  agreements  set out the  terms of our
relationships  with the carriers.  In addition,  any party can  terminate  these
agreements early, and in some instances, without cause.

     Many  other   factors   outside  our  control   could  impair  our  carrier
relationships,  including a carrier's:

     o    preference  for or decision to provision  delivery of our products and
          services to their customer base;

     o    decision  to  offer  its  own  competing  entertainment  applications,
          products and services;

     o    decision to offer  similar  entertainment  applications,  products and
          services to its subscribers for free;

     o    network  encountering  technical problems that disrupt the delivery of
          or billing for our applications; or

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


                                       21
<PAGE>


     If one or more of these  wireless  carriers  decides not to offer  off-deck
applications  we may be unable to replace the revenue  source with an acceptable
alternative,  causing  us to lose  access  to the  subscribers  covered  by that
wireless  carrier,  which could materially harm our business,  operating results
and financial condition.

     WE MAY NEED  ADDITIONAL  FUNDING  TO SUPPORT  OUR  OPERATIONS  AND  CAPITAL
EXPENDITURES,  WHICH MAY NOT BE AVAILABLE  TO US AND WHICH LACK OF  AVAILABILITY
COULD ADVERSELY AFFECT OUR BUSINESS. We expect we may need additional capital to
continue to expand our operations, and to make strategic or necessary product or
business acquisitions.  As part of our planned growth and expansion,  we will be
required to make expenditures  necessary to expand and improve our operating and
management  infrastructure.  We also plan to invest more heavily in research and
development of new products and services.  In addition,  we may need  additional
funds to pursue business  opportunities  (such as acquisitions of  complementary
businesses),  to react to unforeseen  difficulties  or to respond to competitive
pressures.

     If our capital resources are insufficient, we will need to raise additional
funds.  While we will continue to seek out additional debt and equity financing,
we currently have no committed sources of additional  capital,  and there can be
no assurance that any financing  arrangements will be available in amounts or on
terms acceptable to us, if at all. Furthermore, the sale of additional equity or
convertible  debt  securities  may result in  additional  dilution  to  existing
stockholders. If adequate additional funds are not available, we may be required
to delay,  reduce the scope of or eliminate material parts of the implementation
of our business strategy. This limitation could substantially harm our business,
results of operations and financial condition.

     WE HAVE A LIMITED  OPERATING  HISTORY AND THERE CAN BE NO ASSURANCE THAT WE
WILL MAINTAIN  PROFITABILITY.  We have a limited operating history and we cannot
guarantee  that we will  remain  profitable.  Even if we sustain  profitability,
given the  competitive  and evolving nature of the industry in which we operate,
we may not be able to  increase  profitability  and our  failure  to do so would
adversely affect our business, including our ability to raise additional funds.

     THE  MARKETS IN WHICH WE OPERATE  ARE  HIGHLY  COMPETITIVE  AND MANY OF OUR
COMPETITORS HAVE GREATER RESOURCES THAN WE DO. The development, distribution and
sale of wireless entertainment applications is a highly competitive business. We
compete  primarily on the basis of marketing  acquisition cost, brand awareness,
and carrier and  distribution  breadth.  We also  compete  for  experienced  and
talented employees.

     Currently,  we consider our primary competitors to be Jamster,  Buongiorno,
Flycell,  Thumbplay  and Dada  Mobile.  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 wireless entertainment  applications,  products and
services  and as  such  they  might  refuse  to  distribute  some  or all of our
applications or may deny us access to all or part of their networks.

     Some of our competitors' advantages over us include the following:

     o    substantially greater revenues and financial resources;

     o    stronger brand names and consumer recognition;

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

     o    pre-existing relationships with brand holders;

     o    more resources to make acquisitions; and

     o    broader geographic presence.

     If we are not as successful as our competitors in our target  markets,  our
sales could decline,  our margins could be negatively impacted and we could lose
market share, any of which could materially harm our business.

     OUR SUCCESS DEPENDS ON OUR ABILITY TO DEVELOP NEW APPLICATIONS PRODUCTS AND
SERVICES  THAT OUR  CUSTOMERS  WILL  CONTINUE  TO BUY.  Our  success  depends on
providing  applications,  products  and  services  that  offer our  customers  a
high-quality  entertainment  experience.  We must continue to invest significant
resources  in  research  and  development  to enhance  our  offering of wireless
applications and introduce new applications  that our customers will continue to
buy. Our operating  results would suffer if our  applications are not responsive
to the preferences of our customers or are not effectively brought to market.

     The planned timing or introduction of new  applications is subject to risks
and uncertainties.  Unexpected technical, operational, deployment, distribution,
carrier  approval,  or other problems could delay or prevent the introduction of
new  applications,  which  could  result in a loss of, or delay in,  revenues or
damage to our reputation and brand. If any of our


                                       22
<PAGE>


applications is introduced with defects, errors or failures, we could experience
decreased  sales,  loss of customers and damage to our reputation and brand.  In
addition,  new  applications  may not achieve  sufficient  market  acceptance to
offset the costs of development.  Our success depends, in part, on unpredictable
and  volatile  factors  beyond  our  control,  including  customer  preferences,
competing applications and the availability of other entertainment activities. A
shift in mobile phone usage or the  entertainment  preferences  of our customers
could  cause a decline in our  applications'  popularity  that could  materially
reduce our revenues and harm our business.

     We  continuously   develop  and  introduce  new  applications  for  use  on
next-generation  mobile phones. We must make product  development  decisions and
commit significant resources well in advance of the anticipated  introduction of
a new mobile  phone model.  New mobile phone models for which we are  developing
applications  may be delayed,  may not be  commercially  successful,  may have a
shorter  life  cycle  than  anticipated  or may not be  adequately  promoted  by
wireless carriers or the mobile phone  manufacturer.  If the mobile phone models
for which we are  developing  applications  are not released when expected or do
not achieve broad market penetration, our potential revenues will be limited and
our business will suffer.

     WE DEPEND ON A LIMITED NUMBER OF APPLICATIONS,  PRODUCTS AND SERVICES FOR A
SIGNIFICANT  PORTION  OF OUR  REVENUE.  We derive a  significant  portion of our
revenue  from a limited  number of  applications.  In fiscal  2005 and 2006,  we
generated  approximately  67% and 26%,  respectively,  of our  revenue  from our
Ringtone application and approximately 33% and 70%,  respectively of our revenue
from our Trivia  applications.  We expect to  continue  to derive a  substantial
portion of our  revenues  from  Ringtone and Trivia  applications  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 our  Trivia
application, our future revenues could be limited and our business will suffer.

     WE RELY ON  INDEPENDENT  THIRD PARTIES FOR THE  DEVELOPMENT  OF MANY OF OUR
APPLICATIONS,   PRODUCTS  AND  SERVICES.  We  rely  on  independent  third-party
developers  to develop  many of our  entertainment  applications,  products  and
services, which subjects us to the following risks:

     o    key  developers  who  worked for us in the past may choose to work for
          our competitors;

     o    developers  currently  under  contract  may  try  to  renegotiate  our
          agreements with them on terms less favorable to us; and

     o    our  developers  may be unable or  unwilling  to  allocate  sufficient
          resources to complete  our  applications  on a timely or  satisfactory
          basis or at all.

     If our  developers  terminate  their  relationships  with  us or  negotiate
agreements  with  terms less  favorable  to us, we would  have to  increase  our
internal  development  staff,  which would be a time  consuming and  potentially
costly process. If we are unable to increase our internal development staff in a
cost-effective  manner or if our  current  internal  development  staff fails to
create successful applications, our earnings could be materially diminished.

     WE FACE  CHALLENGES IN MANAGING THE RAPID GROWTH OF OUR  BUSINESS.  We have
experienced,  and continue to  experience,  rapid growth in our  business.  This
growth  has  placed,  and may  continue  to place,  significant  demands  on our
management  and our  operational  and  financial  infrastructure.  To manage our
growth  effectively,  we must  continue to improve and enhance our  operational,
financial and management controls in order to maintain efficiency and innovation
in our growing  organization.  We must also  enhance our  reporting  systems and
procedures  to ensure  timely and accurate  periodic  public  disclosure  of our
operations  and we  will  need  to  hire  additional  personnel.  These  systems
enhancements  and  improvements  will  require   significant   expenditures  and
allocation  of  valuable  management  resources.  If we  fail  to  maintain  the
efficiency of our  organization as it grows, our profit margins will decline and
our earnings could be materially diminished.

     We plan to expand  our  technology,  sales,  administrative  and  marketing
organizations.  Any growth in or expansion of our business is likely to continue
to place a strain on our management and administrative resources, infrastructure
and systems.  As with other growing  businesses,  we expect that we will need to
further refine and expand our business development capabilities, our systems and
processes and our access to financing sources. We also will need to hire, train,
supervise  and manage new  employees.  These  processes  are time  consuming and
expensive, will increase management  responsibilities and will divert management
attention. We cannot assure you that we will be able to:

     o    expand our systems effectively or efficiently or in a timely manner;

     o    allocate our human resources optimally;

     o    meet our capital needs;

     o    identify and hire qualified employees or retain valued employees; or

     o    incorporate effectively the components of any business or product line
          that we may acquire in our effort to achieve growth.


                                       23
<PAGE>


     Our  inability  or failure to manage our growth and  expansion  effectively
could harm our  business  and  materially  and  adversely  affect our  operating
results and financial condition.

     WE MAY NOT BE ABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL  PROPERTY RIGHTS.
We rely in part on trade secret,  unfair competition,  trade dress and trademark
law to protect our rights to certain aspects of our product offerings, including
our software technologies,  domain names and recognized trademarks, all of which
we believe are  important  to the success of our  products  and our  competitive
position.  There can be no assurance that any of our trademark applications will
result in the issuance of a registered trademark,  or that any trademark granted
will be  effective  in thwarting  competition  or be held valid if  subsequently
challenged.  In addition, there can be no assurance that the actions taken by us
to protect our proprietary  rights will be adequate to prevent  imitation of our
products, that our proprietary information will not become known to competitors,
that  we  can  meaningfully   protect  our  rights  to  unpatented   proprietary
information  or  that  others  will  not  independently   develop  substantially
equivalent or better products that do not infringe on our intellectual  property
rights.  We could be required  to devote  substantial  resources  to enforce and
protect our intellectual  property,  which could divert our resources and result
in increased expenses. In addition, an adverse determination in litigation could
subject us to the loss of our rights to particular intellectual property,  could
require us to grant licenses to third parties,  could prevent us from selling or
using  certain  aspects  of our  products  or could  subject  us to  substantial
liability, any of which could harm our business.

     WE MAY  BECOME  SUBJECT  TO  LITIGATION  FOR  INFRINGING  THE  INTELLECTUAL
PROPERTY RIGHTS OF OTHERS.  Others may initiate claims against us for infringing
on their  intellectual  property rights.  We may be subject to costly litigation
relating to such infringement  claims and we may be required to pay compensatory
and punitive  damages or license fees if we settle or are found culpable in such
litigation. In addition, we may be precluded from offering products that rely on
intellectual property that is found to have been infringed by us. We also may be
required to cease  offering the affected  products while a  determination  as to
infringement  is considered.  These  developments  could cause a decrease in our
operating  income and  reduce our  available  cash  flow,  which  could harm our
business and cause our stock price to decline.

     IF WE FAIL TO DELIVER OUR  APPLICATIONS  TO CORRESPOND  WITH THE COMMERCIAL
INTRODUCTION OF NEW MOBILE PHONE MODELS,  OUR SALES MAY SUFFER.  Our business is
tied, in part, to the  commercial  introduction  of new mobile phone models with
enhanced  features,  including color screens and greater  processing power. Many
new  mobile  phone  models  are  released  in the final  quarter  of the year to
coincide with the holiday shopping season. We cannot control the timing of these
mobile phone  launches.  Some of our customers  download our  applications  soon
after they  purchase  their new  mobile  phones in order to  experience  the new
features of those phones.  If we miss the opportunity to sell  applications when
our customers  upgrade to a new mobile phone due to  application  launch delays,
our sales may suffer.  In addition,  if we miss the key holiday  selling period,
either because the  introduction of a new mobile phone model is delayed or we do
not successfully deploy our applications in time for the holiday selling season,
our sales may suffer.

     OUR  BUSINESS AND GROWTH MAY SUFFER IF WE ARE UNABLE TO HIRE AND RETAIN KEY
PERSONNEL WHO ARE IN HIGH DEMAND.  We depend on the continued  contributions  of
our senior management and other key personnel,  many of whom may be difficult to
replace.  The loss of the services of any of our executive officers or other key
employees  could harm our  business.  Our  future  success  also  depends on our
ability to identify,  attract and retain highly skilled  technical,  managerial,
finance,  marketing and creative  personnel.  Qualified  individuals are in high
demand,  and we may incur significant costs to attract them. If we are unable to
attract or retain the personnel we need to succeed, our business may suffer.

     Many of our  senior  management  personnel  and  other key  employees  have
become, or will soon become,  substantially vested in their initial stock option
grants.  Employees  may be more likely to leave us if their owned  shares or the
shares underlying their options have significantly appreciated in value relative
to the original purchase price of the shares or the option exercise price.

     OUR SENIOR  MANAGEMENT'S  LIMITED  EXPERIENCE  MANAGING  A PUBLICLY  TRADED
COMPANY MAY DIVERT MANAGEMENT'S ATTENTION FROM OPERATIONS AND HARM OUR BUSINESS.
Our management team has relatively limited recent experience managing a publicly
traded company and complying with federal securities laws,  including compliance
with recently adopted disclosure  requirements on a timely basis. Our management
will be required to design and  implement  appropriate  programs and policies in
responding to increased legal, regulatory compliance and reporting requirements,
and any failure to do so could lead to the imposition of fines and penalties and
harm our business.

     SYSTEM OR NETWORK FAILURES COULD REDUCE OUR SALES, INCREASE COSTS OR RESULT
IN A LOSS OF CUSTOMERS. Any disruption to the carriers' or our services, billing
systems,  information  systems or  communications  networks  could result in the
inability of our customers to download our applications. If any of these systems
fail, there is an interruption in the supply of power, an


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<PAGE>


earthquake,  fire,  flood  or  other  natural  disaster,  or an  act  of  war or
terrorism,  our  customers  may  be  unable  to  access  our  applications.  Any
disruption to the  carriers' or our systems could cause us to lose  customers or
revenue or incur substantial repair costs and distract management from operating
our business.

     THE ACQUISITION OF OTHER COMPANIES, BUSINESSES OR TECHNOLOGIES COULD RESULT
IN OPERATING  DIFFICULTIES,  DILUTION  AND OTHER  HARMFUL  CONSEQUENCES.  We may
selectively pursue strategic acquisitions, any of which could be material to our
business,  operating results and financial condition.  Future acquisitions could
divert  management's  time and focus from  operating our business.  In addition,
integrating an acquired company,  business or technology is risky and may result
in  unforeseen   operating   difficulties  and   expenditures   associated  with
integrating  employees  from the  acquired  company  into our  organization  and
integrating each company's accounting,  management information,  human resources
and  other  administrative  systems  to  permit  effective  management.  Foreign
acquisitions  might involve  unique risks related to  integration  of operations
across  different  cultures and  languages,  currency  risks and the  particular
economic, political and regulatory risks associated with specific countries.

     The anticipated  benefits of our future  acquisitions  may not materialize.
Future  acquisitions  or  dispositions  could  result  in  potentially  dilutive
issuances of our equity  securities,  including our common stock, the incurrence
of debt,  contingent  liabilities  or  amortization  expenses,  or write-offs of
goodwill,  any of which could harm our financial condition.  Future acquisitions
may also require us to obtain additional  financing,  which may not be available
on favorable terms or at all.

     EXPANSION INTO INTERNATIONAL  MARKETS IS A COMPONENT OF LONG-TERM STRATEGY,
AND OUR LIMITED EXPERIENCE IN THE OPERATION OF OUR INTERNATIONAL  BUSINESSES MAY
BE A RISK TO OUR SUCCESS.  An element of our business  strategy is international
expansion.  Risks associated with growing our international  business include:

     o    challenges caused by distance, language and cultural differences;

     o    multiple,  conflicting  and changing laws and  regulations,  including
          difficulties enforcing intellectual property rights;

     o    foreign  exchange  controls  that might  prevent us from  repatriating
          income earned in countries outside the United States;

     o    political and economic instability;

     o    higher costs associated with doing business internationally;

     o    restrictions on the export or import of technology;

     o    difficulties in staffing and managing international operations;

     o    variations in tariffs, quotas, taxes and other market barriers; and

     o    greater  fluctuations  in sales to customers in developing  countries,
          including  longer  payment  cycles and greater  difficulty  collecting
          accounts receivable.

     These risks could harm our international  expansion efforts, which could in
turn  materially  and  adversely  affect our  business,  operating  results  and
financial condition.

     WE FACE RISKS ASSOCIATED WITH CURRENCY EXCHANGE RATE FLUCTUATIONS. Although
we currently  transact business  primarily in U.S. dollars,  a larger portion of
our  revenues  may  be  denominated  in  foreign  currencies  if we  expand  our
international  operations.  Conducting  business in  currencies  other than U.S.
dollars subjects us to fluctuations in currency exchange rates that could have a
negative impact on our reported operating results.  Fluctuations in the value of
the U.S.  dollar  relative to other  currencies may impact our revenue,  cost of
revenue and operating  margin and result in foreign currency  translation  gains
and  losses.  Historically,  we  have  not  engaged  in  exchange  rate  hedging
activities.  Although we may implement hedging strategies to mitigate this risk,
these  strategies  may not  eliminate  our  exposure  to foreign  exchange  rate
fluctuations and involve costs and risks of their own.

     CHANGES TO FINANCIAL ACCOUNTING OR OTHER STANDARDS MAY AFFECT OUR OPERATING
RESULTS AND CAUSE US TO CHANGE OUR BUSINESS PRACTICES.  We prepare our financial
statements to conform with generally accepted accounting principles, or GAAP, in
the United States. These accounting  principles are subject to interpretation by
the American  Institute of Certified  Public  Accountants,  the  Securities  and
Exchange  Commission (the "SEC"), the Public Company Accounting  Oversight Board
and various other bodies.  A change in those  policies  could have a significant
effect on our  reported  results and may affect our  reporting  of  transactions
completed before a change is announced.

     For  example,  we have  used  stock  options  and  other  long-term  equity
incentives as a fundamental component of our employee compensation  packages. We
believe  that stock  options  and other  long-term  equity  incentives  directly
motivate our employees to maximize long-term  stockholder value and, through the
use of  vesting,  encourage  employees  to  remain  with  our  company.  Several
regulatory agencies and entities are considering  additional  regulatory changes
that could make it more  difficult or expensive for us to grant stock options to
employees. In December 2004, the FASB issued SFAS No. 123(R),


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<PAGE>


which  requires  that grants of employee  stock  options are  recognized  on the
income  statement  based  on  their  fair  values.   In  addition,   regulations
implemented by the Nasdaq National Market generally require stockholder approval
for all stock option plans,  which could make it more difficult or expensive for
us to grant stock  options to employees.  We may, as a result of these  changes,
incur increased  compensation costs, change our equity compensation  strategy or
find it difficult to attract, retain and motivate employees, each of which could
materially and adversely  affect our business,  operating  results and financial
condition.

     IF WE ARE NOT ABLE TO RESPOND TO THE ADOPTION OF  TECHNOLOGICAL  INNOVATION
IN OUR INDUSTRY AND CHANGES IN CONSUMER  DEMAND,  OUR PRODUCTS  WILL CEASE TO BE
COMPETITIVE,  WHICH COULD RESULT IN A DECREASE IN REVENUE AND HARM OUR BUSINESS.
Our future success will depend,  in part, on our ability to keep up with changes
in consumer  tastes and our  continued  ability to  differentiate  our  products
through  implementation  of new technologies.  We may not,  however,  be able to
successfully   do  so,  and  our  competitors  may  be  able  to  implement  new
technologies at a much lower cost. These types of developments  could render our
products less competitive and possibly eliminate any  differentiating  advantage
that we might hold at the present time.

     OUR FINANCIAL RESULTS COULD VARY  SIGNIFICANTLY FROM QUARTER TO QUARTER AND
ARE  DIFFICULT  TO  PREDICT.  Our  revenues  and  operating  results  could vary
significantly  from quarter to quarter because of a variety of factors,  many of
which are outside of our control.  As a result,  comparing our operating results
on a period-to-period  basis may not be meaningful.  In addition,  we may not be
able to predict  our future  revenues  or  results  of  operations.  We base our
current and future  expense  levels on our  internal  operating  plans and sales
forecasts,  and our operating costs are to a large extent fixed. As a result, we
may not be able to reduce our costs sufficiently to compensate for an unexpected
shortfall  in  revenues,   and  even  a  small   shortfall  in  revenues   could
disproportionately  and  adversely  affect  financial  results for that quarter.
Products and carrier  relationships  may  represent  meaningful  portions of our
revenues  and  net  income  in  any  quarter.   We  may  incur   significant  or
unanticipated  expenses when licenses are renewed. In addition, any payments due
to us from  carriers  may be delayed  because  of  changes or issues  with those
carriers' processes.

     In addition to other risk factors  discussed in this section,  factors that
may contribute to the variability of our quarterly results include:

     o    the timing of charges  related to impairments of goodwill,  intangible
          assets, prepaid royalties and guarantees;

     o    changes in pricing policies by us, our competitors or our carriers and
          other distributors;

     o    changes  in the mix of  original  and  licensed  content,  which  have
          varying gross margins;

     o    the timing of successful mobile handset launches;

     o    fluctuations in the size and rate of growth of overall consumer demand
          for mobile related content;

     o    strategic  decisions by us or our  competitors,  such as acquisitions,
          divestitures,  spin-offs,  joint  ventures,  strategic  investments or
          changes in business strategy;

     o    charges related to our  acquisition of certain assets of Mobliss,  and
          other acquisitions;

     o    accounting rules governing recognition of revenue;

     o    the timing of compensation expense associated with equity compensation
          grants; and

     o    decisions  by us to incur  additional  expenses,  such as increases in
          marketing or research and development.

     As a result of these and other factors,  our operating results may not meet
the expectations of investors or public market analysts who choose to follow our
company. Failure to meet market expectations would likely result in decreases in
the trading price of our common stock.

RISKS RELATING TO OUR INDUSTRY

     WIRELESS  COMMUNICATIONS  TECHNOLOGY IS CHANGING RAPIDLY, AND WE MAY NOT BE
SUCCESSFUL IN WORKING WITH THESE NEW  TECHNOLOGIES.  Wireless network and mobile
phone technologies are undergoing rapid innovation.  New mobile phones with more
advanced processors and supporting advanced programming languages continue to be
introduced in the market. We have no control over the demand for, or success of,
these products.  However,  if we fail to anticipate and adapt to these and other
technological  changes,  our market share and our operating  results may suffer.
Our future  success  will  depend on our  ability  to adapt to rapidly  changing
technologies,  develop  applications to accommodate  evolving industry standards
and improve the performance and  reliability of our  applications.  In addition,
the  widespread  adoption of networking or  telecommunications  technologies  or
other technological changes could require substantial  expenditures to modify or
adapt our entertainment applications.

     The  markets  for  our   applications,   products  and  services  are  also
characterized  by frequent new mobile phone model  introductions  and shortening
mobile phone model life cycles. The development of new, technologically advanced


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<PAGE>


applications to match the  advancements in mobile phone  technology is a complex
process requiring  significant  research and development expense, as well as the
accurate  anticipation of technological  and market trends. As the life cycle of
mobile phone models and other wireless devices shortens,  we will be required to
develop and adapt our existing  applications  and create new  applications  more
quickly.  These  efforts  may  not  be  successful.  Any  failure  or  delay  in
anticipating technological advances or developing and marketing new applications
that respond to any  significant  change in technology or customer  demand could
limit the available channels for our applications and limit or reduce our sales.

     OUR  SUCCESS   DEPENDS  ON  THE   CONTINUING   ADOPTION  OF   ENTERTAINMENT
APPLICATIONS  BY  WIRELESS  SUBSCRIBERS.  We operate in a  developing  industry.
Currently,  only a limited number of wireless subscribers download entertainment
applications,  products and services to their mobile phones. Our success depends
on growth in the number of wireless  subscribers  who use their mobile phones to
access data services and, in particular,  entertainment  applications,  products
and  services.  If this  market  does not  continue  to grow or we are unable to
acquire new  customers,  our business  growth,  operating  results and financial
condition could be materially and adversely affected.

     ACTUAL  OR  PERCEIVED  SECURITY  VULNERABILITIES  IN  MOBILE  PHONES  COULD
ADVERSELY  AFFECT OUR  REVENUES.  Maintaining  the security of mobile phones and
wireless networks is critical for our business. There are individuals and groups
who develop and deploy viruses, worms and other malicious software programs that
may attack  wireless  networks and mobile  phones.  Recently,  security  experts
identified  what  appears  to be the  first  computer  "worm"  program  targeted
specifically at mobile phones. The worm, entitled "Cabir," targets mobile phones
running the  Symbian(R)  operating  system.  While the "Cabir" worm has not been
widely released and presents little  immediate risk to our business,  we believe
future  threats  could lead some  customers to seek to return our  applications,
reduce or delay  future  purchases  or  reduce or delay the use of their  mobile
phones. Wireless carriers and mobile phone manufacturers may also increase their
expenditures  on protecting  their  wireless  networks and mobile phone products
from attack, which could delay adoption of new mobile phone models. Any of these
activities could adversely affect our revenues.

     CHANGES IN GOVERNMENT  REGULATION OF THE MEDIA AND WIRELESS  COMMUNICATIONS
INDUSTRIES  MAY ADVERSELY  AFFECT OUR BUSINESS.  It is possible that a number of
laws and  regulations  may be adopted in the United States and  elsewhere  which
could restrict the media and wireless communications industries,  including laws
and regulations  relating to customer privacy,  taxation,  content  suitability,
copyright,  distribution and antitrust.  Furthermore, the growth and development
of the market  for  electronic  commerce  may  prompt  calls for more  stringent
consumer protection laws that may impose additional burdens on companies such as
ours conducting  business through wireless carriers.  Changes in current laws or
regulations or the  imposition of new laws and  regulations in the United States
or elsewhere  regarding  the media and wireless  communications  industries  may
lessen the growth of wireless  communications services and may materially reduce
our ability to increase or maintain sales of our applications.

     A DECLINE IN, OR LIMITATION  ON, THE USE OF MOBILE PHONES WOULD  NEGATIVELY
IMPACT OUR  BUSINESS.  A number of public  and  private  entities  have begun to
restrict the use of mobile phones on their premises. For example, many places of
worship,  restaurants,  hospitals, medical offices, libraries,  museums, concert
halls and other private and public businesses  restrict the use of mobile phones
due to privacy concerns, the inconvenience caused by mobile phone users to other
patrons and the disruption mobile phones may cause to other electronic equipment
at these locations.

     Legislation has also been proposed in the U.S.  Congress and by many states
and  municipalities  to  restrict  or prohibit  the use of mobile  phones  while
driving motor vehicles. Some states and municipalities in the United States have
already  passed laws  restricting  the use of mobile phones while  driving,  and
similar  laws  have  been  enacted  in other  countries.  These  laws and  other
potential laws  prohibiting or restricting the use of mobile phones could reduce
demand  for  mobile  phones  generally  and,  accordingly,  the  demand  for our
applications,  which could  reduce our ability to increase or maintain  sales of
our applications.

     A number of studies have  examined  the health  effects of mobile phone use
and the results of some of the studies have been  interpreted  as evidence  that
mobile phone use causes  adverse health  effects.  The  establishment  of a link
between the use of mobile  phone  services  and health  problems,  and any media
reports  suggesting  such a link,  could  reduce  demand for mobile  phones and,
accordingly, the demand for our applications.

     OUR   BUSINESS   DEPENDS  ON  THE  GROWTH  AND   MAINTENANCE   OF  WIRELESS
COMMUNICATIONS  INFRASTRUCTURE.  Our success will depend on the continued growth
and maintenance of wireless  communications  infrastructure in the United States
and around the world.  This  includes  deployment  and  maintenance  of reliable
next-generation  digital  networks with the necessary  speed,  data capacity and
security for  providing  reliable  wireless  communications  services.  Wireless
communications  infrastructure may be unable to support the demands placed on it
if the number of  customers  continues  to  increase,  or if  existing or future
customers increase their bandwidth requirements. In addition, viruses, worms and
similar break-ins and


                                       27
<PAGE>


disruptions from illicit code or unauthorized tampering may harm the performance
of wireless  communications.  If a  well-publicized  breach of security  were to
occur,  general mobile phone usage could decline,  which could reduce the demand
for and use of our applications. Wireless communications experience a variety of
outages and other delays as a result of infrastructure  and equipment  failures,
and could face outages and delays in the future.  These outages and delays could
reduce  the level of  wireless  communications  usage as well as our  ability to
distribute our applications successfully.

RISKS RELATING TO OUR COMMON STOCK

     THE  LIQUIDITY OF OUR COMMON STOCK WILL BE AFFECTED BY ITS LIMITED  TRADING
MARKET.  Bid and ask prices for shares of our common stock are quoted on the OTC
Bulletin  Board under the symbol MPNC.  We expect to continue to have our shares
quoted under that symbol until we change our name. There is currently no broadly
followed,  established trading market for our common stock. While we are hopeful
that following the Exchange, we will command the interest of a greater number of
investors,  an  established  trading  market for our shares of common  stock may
never develop or be maintained. Active trading markets generally result in lower
price  volatility  and more  efficient  execution  of buy and sell  orders.  The
absence of an active  trading  market reduces the liquidity of our common stock.
As a result of the lack of trading  activity,  the  quoted  price for our common
stock on the OTCBB is not  necessarily  a reliable  indicator of its fair market
value. Further, if we cease to be quoted, holders of our common stock would find
it more  difficult  to dispose of, or to obtain  accurate  quotations  as to the
market  value of, our common  stock,  and the market  value of our common  stock
would likely decline.

     IF AND WHEN A TRADING  MARKET FOR OUR  COMMON  STOCK  DEVELOPS,  THE MARKET
PRICE OF OUR COMMON  STOCK IS LIKELY TO BE HIGHLY  VOLATILE  AND SUBJECT TO WIDE
FLUCTUATIONS,  AND YOU MAY BE  UNABLE  TO  RESELL  YOUR  SHARES  AT OR ABOVE THE
OFFERING  PRICE.  The market  price of our  common  stock is likely to be highly
volatile  and could be subject to wide  fluctuations  in response to a number of
factors that are beyond our control,  including announcements of new products or
services by our competitors.  In addition,  the market price of our common stock
could be subject  to wide  fluctuations  in  response  to a variety of  factors,
including:

     o    quarterly variations in our revenues and operating expenses;

     o    developments in the financial  markets,  and the worldwide or regional
          economies;

     o    announcements  of innovations or new products or services by us or our
          competitors;

     o    fluctuations in merchant credit card interest rates;

     o    significant  sales of our common stock or other securities in the open
          market; and

     o    changes in accounting principles.

     In the past,  stockholders  have often  instituted  securities class action
litigation  after  periods  of  volatility  in the market  price of a  company's
securities. If a stockholder were to file any such class action suit against us,
we would  incur  substantial  legal  fees  and our  management's  attention  and
resources  would be  diverted  from  operating  our  business  to respond to the
litigation, which could harm our business.

     SUBSTANTIAL  FUTURE  SALES OF OUR COMMON  STOCK IN THE PUBLIC  MARKET COULD
CAUSE  OUR  STOCK  PRICE TO FALL.  Upon the  effectiveness  of any  registration
statement  that we may file with respect to the resale of shares held by certain
stockholders,  a  significant  number of our  shares of common  stock may become
eligible for sale.  Sales of a significant  number of shares of our common stock
in the open market  could harm the market price of our common  stock.  A reduced
market price for our shares could make it more  difficult to raise funds through
future offering of common stock.

     Moreover,  as  additional  shares of our common stock become  available for
resale in the open market  (including  shares  issued  upon the  exercise of our
outstanding  warrants),  the supply of our publicly traded shares will increase,
which could decrease its price.

     Some of our shares may also be offered from time to time in the open market
pursuant to Rule 144, and these sales may have a depressive effect on the market
for our shares. In general, a person who has held restricted shares for a period
of one year may, upon filing with the SEC a notification  on Form 144, sell into
the market shares up to an amount equal to 1% of the outstanding shares.


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<PAGE>


     THE SALE OF SECURITIES BY US IN ANY EQUITY OR DEBT  FINANCING  COULD RESULT
IN DILUTION TO OUR EXISTING  STOCKHOLDERS  AND HAVE A MATERIAL ADVERSE EFFECT ON
OUR  EARNINGS.  Any sale of  common  stock by us in a future  private  placement
offering  could  result in dilution  to the  existing  stockholders  as a direct
result of our issuance of additional  shares of our capital stock.  In addition,
our  business  strategy  may  include  expansion  through  internal  growth,  by
acquiring complementary businesses, by acquiring or licensing additional brands,
or  by  establishing   strategic   relationships  with  targeted  customers  and
suppliers. In order to do so, or to finance the cost of our other activities, we
may issue additional equity securities that could dilute our stockholders' stock
ownership.  We may also  assume  additional  debt and  incur  impairment  losses
related to goodwill and other tangible  assets if we acquire another company and
this could negatively impact our earnings and results of operations.

     IF SECURITIES OR INDUSTRY ANALYSTS DO NOT PUBLISH RESEARCH OR REPORTS ABOUT
OUR BUSINESS,  OR IF THEY DOWNGRADE THEIR  RECOMMENDATIONS  REGARDING OUR COMMON
STOCK, OUR STOCK PRICE AND TRADING VOLUME COULD DECLINE.  The trading market for
our common stock will be influenced by the research and reports that industry or
securities analysts publish about us or our business. If any of the analysts who
cover us  downgrade  our common  stock,  our common  stock  price  would  likely
decline.  If analysts cease coverage of our company or fail to regularly publish
reports on us, we could lose visibility in the financial markets,  which in turn
could cause our common stock price or trading volume to decline.

     THE TRADING OF OUR COMMON STOCK ON THE OTC BULLETIN BOARD AND THE POTENTIAL
DESIGNATION  OF OUR COMMON  STOCK AS A "PENNY  STOCK"  COULD  IMPACT THE TRADING
MARKET FOR OUR COMMON  STOCK.  Our  securities,  as traded on the OTCBB,  may be
subject  to SEC  rules  that  impose  special  sales  practice  requirements  on
broker-dealers  who sell  these  securities  to persons  other than  established
customers or  accredited  investors.  For the  purposes of the rule,  the phrase
"accredited  investors"  means,  in general terms,  institutions  with assets in
excess of $5,000,000,  or individuals having a net worth in excess of $1,000,000
or having an annual income that exceeds  $200,000 (or that, when combined with a
spouse's income,  exceeds $300,000).  For transactions  covered by the rule, the
broker-dealer  must make a special  suitability  determination for the purchaser
and receive the  purchaser's  written  agreement to the  transaction  before the
sale.  Consequently,  the rule may affect the ability of  broker-dealers to sell
our  securities  and also may affect the  ability  of  purchasers  to sell their
securities in any market that might develop therefore.

     In  addition,  the SEC has  adopted  a number of rules to  regulate  "penny
stock" that restrict transactions involving these securities. Such rules include
Rules 3a51-1,  15g-1,  15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under
the Exchange  Act.  These rules may have the effect of reducing the liquidity of
penny stocks.  "Penny stocks"  generally are equity  securities  with a price of
less than $5.00 per share (other than securities  registered on certain national
securities  exchanges or quoted on the Nasdaq Stock Market if current  price and
volume  information  with respect to transactions in such securities is provided
by the exchange or system).  Because our securities may constitute "penny stock"
within  the  meaning  of the  rules,  the  rules  would  apply  to us and to our
securities.

     Stockholders  should be aware that,  according  to the SEC,  the market for
penny stocks has suffered in recent years from patterns of fraud and abuse. Such
patterns  include  (i)  control of the market for the  security  by one or a few
broker-dealers   that  are  often  related  to  the  promoter  or  issuer;  (ii)
manipulation of prices through  prearranged  matching of purchases and sales and
false and misleading  press releases;  (iii) "boiler room"  practices  involving
high-pressure  sales tactics and unrealistic  price projections by inexperienced
sales persons;  (iv) excessive and undisclosed bid-ask differentials and markups
by selling broker-dealers;  and (v) the wholesale dumping of the same securities
by promoters and broker-dealers  after prices have been manipulated to a desired
level,  resulting in investor losses. Our management is aware of the abuses that
have occurred historically in the penny stock market.  Although we do not expect
to be in a position to dictate the  behavior of the market or of  broker-dealers
who  participate  in the market,  management  will strive within the confines of
practical  limitations to prevent the described  patterns from being established
with respect to our securities.

     IF WE FAIL TO MAINTAIN AN EFFECTIVE SYSTEM OF INTERNAL  CONTROLS,  WE MIGHT
NOT BE ABLE TO REPORT OUR FINANCIAL RESULTS ACCURATELY OR PREVENT FRAUD; IN THAT
CASE, OUR STOCKHOLDERS COULD LOSE CONFIDENCE IN OUR FINANCIAL  REPORTING,  WHICH
WOULD  HARM OUR  BUSINESS  AND COULD  NEGATIVELY  IMPACT THE PRICE OF OUR STOCK.
Effective  internal controls are necessary for us to provide reliable  financial
reports and prevent fraud. In addition, Section 404 of the Sarbanes-Oxley Act of
2002 will  require  us to  evaluate  and  report on our  internal  control  over
financial  reporting and have our independent  registered public accounting firm
attest to our evaluation beginning with our Annual Report on Form 10-KSB for the
year  ending  December  31,  2007.  We are  in  the  process  of  preparing  and
implementing  an internal  plan of action for  compliance  with  Section 404 and
strengthening  and testing our system of internal  controls to provide the basis
for our report.  The process of implementing our internal controls and complying
with  Section  404 will be  expensive  and  time  consuming,  and  will  require
significant  attention of  management.  We cannot be certain that these measures
will ensure that we implement and maintain  adequate controls over our financial
processes and reporting in the future. Even if we conclude,  and our independent
registered  public  accounting  firm  concurs,  that our  internal  control over
financial reporting provides  reasonable  assurance regarding the reliability of
financial  reporting and the  preparation  of financial  statements for external
purposes in accordance with generally


                                       29
<PAGE>


accepted accounting  principles,  because of its inherent limitations,  internal
control  over   financial   reporting   may  not  prevent  or  detect  fraud  or
misstatements.  Failure to  implement  required  new or  improved  controls,  or
difficulties  encountered  in their  implementation,  could  harm our  operating
results  or  cause us to fail to meet our  reporting  obligations.  If we or our
independent  registered  public  accounting firm discover a material weakness or
reportable  condition,  the disclosure of that fact,  even if quickly  remedied,
could reduce the market's  confidence in our financial  statements  and harm our
stock price.

     NEW MOTION HAS NOT PAID  DIVIDENDS  IN THE PAST AND WE DO NOT EXPECT TO PAY
DIVIDENDS  FOR THE  FORESEEABLE  FUTURE,  AND ANY  RETURN ON  INVESTMENT  MAY BE
LIMITED TO POTENTIAL  FUTURE  APPRECIATION  ON THE VALUE OF OUR COMMON STOCK. We
currently  intend to retain any future  earnings to support the  development and
expansion  of our business and do not  anticipate  paying cash  dividends in the
foreseeable  future.  Our  payment  of  any  future  dividends  will  be at  the
discretion of our board of directors after taking into account various  factors,
including without limitation,  our financial condition,  operating results, cash
needs,  growth  plans and the terms of any  credit  agreements  that we may be a
party to at the time.  To the extent we do not pay  dividends,  our stock may be
less  valuable  because a return  on  investment  will only  occur if and to the
extent  our  stock  price  appreciates,  which  may never  occur.  In  addition,
investors must rely on sales of their common stock after price  appreciation  as
the only way to realize their investment, and if the price of our stock does not
appreciate,  then there will be no return on investment.  Investors seeking cash
dividends should not purchase our common stock.

     OUR OFFICERS,  DIRECTORS AND PRINCIPAL  STOCKHOLDERS CAN EXERT  SIGNIFICANT
INFLUENCE  OVER US AND MAY MAKE  DECISIONS THAT ARE NOT IN THE BEST INTERESTS OF
ALL   STOCKHOLDERS.   Collectively,   our  officers,   directors  and  principal
stockholders  (greater than 5% stockholders)  beneficially own approximately 90%
of our outstanding common stock. As a result, these stockholders will be able to
affect  the  outcome  of,  or exert  significant  influence  over,  all  matters
requiring stockholder approval,  including the election and removal of directors
and any change in control. In particular, this concentration of ownership of our
common stock could have the effect of delaying or preventing a change of control
of  us or  otherwise  discouraging  or  preventing  a  potential  acquirer  from
attempting to obtain control of us. This, in turn,  could have a negative effect
on the market price of our common stock. It could also prevent our  stockholders
from  realizing  a premium  over the market  prices  for their  shares of common
stock. Moreover, the interests of this concentration of ownership may not always
coincide  with  our  interests  or the  interests  of  other  stockholders,  and
accordingly,  they could cause us to enter into  transactions or agreements that
we would not otherwise consider.

     ANTI-TAKEOVER  PROVISIONS MAY LIMIT THE ABILITY OF ANOTHER PARTY TO ACQUIRE
US, WHICH COULD CAUSE OUR STOCK PRICE TO DECLINE.  Our restated  certificate  of
incorporation,  as amended,  our bylaws and Delaware law contain provisions that
could  discourage,  delay or prevent a third  party from  acquiring  us, even if
doing so may be beneficial to our  stockholders.  In addition,  these provisions
could limit the price investors would be willing to pay in the future for shares
of our common stock.

     MAINTAINING  AND IMPROVING OUR FINANCIAL  CONTROLS AND THE  REQUIREMENTS OF
BEING A PUBLIC COMPANY MAY STRAIN OUR RESOURCES,  DIVERT MANAGEMENT'S  ATTENTION
AND AFFECT OUR ABILITY TO ATTRACT AND RETAIN QUALIFIED  MEMBERS FOR OUR BOARD OF
DIRECTORS.  As a public company, we are subject to the reporting requirements of
the Exchange Act and the Sarbanes-Oxley Act. The requirements of these rules and
regulations increase our legal,  accounting and financial compliance costs, make
some  activities more  difficult,  time-consuming  and costly and may also place
undue strain on our personnel,  systems and resources.  The  Sarbanes-Oxley  Act
requires, among other things, that we maintain effective disclosure controls and
procedures and internal control over financial reporting.  This can be difficult
to do.  For  example,  we  depend  on  the  reports  of  wireless  carriers  for
information  regarding the amount of sales of our games and related applications
and to determine  the amount of royalties we owe branded  content  licensors and
the amount of our  revenues.  These  reports may not be timely,  and in the past
they have contained, and in the future they may contain, errors.

     In order to  maintain  and  improve  the  effectiveness  of our  disclosure
controls and procedures and internal control over financial  reporting,  we will
need  to  expend  significant  resources  and  provide  significant   management
oversight.  We have a  substantial  effort ahead of us to implement  appropriate
processes,  document  the system of internal  control over  relevant  processes,
assess  their  design,  remediate  any  deficiencies  identified  and test their
operation.  As a result,  management's  attention  may be  diverted  from  other
business  concerns,  which  could  harm  our  business,  operating  results  and
financial    condition.    These   efforts   will   also   involve   substantial
accounting-related costs.


                                       30
<PAGE>


                          ITEM 7. FINANCIAL STATEMENTS

                         NEW MOTION, INC. AND SUBSIDIARY

                        CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2006


                                TABLE OF CONTENTS

Report of Independent Registered Public Accounting Firm                     F-1

Consolidated Balance Sheet                                                  F-2

Consolidated Statements of Income                                           F-3

Consolidated Statement of Stockholders' Equity                              F-4

Consolidated Statements of Cash Flows                                       F-5

Notes to the Consolidated Financial Statements                       F-6 - F-24


                                       31
<PAGE>


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To the Board of Directors and Stockholders of
New Motion, Inc.

We have audited the accompanying  consolidated balance sheet of New Motion, Inc.
and subsidiary as of December 31, 2006, and the related consolidated  statements
of income, stockholders' equity, and cash flows for each of the two years in the
period ended December 31, 2006. These consolidated  financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements  are free of material  misstatement.  THE COMPANY IS NOT  REQUIRED TO
HAVE,  NOR WERE WE ENGAGED TO PERFORM,  AN AUDIT OF ITS  INTERNAL  CONTROL  OVER
FINANCIAL REPORTING.  OUR AUDIT INCLUDED  CONSIDERATION OF INTERNAL CONTROL OVER
FINANCIAL  REPORTING  AS  A  BASIS  FOR  DESIGNING  AUDIT  PROCEDURES  THAT  ARE
APPROPRIATE  IN THE  CIRCUMSTANCES,  BUT NOT FOR THE  PURPOSE OF  EXPRESSING  AN
OPINION ON THE  EFFECTIVENESS  OF THE COMPANY'S  INTERNAL CONTROL OVER FINANCIAL
REPORTING.  ACCORDINGLY  WE EXPRESS  NO SUCH  OPINION.  An audit  also  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial   statements,   assessing  the  accounting  principles  used  and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the financial position of New Motion, Inc. and
subsidiary  as of December 31,  2006,  and the results of their  operations  and
their  cash  flows for each of the two years in the period  ended  December  31,
2006, in conformity with accounting  principles generally accepted in the United
States of America.


        /S/ WINDES & MCCLAUGHRY
-------------------------------------------
Windes & McClaughry Accountancy Corporation

Irvine, California
March 30, 2007


                                      F-1
<PAGE>


                         NEW MOTION, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS
               (in thousands, except share and per share amounts)


                                                                    DECEMBER 31,
                                                                        2006
                                                                    ------------
                              ASSETS

CURRENT ASSETS
Cash ............................................................   $        544
Accounts receivable, net of allowance for doubtful
  accounts of $1,263 ............................................          3,527
Prepaid income taxes ............................................            578
Prepaid expenses and other ......................................            167
Deferred income taxes ...........................................            149
                                                                    ------------
                                                                           4,965
                                                                    ------------

PROPERTY AND EQUIPMENT ..........................................            146
                                                                    ------------

OTHER ASSETS
Acquisition costs ...............................................            336
Deposits and other assets .......................................             47
                                                                    ------------
                                                                             383
                                                                    ------------

TOTAL ASSETS ....................................................   $      5,494
                                                                    ============

               LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable ................................................   $      2,870
Accrued expenses ................................................            837
Deferred income taxes ...........................................            564
                                                                    ------------
                                                                           4,271
                                                                    ------------

COMMITMENTS AND CONTINGENCIES (NOTE 8)

STOCKHOLDERS' EQUITY
Common stock, par value $0.01, 75,000,000 authorized,
     7,263,688 issued and outstanding ...........................             73
Additional paid-in capital ......................................             84
Retained earnings ...............................................          1,066
                                                                    ------------
                                                                           1,223
                                                                    ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ......................   $      5,494
                                                                    ============


The accompanying notes are an integral part of these consolidated statements.


                                      F-2
<PAGE>


                         NEW MOTION, INC. AND SUBSIDIARY

                        CONSOLIDATED STATEMENTS OF INCOME
                        FOR THE YEARS ENDED DECEMBER 31,
               (in thousands, except share and per share amounts)



                                                          2005           2006
                                                       ----------     ----------
NET SALES ........................................     $    5,867     $   18,721

COST OF SALES ....................................            267            597
                                                       ----------     ----------

GROSS PROFIT .....................................          5,600         18,124
                                                       ----------     ----------

EXPENSES
   Selling and marketing .........................          3,618         11,971
   General and administrative ....................          1,289          4,679
                                                       ----------     ----------
                                                            4,907         16,650
                                                       ----------     ----------

INCOME FROM OPERATIONS ...........................            693          1,474
                                                       ----------     ----------

OTHER EXPENSE (INCOME)
   Other expense, net ............................             27             75
   Interest expense ..............................              9             14
                                                       ----------     ----------
                                                               36             89
                                                       ----------     ----------
INCOME BEFORE PROVISION FOR INCOME TAXES .........            657          1,385

PROVISION FOR INCOME TAXES .......................            270            708
                                                       ----------     ----------

NET INCOME .......................................     $      387     $      677
                                                       ==========     ==========

NET INCOME PER SHARE:

Basic ............................................     $     0.05     $     0.09
                                                       ==========     ==========
Diluted ..........................................     $     0.05     $     0.09
                                                       ==========     ==========

WEIGHTED AVERAGE SHARES OUTSTANDING:

Basic ............................................      7,263,688      7,263,688
                                                       ==========     ==========
Diluted ..........................................      7,263,688      7,263,688
                                                       ==========     ==========


The accompanying notes are an integral part of these consolidated statements.


                                      F-3
<PAGE>


<TABLE>
                         NEW MOTION, INC. AND SUBSIDIARY

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
            FOR THE PERIOD FROM JANUARY 1, 2005 TO DECEMBER 31, 2006
                      (in thousands, except share amounts)

<CAPTION>
                                        COMMON STOCK       ADDITIONAL
                                   ---------------------    PAID IN      RETAINED
                                     SHARES      AMOUNT     CAPITAL      EARNINGS     TOTAL
                                   ---------   ---------   ---------    ---------   ---------
<S>                                <C>         <C>         <C>          <C>         <C>
BALANCE AT JANUARY 1, 2005 .....   7,263,688   $    --     $    --      $       2   $       2

RETROACTIVE SHARE CONVERSION
(NOTE 4) .......................        --            68         (68)        --          --

RECAPITALIZATION OF NEW
MOTION, INC. (NOTE 4) ..........        --             5           5         --            10

NET INCOME .....................        --          --          --            387          387
                                   ---------   ---------   ---------    ---------   ---------

BALANCE AT DECEMBER 31, 2005 ...   7,263,688          73         (63)         389         399

STOCK-BASED COMPENSATION EXPENSE        --          --           147         --           147

NET INCOME .....................        --          --          --            677         677
                                   ---------   ---------   ---------    ---------   ---------

BALANCE AT DECEMBER 31, 2006 ...   7,263,688   $      73   $      84    $   1,066   $   1,223
                                   =========   =========   =========    =========   =========
</TABLE>


The accompanying notes are an integral part of these consolidated statements.


                                      F-4
<PAGE>


                         NEW MOTION, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                        FOR THE YEARS ENDED DECEMBER 31,
                                 (in thousands)



                                                               2005       2006
                                                             -------    -------

CASH FLOWS FROM OPERATING ACTIVITIES
Net income ................................................  $   387    $   677
Adjustments to reconcile net income
   to net cash from operating activities:
Allowance for doubtful accounts ...........................    1,035        228
Depreciation and amortization .............................        9         25
Stock-based compensation expense ..........................     --          147
Deferred income taxes .....................................      232        183

Changes in operating assets and liabilities:
Accounts receivable .......................................   (2,378)    (2,388)
Prepaid income taxes ......................................     --         (578)
Prepaid expenses ..........................................      (43)      (124)
Deposits and other assets .................................      (42)        (5)
Accounts payable ..........................................    1,028      2,129
Accrued expenses ..........................................      198        637
                                                             -------    -------
Net Cash Provided By Operating Activities .................      426        931
                                                             -------    -------
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for subsequent event Mobliss transaction .....     --         (123)
Purchase of property and equipment ........................     (103)       (77)
                                                             -------    -------

Net Cash Used In Investing Activities .....................     (103)      (200)
                                                             -------    -------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from recapitalization ............................       10       --
Borrowings from short-term notes payable to related parties      355       --
Expenditures for subsequent event equity financing ........     --         (213)
Repayment of short-term notes payable to related parties ..     (341)      (324)
                                                             -------    -------

Net Cash Provided By (Used In) Financing Activities .......       24       (537)
                                                             -------    -------
NET CHANGE IN CASH ........................................      347        194

CASH AT BEGINNING OF PERIOD ...............................        3        350
                                                             -------    -------
CASH AT END OF PERIOD .....................................  $   350    $   544
                                                             =======    =======


The accompanying notes are an integral part of these consolidated statements.


                                      F-5
<PAGE>


                         NEW MOTION, INC. AND SUBSIDIARY

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS

         New Motion,  Inc. (the  "Company" or "New Motion") is a privately  held
digital entertainment company headquartered in Irvine,  California.  The Company
provides 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   in  its   three   product   lines:
MobileSidewalk(TM), RingtoneChannel and Bid4Prizes. MobileSidewalk(TM) is one of
the largest U.S.  based mobile  entertainment  companies,  RingtoneChannel  is a
mobile storefront provider,  and Bid4Prizes is a low-bid mobile auction game. In
2004 the Company began to sell ringtones  internationally  and then launched its
first ringtone subscription service in the USA in February 2005. In August 2005,
the Company launched its first  successful text message  campaign  incorporating
music trivia. In March of 2006, the Company  partnered with Goldpocket  Wireless
to enhance the proficiency and performance of its mobile service  offering.  The
Company manages its business under one entity.

HISTORY

         RingtoneChannel Pty Limited, an Australian  developer and aggregator of
ringtones  ("RingtoneChannel"),  was  incorporated  on February 23, 2004 and was
acquired by BroadSpring,  Inc., a Delaware corporation ("Broadspring"),  in June
2004 as a wholly-owned  subsidiary to explore mobile opportunities in the United
States market.  In March 2005,  Broadspring  stockholders  formed New Motion,  a
Delaware corporation with common ownership with Broadspring,  with the intent of
exploring  mobile  opportunities  in the  USA and the  eventual  possibility  of
transferring  the  mobile  business  out of  Broadspring.  Beginning  June 2005,
RingtoneChannel  continued  operations as a legal subsidiary of New Motion. This
transition  was deemed a  continuation  of an existing  business  controlled  by
common ownership and the historical  operating results of  RingtoneChannel  from
its inception in February 2004 to the date of the recapitalization  (see Note 4)
are  therefore  included  in  the  financial   statements  of  New  Motion.  All
expenditures  by BroadSpring on behalf of  RingtoneChannel  during the period in
which  it was a  subsidiary  of  BroadSpring  were  recorded  in the  historical
operating  results of  RingtoneChannel  and thus were  included in the financial
statements of the combined New  Motion-Ringtone  Channel entity.  The assets and
liabilities of  RingtoneChannel  were recorded at their historical cost basis at
that  time of the  recapitalization  and not  marked  to fair  value  by  either
BroadSpring or New Motion.

         On January 31, 2007,  the Company  entered  into an exchange  agreement
with MPLC, Inc. a Delaware corporation ("MPLC"), and Trinad Capital Master Fund,
Ltd. The closing,  ("Closing") of the transaction occurred on February 12, 2007.
At the Closing, MPLC acquired all of the outstanding shares of the capital stock
of the Company's stock.  Accordingly,  for accounting purposes,  the acquisition
was  treated  as a "reverse  acquisition"  and the  Company  is the  "accounting
acquiror." Therefore,  the transaction is accounted for as a recapitalization of
the Company and  recorded  based on MPLC's net tangible  assets  acquired by the
Company. No goodwill or other intangible assets is to be recorded.  Effective at
Closing,  MPLC  changed its fiscal year end to December 31. Since the Company is
the surviving entity, the financial  statements and other data to be reported in
MPLC's Form 10-KSB for the year ended  December 31, 2006  reflects the Company's
historical results of operations prior to these transactions.

PRINCIPLES OF CONSOLIDATION

         The  consolidated   financial   statements   include  the  accounts  of
RingtoneChannel  from its  inception  in February  2004 and the  accounts of New
Motion from its inception in March 2005. All significant  intercompany  balances
and transactions have been eliminated in consolidation.

         The Company has focused its efforts on the high-growth opportunities in
the United  States market with less focus on the  international  market that was
historically  Ringtone  Channel's  business.  As such,  by September  2006,  the
operations of  RingtoneChannel  were essentially  blended into the operations of
New Motion and the Company began the process for the eventual dissolution of the
RingtoneChannel legal entity.


                                      F-6
<PAGE>


                         NEW MOTION, INC. AND SUBSIDIARY

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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 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 period.  Significant  estimates made by management
are, among others, the recognition of revenue and related  chargebacks and other
credits,  realizability  of accounts  receivable,  recoverability  of long-lived
assets,  valuation of stock  options and deferred  taxes.  Actual  results could
materially differ from those estimates.

RISKS AND UNCERTAINTIES

         The  Company  operates  in  industries  that  are  subject  to  intense
competition, government regulation and rapid technological change. The Company's
operations  are  subject  to  significant  risks  and  uncertainties   including
financial,  operational,  technological,  regulatory and other risks  associated
with an operating business, including the potential risk of business failure.

FAIR VALUE OF FINANCIAL INSTRUMENTS

         The carrying  amounts of current assets and  liabilities are reasonable
estimates of their fair value because of the short maturity of these items.  The
Company  believes the fair value of its convertible  short-term notes payable to
related parties cannot be estimated as these  transactions can not be considered
to be arm's length transactions. These balances are carried at historical value.
The  Company  determined  that it was not  necessary  to  separately  value  the
conversion feature within the note agreements (See Note 3).

FOREIGN CURRENCY RISK

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

         The Company'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 statement of operations.

CONCENTRATION OF CREDIT RISK

         Financial  instruments  that subject the Company to credit risk consist
primarily of cash and accounts  receivable.  The Company maintains cash balances
in bank deposit accounts that, at times,  may exceed  federally  insured limits.
Accounts are  guaranteed  by the Federal  Deposit  Insurance  Corporation  up to
$100,000.  The Company places its cash with high quality financial  institutions
and limits the amount of credit exposure to any one institution. At December 31,
2006 the  Company had  approximately  $400,000  in excess of  federally  insured
limits. The Company has not experienced any losses in such accounts. The Company
extends credit to its customers,  all on an unsecured  basis,  after  performing
certain credit analysis.  The Company performs ongoing credit evaluations of its
customers and maintains an allowance for doubtful  accounts for potential credit
losses.

         The Company is currently utilizing several billing partners in order to
provide  content  and  subsequent  billings  to  its  customers.  These  partner
companies have not had long operating  histories in the U.S. or operations  with
traditional business models. These companies face a greater business risk in the
market place, due to a constant  evolving  business  environment that stems from
the infancy of the U.S. mobile content industry.

         The  Company's  sales were derived  entirely from two customers for the
year  ended  December  31,  2005 and from  three  customers  for the year  ended
December 31, 2006.  Approximately  99% of the Company's sales for the year ended
December 31, 2005 and 2006 were within the United States.


                                      F-7
<PAGE>


                         NEW MOTION, INC. AND SUBSIDIARY

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

CONCENTRATION OF CREDIT RISK (CONTINUED)

The following table reflects the concentration of sales with these customers:

                                              FOR THE YEAR ENDED
                                                 DECEMBER 31,
                                         ---------------------------
                                              2005          2006
                                         ---------------------------
         SIGNIFICANT CUSTOMERS:
         REVENUES
         Customer A                            22%         34%
         Customer B                            78%          6%
         Customer C                            - %         60%

         ACCOUNTS RECEIVABLE
         Customer A                            91%         18%
         Customer B                             9%         11%
         Customer C                            - %         70%

         For the year ended  December 31, 2005,  the Company's  advertising  and
marketing expenses were concentrated with three vendors,  each of which provided
more than 10% of the total and  collectively  accounted for 58% of total selling
and  marketing  expenses.  For the year ended  December 31, 2006,  the Company's
advertising  and  marketing  expenses  were  concentrated  with one vendor,  who
accounted for 54% of total selling and marketing expenses.

ACCOUNTS RECEIVABLE

         Accounts  receivable  are  stated at the amount  management  expects to
collect  from  outstanding  balances.  The Company  makes  estimates  for future
refunds,  charge backs or credits, and provides for these probable uncollectible
amounts  through a credit to a valuation  allowance  and a reduction of recorded
revenues in the period for which the sale  occurs  based on analyses of previous
rates and trends,  which have  historically  varied between 10% and 17% of gross
revenue.  This reserve is reconciled  once a carrier remits total payment to the
Company's aggregator,  who subsequently remits payments to the Company,  usually
between  90-120 days after  billing.  Balances  that are still  outstanding  and
deemed  uncollectible  after  management has performed this  reconciliation  are
written off through a charge to the  valuation  allowance  and a credit to trade
accounts  receivable.  The Company has an arrangement  with its aggregators that
allows  for  the  collection  of 70%  of the  outstanding  receivable  from  the
aggregator  within 30 days,  instead  of waiting  the 90-120  days for the final
carrier  confirmation of the receivable.  The Company  believes that the reserve
established  against the  accounts  receivable  balance is adequate to cover any
credits  and charge  backs from the  carrier  and that the  Company  will not be
required to repay any amounts to the aggregator.

PROPERTY AND EQUIPMENT

         The Company provides for depreciation  using the  straight-line  method
over the  estimated  useful lives of its property  and  equipment,  ranging from
three  to  five  years.  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.


                                      F-8
<PAGE>


                         NEW MOTION, INC. AND SUBSIDIARY

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

IMPAIRMENT OF LONG-LIVED ASSETS

         Long-lived   assets,   such  as  property  and  equipment   subject  to
amortization,  are  reviewed  for  impairment  whenever  events  or  changes  in
circumstances  indicate  that  the  carrying  amount  of an  asset  may  not  be
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, 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.

STOCK-BASED COMPENSATION

         The  Company  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 the
Company 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.

         Since the Company 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 the Company's results of operations,
income taxes or earnings per share.

         The Company estimates stock option forfeiture rates based on historical
trends of its employees.


                                      F-9
<PAGE>


                         NEW MOTION, INC. AND SUBSIDIARY

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

REVENUE RECOGNITION

         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:  fees are  fixed  and  determinable;  we have no  significant  obligations
remaining;  and collection of the related receivable is reasonably assured.  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 10% and 17% of gross
revenue.  This reserve is reconciled  once a carrier remits total payment to the
Company's aggregator,  who subsequently remits payment usually 90-180 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 revenues 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.

         Revenue  earned  from  certain   aggregators   may  not  be  reasonably
estimated.  In these  situations,  the Company'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
the  Company  upon the sale of  applications,  net of any  service or other fees
earned and  deducted by the  wireless  carrier or  distributor.  The Company has
evaluated its wireless  carrier and  distributor  agreements  and has determined
that it is not the  principal  when selling its  applications  through  wireless
carriers.

SOFTWARE DEVELOPMENT COSTS

         The Company 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 the Company'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, the
Company 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.


                                      F-10
<PAGE>


                         NEW MOTION, INC. AND SUBSIDIARY

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

ADVERTISING AND MARKETING EXPENSE

         The Company expenses  advertising and marketing costs as incurred.  For
the years ended December 31, 2005 and 2006,  advertising and marketing  expenses
were $3,618,000 and 11,971,000, respectively.

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. The Company increased it valuation  allowance as of
December 31, 2006 to $27,000, from $0 as of December 31, 2005.

         The  Company  provides a valuation  allowance  against a portion of its
deferred  tax assets.  In  assessing  the  realization  of deferred  tax assets,
management  weighs the positive and negative evidence to determine if it is more
likely than not that some or all of the  deferred  tax assets will be  realized.
The ultimate realization of deferred tax assets is dependent upon the generation
of future taxable income in the appropriate tax jurisdiction.  A decrease in the
Company's  valuation  allowance would result in an immediate material income tax
benefit,  an increase in total assets and stockholder's  equity and could have a
significant impact on earnings in future periods.

         The  Company'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
the Company 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. Uncertainties are recorded
in accordance with SFAS No. 5, "Loss Contingencies."

EARNINGS PER SHARE

         Basic  earnings  per share  ("EPS") is computed  by  dividing  reported
earnings by the weighted  average  number of shares of common stock  outstanding
for 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.  Potential
dilutive securities for the Company include outstanding stock options,  warrants
and convertible debt.


                                      F-11
<PAGE>


                         NEW MOTION, INC. AND SUBSIDIARY

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

NEW ACCOUNTING PRONOUNCEMENTS

         In  September   2006,  the  FASB  issued  SFAS  No.  157,  "Fair  Value
Measurements." SFAS No. 157 establishes a framework for measuring the fair value
of assets and  liabilities.  This  framework  is intended  to provide  increased
consistency  in how fair value  determinations  are made under various  existing
accounting  standards that permit,  or in some cases require,  estimates of fair
market  value.  SFAS No. 157 is  effective  for  fiscal  years  beginning  after
November 15, 2007,  and interim  periods  within  those  fiscal  years.  Earlier
adoption is  encouraged,  provided that the reporting  entity has not yet issued
financial  statements for that fiscal year,  including any financial  statements
for an interim  period within that fiscal year.  The Company is currently in the
process  of  evaluating  the  impact  of  this  pronouncement  on its  financial
statements.

         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  financials
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.  The Company will adopt this provision in the first quarter of 2007 and is
currently  evaluating  the impact of this  provision on its financial  position,
results of operations and cash flows.

         In September 2006, the Securities and Exchange  Commission issued Staff
Accounting  Bulletin  ("SAB")  No. 108,  "Considering  the Effects of Prior Year
Misstatements   When   Quantifying   Misstatements  in  Current  Year  Financial
Statements",  which  provides  interpretive  guidance  on how the effects of the
carryover  or  reversal  of prior year  misstatements  should be  considered  in
quantifying a current year  misstatement.  The Company will be required to adopt
the  provisions  of SAB No. 108 in its fiscal year 2006.  The  Company  does not
believe  the  adoption  of SAB  No.  108  will  have a  material  impact  on its
consolidated financial position, results of operations or cash flows.


                                      F-12
<PAGE>


                         NEW MOTION, INC. AND SUBSIDIARY

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - PROPERTY AND EQUIPMENT

         Property and equipment consists of the following:

                                                          DECEMBER 31,
                                                              2006
                                                          ------------

         Computer hardware ............................   $     71,000
         Furniture and fixtures .......................        109,000
                                                          ------------
                                                               180,000
         Less: accumulated depreciation ...............        (34,000)
                                                          ------------
                                                          $    146,000
                                                          ============

     Depreciation  expense  for the years  ended to  December  31, 2005 and 2006
totaled $9,000 and $25,000, respectively.

NOTE 3 - SHORT-TERM NOTES PAYABLE

         During  June and August  2005,  the  Company  entered  into a series of
short-term  notes  with  certain of its  executives  to fund  general  operating
expenses.  The notes were all twelve month notes that bore 7.5% simple  interest
per annum.  The notes  included the right to convert the notes into common stock
of the Company,  at the option of the Company,  upon the first equity  financing
transaction of at least $500,000. The conversion price for these notes was to be
80% of the per share price of the equity transaction.  In addition, in the event
of such an equity financing transaction, under the terms of the note agreements,
the Company would have been required to issue stock warrants to the note holders
totaling 30% of the number of shares issuable upon conversion of the notes.  The
conversion price of the warrants would have been equal to the per share price of
the equity transaction. The Company reviewed the terms of the conversion feature
and  contingent  warrants  within these note  agreements  in light of EITF 98-5,
"Accounting for Convertible  Securities with Beneficial  Conversion  Features or
Contingently  Adjustable  Conversion  Ratios," and EITF 00-27,  "Application  of
Issue No. 98-5 to Certain Convertible  Instruments," and concluded that separate
accounting  for these  features at the date of issuance was not necessary  since
(i) the  conversion  was at the  option of the  Company,  (ii) this  option  was
contingent upon a future  undeterminable  event,  and (iii) the number of shares
and warrants to be issued was not determinable until the future event would have
occurred.  As of  December  31,  2005,  no  such  equity  transaction  had  been
consummated  by the  Company.  The  remaining  balances of these  notes  totaled
$270,000 as of December  31, 2005 and $0 as of December  31, 2006 as these notes
were repaid in full.

         In June 2005, in connection with the transaction with BroadSpring,  the
Company  issued a short-term  note payable to  Broadspring  related to marketing
expenses incurred by Broadspring on behalf of Ringtone Channel. Under this note,
the Company  undertook to reimburse the  marketing  expenses  totaling  $295,000
within one year.  This note  carried  interest at a rate of 3.4% per annum.  The
remaining  balance of this note was $53,730 as of December 31,  2005,  and as of
December 31, 2006 the note was repaid in full.


                                      F-13
<PAGE>


                         NEW MOTION, INC. AND SUBSIDIARY

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - STOCKHOLDERS' EQUITY

COMMON STOCK

         RingtoneChannel  was  incorporated on February 23, 2004 with authorized
common stock of 100 shares at $1 par value. New Motion was incorporated on March
21,  2005 with an  authorized  common  stock of  10,000,000  shares at $.001 par
value.  As discussed in Note 1,  RingtoneChannel  was  transferred to New Motion
from  BroadSpring,  under common  ownership  with New Motion.  Accordingly,  New
Motion  from  its  inception  was  considered  to  be  a  continuation   of  the
RingtoneChannel  business. In connection with this transfer,  the Company issued
1,000,000  shares to its  stockholders  in May 2005 in return  for  $100,000  in
proceeds and then paid $90,000 of these proceeds back to Broadspring for all the
outstanding shares of RingtoneChannel. The change in the equity structure of the
Company at the time of the transfer was a recapitalization  with net proceeds of
$10,000 but no change in the percentage of ownership  amongst the  stockholders.
In June 2005,  the Board of  Directors  of the Company  approved a 5 for 1 stock
split, thus increasing issued and outstanding common stock to 5,000,000 shares.

         In November  2005,  the Board of Directors  approved an employee  stock
incentive  program  whereby  1,000,000  shares of common stock were reserved for
issuance under the Stock Incentive Plan.

         On January 31, 2007,  the Company  entered  into an exchange  agreement
("Exchange  Agreement") with MPLC, Inc., a Delaware  corporation  ("MPLC"),  and
Trinad Capital Master Fund,  Ltd. The closing (the "Closing") of the transaction
contemplated by the Exchange Agreement (the "Exchange") occurred on February 12,
2007. At the Closing, MPLC acquired all of the outstanding shares of the capital
stock of the  Company's  stock.  In exchange  for the stock,  MPLC issued to the
Stockholders  500,000  shares  ("Series C Preferred  Shares") of MPLC's Series C
Convertible  Preferred Stock, par value $0.10 per share (the "Series C Preferred
Stock"),  which will be convertible into 7,263,688 shares of MPLC's common stock
(on a  post-Reverse  Split basis).  MPLC intends to restate its  certificate  of
incorporation,  as amended,  to provide for an increase in authorized  shares of
common stock from 75 million to 100 million and effect a 1-for-300 reverse stock
split (the "Reverse  Split").  These matters were approved by the requisite vote
of the  stockholders  of the Company on March 15, 2007. 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, 2005 and consistently applied throughout all
periods presented.


                                      F-14
<PAGE>




NOTE 5 - STOCK AWARDS

STOCK INCENTIVE PLAN

         In 2005,  the  Company  established  the  Stock  Incentive  Plan,  (the
"Plan"),  for eligible employees and other directors and consultants.  Under the
Plan,  officers,  employees and non-employees may be granted options to purchase
the Company's  common stock at no less than 100% of the market price at the date
the option is granted.  Since the Company's stock was not publicly  traded,  the
market  price at the date of grant was  historically  determined  by third party
valuation. 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 the Company. In connection with the Exchange transaction  discussed in
Note 12, there could be a modification to the stock incentive plan.

         To value  awards  granted,  the Company uses the  Black-Scholes  option
pricing model.  The Company  determines the assumptions in this pricing model at
the grant date.  For options  granted prior to January 1, 2006, the Company used
the minimum value method for volatility, as permitted by SFAS No. 123, resulting
in 0%  volatility.  For options  granted or modified  after January 1, 2006, the
Company bases expected  volatility on the historical  volatility of a peer group
of publicly  traded  entities.  The Company has limited  history  with its stock
option  grants,  during which time there has been limited stock option  exercise
and forfeiture activity on which to base expected maturity. Management estimates
that on average,  options will be outstanding  for  approximately  7 years.  The
Company bases the risk-free rate for the expected term of the option on the U.S.
Treasury Constant Maturity rate as of the grant date.

         The fair value of each option  award  within the Plan was  estimated on
the date of grant or  modification  using a  Black-Scholes  valuation model that
used the assumptions noted in the following table:

<TABLE>
<CAPTION>
                                  JUNE            JUNE          SEPTEMBER        SEPTEMBER
GRANT/MODIFICATION DATE           2005            2005            2006              2006
---------------------------   --------------  -------------- ----------------- ---------------
                                 (Grant)         (Grant)      (Modification)      (Grant)
<S>                             <C>            <C>               <C>             <C>
Stock price                       $0.32          $0.32             $1.70           $1.70
Strike Price                      $0.70          $0.77             $0.70           $3.40
Maturity                        7 years        7 years           7 years         7 years
Risk free interest rate              4%             4%                5%              5%
Volatility                           0%             0%               86%             86%
Fair market value per share        None           None             $1.48           $1.19
Forfeiture rate                      0%             0%                0%              0%
</TABLE>

         The  Company  determines  stock  option  forfeiture  rates based on the
historical trends of its employees.


                                      F-15
<PAGE>


                         NEW MOTION, INC. AND SUBSIDIARY

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 - STOCK AWARDS (CONTINUED)

STOCK INCENTIVE PLAN (CONTINUED)

     Stock option activity under the Plan was as follows (amounts presented on a
pre-Reverse Split basis before the Exchange with MPLC):

                                                           WEIGHTED-   ESTIMATED
                                                            AVERAGE    AGGREGATE
                                              NUMBER OF    EXERCISE    INTRINSIC
                                               SHARES        PRICE       VALUE
                                              ---------    ---------   ---------
Outstanding at January 1, 2005 ............      None
Granted ...................................     946,500    $    0.73
                                              ---------
Outstanding at December 31, 2005 ..........     946,500    $    0.73
                                              =========
Exercisable at December 31, 2005 ..........      30,000    $    0.70
                                              =========

Granted ...................................       5,000    $    3.40
Forfeited or cancelled ....................     (22,500)   $    0.70
                                              ---------
Outstanding at December 31, 2006 ..........     929,000    $    0.74   $ 892,000
                                              =========
Vested or expected to vest at
   December 31, 2006 ......................     929,000    $    0.74   $ 892,000
                                              =========
Exercisable at December 31, 2006 ..........     534,319    $    0.73   $ 518,000
                                              =========

         In connection  with the  termination  of an  executive,  the vesting of
approximately  76,000  options was  accelerated  in September  2006.  Additional
compensation  expense  associated  with  these  options  was  valued  under SFAS
No.123(R),  resulting in $113,000  ($113,000 after tax) of compensation  expense
recorded immediately at the date of modification.

GRANTS OUTSIDE OF PLAN

         In  September  2006,  the Company  issued  options to purchase  250,000
shares of the  Company's  common stock to an  executive  of the  Company.  These
options  were issued  outside of the Plan due to a  limitation  in the number of
shares  available  under the Plan,  and were issued at an  exercisable  price of
$3.40 with other terms  similar to those  issued  under the Plan.  There were no
other options granted outside of the Plan.

         Awards  granted  outside  the Plan are  valued  in the same  manner  as
options  granted  under the Plan,  including  the methods of  deciding  upon the
assumptions used in the  Black-Scholes  valuation.  The fair value of the option
award outside the Plan was estimated on the date of grant using a  Black-Scholes
valuation model that used the assumptions noted in the following table:

         GRANT/MODIFICATION DATE          SEPTEMBER 2006
                                          ---------------
                                             (Grant)
         Stock price                          $ 1.70
         Strike Price                         $ 3.40
         Maturity                            7 years
         Risk free interest rate                  5%
         Volatility                              86%
         Fair market value per share          $ 1.19
         Forfeiture rate                          0%


                                      F-16
<PAGE>


                         NEW MOTION, INC. AND SUBSIDIARY

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 - STOCK AWARDS (CONTINUED)

GRANTS OUTSIDE OF PLAN (CONTINUED)

Stock option activity outside the Plan was as follows:

                                                           WEIGHTED-   ESTIMATED
                                                            AVERAGE    AGGREGATE
                                               NUMBER OF   EXERCISE    INTRINSIC
                                                 SHARES      PRICE       VALUE
                                               ---------   ---------   ---------
Outstanding at January 1, 2006 .............      None                    None
Granted ....................................     250,000   $    3.40
                                               ---------
Outstanding at December 31, 2006 ...........     250,000   $    3.40      None
                                               =========
Vested or expected to vest at
   December 31, 2006 .......................      None                    None
                                               =========
Exercisable at December 31, 2006 ...........      None                    None
                                               =========

         The  following  table  summarizes   information   concerning  currently
outstanding and exercisable stock options as of December 31, 2006:

<TABLE>
<CAPTION>
                                     WEIGHTED-
                                     AVERAGE       WEIGHTED-                WEIGHTED
    RANGE OF                        REMAINING      AVERAGE                  AVERAGE
    EXERCISE           OPTIONS     CONTRACTUAL     EXERCISE     OPTIONS     EXERCISE
     PRICES          OUTSTANDING   LIFE (YEARS)     PRICE     EXERCISABLE    PRICE
----------------     -----------   ------------   ---------   -----------   --------
<S>                     <C>            <C>           <C>         <C>         <C>
WITHIN PLAN
     $  0.70            524,000        8.4           $0.70       334,319     $0.70
     $  0.77            400,000        8.4           $0.77       200,000     $0.77
     $  3.40              5,000        9.4           $3.40             -     $3.40

OUTSIDE OF PLAN
     $  3.40            250,000        9.4           $3.40             -     $3.40
</TABLE>

         For the year ended December 31, 2006,  $147,000 ($147,000 after tax) of
compensation  was  recorded.  As a result of the option  modification  discussed
above, there was no other compensation expense recorded related to stock options
for  any of the  periods  presented.  No  stock-based  compensation  costs  were
capitalized  as part of the cost of an asset for any of the  periods  presented.
Additionally,  SFAS  No.  123(R)  requires  that  the tax  benefit  from the tax
deduction  related to share-based  compensation  that is in excess of recognized
compensation costs be reported as a financing cash flow rather than an operating
cash flow.  Prior to January 1, 2006, the Company would have reported the entire
tax benefit  related to the exercise of stock options as an operating  cash flow
if options had been  exercised.  There was no tax benefit from option  exercises
for the period ended December 31, 2006.

     Compensation cost of approximately  $269,000 had not yet been recognized on
nonvested  awards through  December 31, 2006 and is expected to be recognized as
follows:

         YEAR ENDING                COMPENSATION
         DECEMBER 31,                    COST
         ------------               ------------
            2007                    $    101,000
            2008                         101,000
            2009                          67,000
                                    ------------
                                    $    269,000
                                    ============


                                      F-17
<PAGE>


                         NEW MOTION, INC. AND SUBSIDIARY

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 - EARNINGS PER SHARE

The  computational  components  of basic and diluted  earnings  per share are as
follows:

                                                        WEIGHTED
                                                        AVERAGE
                                             NET         SHARES
                                            INCOME     OUTSTANDING       EPS
                                         -----------   -----------   -----------
DECEMBER 31, 2005
Basic earnings per share .............   $   387,000     7,263,688   $      0.05
Effect of dilutive stock options .....          --            --            --
                                         -----------   -----------   -----------
Diluted earnings per share ...........   $   387,000     7,263,688   $      0.05
                                         ===========   ===========   ===========

DECEMBER 31, 2006
Basic earnings per share .............   $   677,000     7,263,688   $      0.09
Effect of dilutive stock options .....          --            --            --
                                         -----------   -----------   -----------
Diluted earnings per share ...........   $   677,000     7,263,688   $      0.09
                                         ===========   ===========   ===========

         For comparative  purposes,  the 7,263,688 shares of outstanding  common
stock of the Company, after the recapitalization and the 5 for 1 stock split (as
discussed  in Note 4),  has been  retroactively  applied  to January 1, 2005 and
consistently  applied  throughout  all  periods  presented  for the  purposes of
earnings per share calculations.

         Options to purchase an additional  520,000  shares of common stock were
not included in the computation of diluted earnings per share for the year ended
December  31, 2005,  because  their  exercise  price was greater than the market
price of the common shares and therefore would be antidilutive.

         Options to purchase an  additional  383,000 and 32,000  share of common
stock were not included in the computation of diluted earnings per share for the
periods ended December 31, 2005 and 2006, for the same reasons.

NOTE 7 - PROVISION FOR INCOME TAXES

         The provision for income taxes consists of the following components for
the periods ended as follows:

                                                  FOR THE YEAR ENDED
                                                     DECEMBER 31,
                                              -------------------------
                                                2005             2006
                                              --------         --------

         CURRENT:
         Federal ....................         $  4,000         $420,000
         State ......................            8,000          105,000
         Foreign ....................           26,000             --
                                              --------         --------
                                                38,000          525,000
                                              --------         --------

         DEFERRED:
         Federal ....................          188,000          141,000
         State ......................           44,000           42,000
                                              --------         --------
                                               232,000          183,000
                                              --------         --------

                                              --------         --------
                                              $270,000         $708,000
                                              --------         --------


                                      F-18
<PAGE>


                         NEW MOTION, INC. AND SUBSIDIARY

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 - PROVISION FOR INCOME TAXES (CONTINUED)

         The income tax effects of  significant  items  comprising the Company's
deferred income tax liabilities are as follows:

                                                            DECEMBER 31,
                                                                2006
                                                             ---------
         Deferred tax assets:
         Allowance for doubtful accounts .............       $  91,000
         Professional fee accrual ....................          22,000
         State taxes .................................          36,000
         Net operating loss carryforward .............          27,000
                                                             ---------
                                                               176,000
         Valuation Allowance .........................         (27,000)
                                                             ---------
         Total deferred tax assets ...................         149,000
                                                             ---------

         Deferred tax liabilities:
         Prepaid expenses ............................          28,000
         Depreciation ................................          53,000
         Accrual to cash adjustments .................         483,000
                                                             ---------
                                                               564,000
                                                             ---------

         Net deferred tax liabilities: ...............       $ 415,000
                                                             =========

         As of  December  31,  2006,  the Company  had  available  approximately
$90,000 of foreign net operating loss carryforward that relates to the Company's
Australian  entity  and may be applied  against  future  taxable  income of that
entity.  The foreign net operating  loss  carryforward  will expire in 2014. The
foreign net operating  loss has a 100%  valuation  allowance as the Company does
not expect to be able to utilize these losses.

         A  reconciliation  of the Company's income tax provision as compared to
the tax  provision  for  continuing  operations  is  calculated  by applying the
statutory  federal  tax rate at 34% to the  income  from  continuing  operations
before income taxes for the periods:

<TABLE>
<CAPTION>
                                                      FOR THE YEAR ENDED
                                                         DECEMBER 31,
                                       ---------------------------------------------------
                                                 2005                        2006
                                       -----------------------     -----------------------
<S>                                    <C>                  <C>    <C>                  <C>
Computed expected income tax expense
   at statutory rate ...............   $ 223,000            34%    $ 470,000            34%
Benefit for graduated federal rates       (8,000)           (1)%        --              - %
Permanent differences ..............       9,000             1%       65,000             5%
State taxes, net of federal benefit       53,000             8%      144,000            10%
Foreign rate differential ..........      (3,000)           - %        4,000            - %
Amortization of goodwill ...........      (1,000)           - %       (2,000)           - %
Change in valuation allowance ......      (3,000)           - %       27,000             2%
                                       ---------     ---------     ---------     ---------
                                       $ 270,000            42%    $ 708,000            51%
                                       =========     =========     =========     =========
</TABLE>


                                      F-19
<PAGE>


                         NEW MOTION, INC. AND SUBSIDIARY

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - COMMITMENTS AND CONTINGENCIES

LITIGATION

         On August 24, 2006,  New Motion and Burton Katz filed an action against
Buongiorno USA, Inc. ("Buongiorno") in the Superior Court of California,  county
of Orange, seeking a declaration that the non-competition,  non-solicitation and
non-interference provisions of that certain Employment Agreement dated April 11,
2005, between Burton Katz and Buongiorno,  are void and unenforceable  under the
California  Business  and  Professions  Code,  an  order  permanently  enjoining
Buongiorno from enforcing the above referenced provisions, reasonable attorneys'
fees and other costs  related to the action.  Subsequent  to filing,  Buongiorno
threatened  to withhold  payments  due to New Motion  Inc.  for  previous  sales
totaling approximately $340,000.

         On October 24, 2006, New Motion filed a Demand for Arbitration with the
American  Arbitration  Association  against Buongiorno  pursuant to the terms of
that certain Marketing  Agreement dated January 10, 2006, between New Motion and
Buongiorno, whereby New Motion agreed to market certain of Buongiorno's services
and the  parties  agreed to share  revenue  generated  from such  services.  The
Company seeks payment of $340,000 and attorneys' fees and other costs related to
the action.  Subsequently,  the Company has settled the dispute with  Buongiorno
for $384,000, which it received in the first quarter of 2007. The Company is not
liable for any additional costs related to this dispute.

         In the normal  course of  business,  the Company  has been  involved in
various  disputes,  which are routine and  incidental  to the  business.  In the
opinion of  management  the results of such disputes will not have a significant
adverse  effect on the  financial  position or the results of  operations of the
Company.

OPERATING LEASES

         In  September  2005,  the Company  entered into a lease  agreement  for
office  space.  Prior to that the Company  paid month to month rent at a monthly
rate of $3,000. Rent payments are $9,969, $10,228, and $10,487 per month through
September 30, 2006, 2007, and 2008,  respectively.  There is a separate 24 month
lease which originated in September 2006, with rent payments per month of $4,818
and $5,010 for the twelve  months  ending  August 31, 2007 and August 31,  2008,
respectively.  In August 2005, the Company  entered into an equipment  lease for
twenty four months at a monthly rental rate of $687 per month.

         The following is a schedule by years of future  minimum lease  payments
required under operating leases that have remaining  noncancellable  lease terms
in excess of one year at December 31, 2006.

                 YEAR ENDING            MINIMUM
                 DECEMBER 31,           PAYMENTS
                 -----------           ---------
                    2007               $ 298,000
                    2008                 188,000
                                       ---------

                                       $ 486,000
                                       =========

         Rent expense for the year ended to December 31, 2005, was approximately
$39,000 for office space and  approximately  $2,000 for office  equipment.  Rent
expense for the year ended to December 31, 2006, was approximately  $155,000 for
office space and approximately $9,000 for office equipment, respectively.


                                      F-20
<PAGE>


                         NEW MOTION, INC. AND SUBSIDIARY

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

EMPLOYMENT AGREEMENTS

         The  Company  has  various  employment  agreements  for  members of its
management.  Each employment  agreement states the compensation  benefits and if
termination   occurs  the  Company  shall   continue  to  pay  the   executive's
then-current  base  salary and bonus for the balance of the  initial  term.  The
average employment  contract is two to three years. The future commitments under
employment agreements are as follows:

                  YEAR ENDING             FUTURE
                  DECEMBER 31,         COMMITMENTS
                  -----------          -----------
                     2007              $ 1,578,000
                     2008                1,034,000
                     2009                  233,000
                                       -----------

                                       $ 2,845,000
                                       ===========


NOTE 9 - EMPLOYEE BENEFIT PLAN

         The Company's  employee benefit plan covers all eligible employees with
over three months of service and includes a savings plan under Section 401(k) of
the Internal  Revenue Code. The savings plan allows  participants to make pretax
contributions  up to 90% of their  earnings,  with the Company  contributing  an
additional  35% of up to six percent of an employee's  compensation.  During the
year ended  December 31, 2005 and 2006,  the Company  contributed  approximately
$1,700 and $20,000, respectively, to the plan.

NOTE 10 - RELATED PARTY TRANSACTIONS

         At various  periods  throughout  the year ended  December  31, 2005 and
2006, the Company rented a house owned by one of its officers to various Company
employees  visiting from out of town.  For the year ended  December 30, 2005 and
2006 rent payments to this officer totaled of $3,000 and $0, respectively.

         The Company utilizes the legal expertise of Stubbs, Alderton & Markiles
LLP law firm,  which is a  founding  shareholder  of the  Company.  Total  legal
services paid to Stubbs,  Alderton & Markiles LLP during the year ended December
31, 2005 and 2006 totaled approximately $46,000 and $112,000, respectively.

         See Note 3 for related party short-term notes payable.


                                      F-21
<PAGE>


                         NEW MOTION, INC. AND SUBSIDIARY

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Additional  information  to the  consolidated  statement  of  cash  flows  is as
follows:

                                                            FOR THE YEAR ENDED
                                                               DECEMBER 31,
                                                          ----------------------
                                                            2005          2006
                                                          --------      --------
CASH PAID DURING THE PERIOD FOR:

Income taxes .......................................      $   --        $949,000
Interest ...........................................      $  3,000      $ 20,000

NONCASH INVESTING AND FINANCING ACTIVITIES:

Assumption of note payable for expenses
   paid on behalf of the Company ...................      $295,000


NOTE 12 - SUBSEQUENT EVENTS

PURCHASE OF CERTAIN MOBLISS(R) ASSETS

         On  January  19,  2007,  the  Company  entered  into an Asset  Purchase
Agreement  with  Index  Visual & Games  Ltd.,  a Japanese  corporation  ("IVG"),
pursuant to which the Company will purchase from IVG certain  mobile  associated
assets  of  Mobliss,   Inc.,  a  Washington  corporation  affiliated  with  IVG,
previously purchased by IVG. These assets do not constitute substantially all of
the assets or the ongoing  business of Mobliss,  Inc. and thus will be accounted
for at  cost  consistent  with  the  purchase  of  specific  assets  and not the
acquisition  of a business.  The Company  purchased the assets  specified in the
Asset Purchase Agreement through the issuance to IVG of a convertible promissory
note (the "IVG Note") with an aggregate  principal  amount of up to  $2,320,000.
Pursuant to the terms of the Asset Purchase Agreement,  on January 19, 2007, the
Company  consummated the initial closing of the acquisition  wherein the Company
issued the IVG Note in the principal  amount of $500,000 to IVG and received all
of the assets to be purchased  under the Asset  Purchase  Agreement,  other than
certain cellular carrier connection contracts described under 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  in payment of the  assignment of one of
the  cellular  carrier  connection   contracts  listed  in  the  Asset  Purchase
Agreement.  On February 26, 2007, the Company  repaid  $500,000 of the IVG Note.
The Company and IVG are  continuing to use  commercially  reasonable  efforts to
facilitate an assignment  of the  agreements  not yet assigned to the Company in
the  initial  closing  or to  facilitate  the  issuance  and  execution  of  new
agreements  between the carriers  and the Company.  Pursuant to the terms of the
Asset Purchase Agreement, the Company may pay additional sums to IVG for any new
cellular carrier  connection  contracts  assigned or issued to us, by increasing
the  principal  amount of the IVG Note up to a  maximum  of  $2,320,000.  Unless
requested  by us, we have no  obligation  to purchase  any  additional  cellular
carrier  connection  contracts beyond what we had already  purchased at February
28, 2007.

         The IVG Note bears  interest at the rate of 5% per annum  accruing from
the time amounts are advanced  thereunder and matures on the earlier of November
30,  2007 or 30 days  after  delivery  by IVG of written  notice to the  Company
demanding payment. Prior to repayment,  IVG may convert the IVG Note into shares
of Common  Stock at a  conversion  price of $3.44  per share (on a  post-Reverse
Split basis). The IVG Note automatically converts into shares of Common Stock at
a conversion  price of $3.44 (on a post-Reverse  Split basis) upon the date that
the  Common  Stock is  listed on the New York  Stock  Exchange,  American  Stock
Exchange,  Nasdaq  Global  Market or Nasdaq  Capital  Market.  The Company  also
granted  IVG  piggyback   registration  rights  for  the  shares  issuable  upon
conversion  of the IVG Note.  However,  the Company is not obligated to register
these shares within any specific  period of time. The Company intends to account
for this note as  short-term  debt and is currently  evaluating  the  conversion
feature and  registration  rights  associated with this note, in accordance with
EITF 98-5,  "Accounting  for Convertible  Securities with Beneficial  Conversion
Features  or  Contingently   Adjustable   Conversion  Ratios,  and  EITF  00-27,
"Application of Issue No. 98-5 to Certain Convertible Instruments."


                                      F-22
<PAGE>


                         NEW MOTION, INC. AND SUBSIDIARY

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - SUBSEQUENT EVENTS (CONTINUED)

         In January 2007,  the Board of Directors of the Company agreed to issue
9,900  and  6,300  warrants  (14,632  and  9,152  warrants  post-Reverse  Split,
post-Exchange)  to both  Scott  Walker and SGE,  respectively.  The price of the
warrants  was  set  at  $5  per  share  ($3.44  per  share  post-Reverse  Split,
post-Exchange)  based on the approximate  valuation placed on the Company by the
current  negotiations of the IVG assets and subsequent issuance of note. We have
valued the warrants  granted using the  Black-Scholes  option pricing model, and
will expense  $57,000,  the full value of the warrants,  in the first quarter of
2007.

MOBILE ENTERTAINMENT CHANNEL JOINT VENTURE

         On January 19, 2007, the Company entered into a Heads of Agreement with
IVG  setting  forth  the terms of a joint  venture  with IVG to  distribute  IVG
content within North America and to manage and service the assets acquired under
the Asset  Purchase  Agreement.  The joint  venture,  The  Mobile  Entertainment
Channel Corporation, is a Nevada corporation in which the Company will own a 49%
stake  and in which IVG will own a 51%  stake.  Notwithstanding  the  respective
percentage  interests of each party,  IVG and the Company will share  equally in
any  dividends  or other  distributions  made by the  joint  venture.  The joint
venture will be managed by a board of directors consisting of three members. The
Company will  designate one member to serve on the board of directors,  IVG will
designate  one member to serve on the board of  directors  and both parties will
mutually  designate the third member of the board. The Company will enter into a
management  services  agreement  with the joint  venture  pursuant  to which the
Company will pay the joint venture a management  fee equal to the purchase price
paid under the Asset Purchase  Agreement,  with a maximum fee of $2,320,000,  in
connection  with  management  services  rendered  to the  Company  by the  joint
venture.  We made an advance  payment on the management fee of $500,000 on March
12, 2007 and expect to make another  $500,000  advance payment on June 30, 2007,
with the  remainder of the  management  fee payable in  quarterly  installments,
within 30 calendar days  following the end of each fiscal  quarter  through June
30, 2008.  Each  quarterly  payment  will equal to 10% of the payments  actually
received by the Company during such quarter from the cellular carrier connection
contracts  assigned to the Company  under the Asset  Purchase  Agreement and the
advance payments,  provided,  however,  that the Company will not be required to
make quarterly payments until the advance payments has been fully accounted for.
The Company  will  determine  the impact of this joint  venture as it relates to
FASB  Interpretation  No. 46 (R),  "Consolidation  of Variable Interest Entities
(revised December 2003)--an interpretation of ARB No. 51".

EXCHANGE TRANSACTION AND CAPITALIZATION

         On January 31, 2007,  the Company  entered  into an exchange  agreement
("Exchange  Agreement") with MPLC, Inc., a Delaware  corporation  ("MPLC"),  and
Trinad Capital Master Fund, Ltd. ("Trinad").  The closing (the "Closing") of the
transaction  contemplated by the Exchange Agreement (the "Exchange") occurred on
February 12, 2007. At the Closing,  MPLC acquired all of the outstanding  shares
of the capital stock of the  Company's  stock.  In exchange for the stock,  MPLC
issued to the  Stockholders  500,000  shares  ("Series C  Preferred  Shares") of
MPLC's  Series C  Convertible  Preferred  Stock,  par value $0.10 per share (the
"Series C Preferred Stock"),  which will be convertible into 7,263,688 shares of
MPLC's common stock (on a  post-Reverse  Split basis).  On March 15, 2007,  MPLC
received  the  requisite  approval  from its  stockholders  to amend its Restate
Certificate of Incorporation,  as amended,  to increase the authorized number of
shares of its  common  stock  from 75  million  to 100  million  and to effect a
1-for-300 reverse stock split (the "Reverse Split").

         After the Closing,  the Company continued as a wholly-owned  subsidiary
of MPLC and all  costs  associated  with this  Merger  up to the  amount of cash
received were charged to equity.  Although MPLC acquired the Company as a result
of the above transactions,  the Company's stockholders hold a majority of MPLC's
common stock following the transactions.  Accordingly,  for accounting purposes,
the  acquisition was accounted for as a "reverse  acquisition"  with the Company
deemed to be the "accounting acquiror." Therefore, the transaction was accounted
for as a recapitalization of the Company and recorded based on the fair value of
MPLC's net  tangible  assets  acquired  by the  Company.  No  goodwill  or other
intangible assets were recorded.  Effective at Closing,  MPLC changed its fiscal
year end to  December  31.  Since  the  Company  is the  surviving  entity,  the
financial statements and other data to be reported in MPLC's Form 10-KSB for the
year ended  December 31, 2006 will reflect the Company's  historical  results of
operations prior to these transactions.


                                      F-23
<PAGE>


                         NEW MOTION, INC. AND SUBSIDIARY

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - SUBSEQUENT EVENTS (CONTINUED)

         MPLC also assumed the  outstanding  options and warrants  issued by the
Company,  and those  options and warrants now entitle the  Company's  holders to
purchase  1,712,778 shares of common stock and 23,534 shares of common stock (on
a post-Reverse Split basis),  respectively.  The Exchange represented a combined
plan to capitalize  MPLC, by executing the Exchange  Agreement and  effectuating
the exchange,  to implement a tax-exempt  contribution of property under Section
351 of the Internal Revenue Code of 1986, as amended.

         On January 24, 2007, MPLC entered into a Series A Convertible Preferred
Stock Purchase  Agreement  with Trinad  pursuant to which MPLC sold one share of
Series A  Preferred  Stock to  Trinad  in a private  placement  transaction  for
aggregate gross proceeds to MPLC of $3,500,000.  The Series A Preferred Stock is
convertible  into  1,200,000  shares of Common  Stock  (on a  post-Reverse  Slit
basis).  On January 30, 2007, MPLC entered into the Series B Purchase  Agreement
with the Series B  Investors  pursuant to which MPLC sold 650 shares of Series B
Preferred Stock to the Series B Investors in a private placement transaction for
aggregate gross proceeds to MPLC of $6,500,000.  The Series B Preferred Stock is
convertible  into  1,300,000  shares of Common  Stock  (on a  post-Reverse  Slit
basis).  Both series of preferred stock have mandatory  conversion  features and
will  automatically  be converted  into common  shares of MPLC after the Reverse
Split.

         On  February  28,  2007,   the  Company   received  gross  proceeds  of
approximately  $10  million  in  a  private  placement  with  institutional  and
accredited  investors  in exchange  for selling  approximately  8,333  shares of
Series D 8%  Convertible  Preferred  Stock.  The Series D Convertible  Preferred
Stock is  automatically  convertible into 1,666,700 shares of Common Stock after
the Reverse Split.

         In connection  with the Series A, B and D Preferred  Stock  financings,
Sanders Morris Harris,  Inc. acted as placement  agent.  For their services,  we
paid Sanders  Morris Harris a cash fee equal to 7.5% of the gross  proceeds from
the financing and five year warrants to purchase  290,909 shares of common stock
at an average exercise price of $5.50 per share (post-Reverse  Split), which was
equivalent to the average per share valuation of the Company for the Series A, B
and D Preferred Stock financings.  We are currently  evaluating our treatment of
this warrant  issuance to the placement  agent in accordance  with SFAS No. 133,
"Accounting  for Derivative  Instruments  and Hedging  Activities"  and Emerging
Issues Task Force EITF 00-19,  "Accounting for Derivative Financial  Instruments
Indexed to, and  Potentially  Settled  in, a Company s Own Stock."  Based on the
value of the warrants  established by the Black-Scholes option pricing model, we
currently  expect  to  credit  additional  paid  in  capital  in the  amount  of
$1,126,000 with a corresponding offset to Preferred Stock.

EMPLOYMENT AGREEMENT

         On March 8, 2007, the Company entered into an Employment Agreement with
Scott Walker. Mr. Walker's Employment  Agreement  terminates on June 1, 2008. In
the current  year,  Mr.  Walker base salary is $225,000,  which will increase to
$250,000 on June 1, 2007. Mr. Walker's  Employment  Agreement also provides that
Mr. Walker will be eligible to participate in the Company's Management Incentive
Program.  Mr.  Walker is also  entitled to receive an option to purchase  37,500
shares of the Company's common stock at an exercise price per share of $6.60 (on
a post Reverse-Split basis),  however, all options to purchase equity securities
of New Motion,  Inc. which were previously  granted to Mr. Walker were cancelled
pursuant to the terms of the Employment Agreement.

2007 STOCK INCENTIVE PLAN

         On February 16, 2007 the Board of Directors of the Company approved the
2007 Stock  Incentive  Plan (the "2007 Plan").  On March 15, 2007, the Company's
2007 Plan was adopted by the requisite vote of the  stockholders of the Company.
The Board of  Directors  approved  the 2007 Plan to ensure  that the Company has
adequate ways in which to provide  stock based  compensation  to its  directors,
officers,  employees  and  consultants.  The Board  believes that the ability to
grant  stock-based  compensation,  such as stock  options,  is  important to the
Company's future success. The grant of stock-based  compensation,  such as stock
options,  can motivate high levels of performance and provide an effective means
of recognizing  employee and consultant  contributions to the Company's success.
In  addition,  stock-based  compensation  can  be  valuable  in  recruiting  and
retaining  highly  qualified  technical and other key personnel who are in great
demand,  as well as rewarding and providing  incentives to the Company's current
employees and consultants.


                                      F-24
<PAGE>


     ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
                             FINANCIAL DISCLOSURES

         None.

                        ITEM 8A. CONTROLS AND PROCEDURES

         As of the end of the period  covered by this report,  we carried out an
evaluation,  under  the  supervision  and with the  participation  of our  Chief
Executive  Officer and Chief  Financial  Officer,  of the  effectiveness  of our
disclosure  controls and  procedures.  Disclosure  controls and  procedures  are
designed to ensure that  information  required to be  disclosed  in the periodic
reports  filed or  submitted  under  the  Securities  Exchange  Act of 1934,  as
amended, is recorded, processed, summarized and reported within the time periods
specified in the Securities  and Exchange  Commission's  rules and forms.  Based
upon that evaluation,  the Chief Executive  Officer and Chief Financial  Officer
allocated additional resources to address the deficiencies detailed below. Other
than those  described  below,  no change in the internal  control over financial
reporting  occurred  during the last year that has  materially  affected,  or is
reasonably  likely to materially  affect,  the internal  control over  financial
reporting.

         The Public Company  Accounting  Oversight  Board has defined a material
weakness  as  "a   significant   deficiency,   or   combination  of  significant
deficiencies,  that  results  in more than a remote  likelihood  that a material
misstatement of the annual or interim financial statements will not be prevented
or detected." We have identified the following material weaknesses:

         During the  preparation,  and prior to the issuance of our February 12,
2007  Current  Report  on Form  8-K (the  "8-K  Filing"),  Windes  &  McClaughry
determined that our initial accounting for the  RingtoneChannel  transaction was
improper.  We initially  treated the  transaction as a purchase  acquisition and
allocated a portion of the "purchase price" to intangible assets. Upon review of
the facts and related  guidance,  we agreed with them that the  transaction  was
actually the transfer of assets between  companies under common control.  Before
any  public  filing  of  our  financial  statements,  the  appropriate  internal
accounting  treatment for this transaction was made and the as filed 8-K Filing,
which contained  audited  financial  statements for the years ended December 31,
2004  and  2005,   fully   reflected   the   appropriate   accounting   for  the
RingtoneChannel   transaction.   In  order  to  ameliorate  this   transactional
accounting  treatment  issue, we have hired additional  internal  accounting and
finance  personnel to give us the  resources to anticipate  and identify  unique
transactions  that may require  additional  analysis and  evaluation  concerning
their  accounting  treatment.  We have also begun the  process  of  interviewing
consultative  public  accounting firms in order to engage such a firm to provide
guidance and feedback regarding  accounting treatment for our current and future
activities.

         Also  during  the  preparation  and  prior to the  issuance  of our 8-K
Filing,  Windes & McClaughry  discovered that in calculating  the  Black-Scholes
value of options  issued under the Plan, we had  mistakenly  used the calculated
put value,  not the call value,  to calculate  compensation  expense  under SFAS
123(R).  After alerting us to this issue,  we removed the put value  calculation
from our  internal  documentation.  Before  any public  filing of our  financial
statements,  the appropriate  compensation expense was recorded and the as filed
8-K Filing,  which contained  audited  financial  statements for the years ended
December 31, 2004 and 2005, fully reflected the appropriate compensation expense
under SFAS 123(R).  In order to mitigate the  possibility  that a similar  error
could be made in the future,  we have  updated our  internal  documentation  and
hired  additional  internal  accounting  and  finance  personnel  to give us the
resources to strengthen our internal controls. We have also begun the process of
interviewing consultative public accounting firms in order to engage such a firm
to provide additional resources.

         Also  during  the  preparation  and  prior to the  issuance  of our 8-K
Filing,  Windes & McClaughry  advised us that our  disclosures and controls were
not  effective,  resulting in a number of errors and omissions in draft versions
of the 8-K Filing that we provided to Windes & McClaughry over the course of the
preparation  of the 8-K  Filing.  In order to  improve  and  expand  our  public
disclosure,  we have hired additional internal accounting and finance personnel,
including an SEC reporting  consultant,  to give us the resources to ensure that
our disclosures and controls are accurate.

                           ITEM 8B. OTHER INFORMATION

         None.


                                       32
<PAGE>


                                    PART III

 ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE
         GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

         Set forth below is  information  concerning  our  directors,  executive
officers  and  other  key  employees.   This  information   reflects  the  board
composition and executive officers of MPLC as of March 15, 2007.

NAME                             AGE       POSITION
---------------------------    --------    -------------------------------------
Burton Katz                      35        Chief Executive Officer and Director
Raymond Musci                    46        President and Director
Allan Legator                    36        Chief Financial Officer and Secretary
Scott Walker                     45        Chief Marketing Officer
Drew Larner                      42        Director
Robert S. Ellin                  42        Director
Barry I Regenstein               50        Director
Jerome Chazen                    79        Director

     BURTON KATZ. Mr. Katz became MPLC's Chief Executive  Officer and a Director
on February 12, 2007. Mr. Katz also serves as the Chief Executive Officer of New
Motion and has served in such capacity since  September  2006. Mr. Katz has been
involved in the mobile  industry since its inception.  Previously,  Mr. Katz was
with Buongiorno  S.p.A.,  where he was president of Buongiorno's  North American
operations and past executive of its U.K. operations. Mr. Katz oversaw strategic
planning and implementation of both Buongiorno's B2B business and the successful
U.S.  launch of their consumer brand.  Prior to joining  Buongiorno in 2001, Mr.
Katz was a principal in  PriceWaterhouseCooper's  E-Business Division,  where he
advised  global  telecom  and media  clients  on  pioneering  new  products  and
developing digital distribution  channels.  Mr. Katz holds a masters of business
administration  degree  in  marketing  and  interactive  technologies  from  the
University of Southern California.

     RAYMOND MUSCI. Mr. Musci became MPLC's President and a Director on February
12, 2007. Mr. Musci also serves as President and Chief Operating  Officer of New
Motion  and has served in this  capacity  since  August  2006.  Mr.  Musci was a
consultant to New Motion from January  through  August 2006 prior to joining the
organization.  Mr. Musci brings over 25 years of high tech, media, entertainment
and consumer product experience to us. Most recently,  Mr. Musci was founder and
chief  executive  officer of Bam!  Entertainment,  Inc., a company he founded in
1999 that published and distributed  movie,  sports and cartoon video games to a
wide  range of  retailers.  Prior to Bam!,  Mr.  Musci was  president  and chief
executive officer of the U.S. subsidiary of Infograms  Entertainment,  Inc., now
better  known as Atari,  Inc.  In that  position,  he oversaw all aspects of the
company's  North  American  unit, was  responsible  for 250 employees,  and grew
global  revenues  from $60 million to $300 million,  and U.S.  revenues from $80
million to $150 million. Before joining Infograms/Atari,  Mr. Musci was founder,
president and chief executive officer of Ocean Of America, Inc., a publisher and
distributor  of  entertainment  software.  Founded in 1990,  Mr. Musci built the
company to annual  revenues of $50 million,  and sold it to  Infograms/Atari  in
1996.  Mr.  Musci  holds a degree in criminal  justice  with a minor in business
administration  from Western New Mexico  University.  Mr. Musci is a director of
publicly traded Tag-It Pacific, Inc.

         ALLAN LEGATOR.  Mr. Legator became MPLC's Chief  Financial  Officer and
Secretary on February 12, 2007. Mr.  Legator also serves as the Chief  Financial
Officer and Secretary of New Motion and has served in this capacity  since March
2005.  Mr.  Legator began his career in the early 1990s in the biotech area, and
then in the audit practice of KPMG Peat Marwick,  specializing in the technology
sector,  starting  in 1994.  In 2000,  Mr.  Legator  was  recruited  to serve as
director of finance for Sega Japan Gaming Division, where he helped to structure
the company's Las Vegas gaming strategy.  Sega  subsequently  named him chief of
operations for the newly formed Sega Gaming Technologies. After a brief stint as
chief financial  officer of BroadSpring,  Inc., he joined Scott Walker to launch
New Motion in June 2005,  where he heads up all financial  functions,  including
business  operations  and all  financial  dealings with Mobile  Sidewalk's  many
partner  companies and consumer  customers.  Mr.  Legator has a BS in Accounting
from  San  Diego  State  University  and is  licensed  as a CPA in the  State of
California.

         SCOTT  WALKER.  Mr. Walker  became  MPLC's Chief  Marketing  Officer on
February 12, 2007. Mr. Walker is also the Chief Marketing  Officer of New Motion
and was the founder of New Motion. Mr. Walker has been a leader in new media and
emerging technologies for over two decades. Mr. Walker founded his first company
in 1986 - World  Travel,  which was  valued at $15  million  when  sold.  In the
mid-1990s, he founded and built one of the first Internet web hosting companies,
NetPage Communications,  which he sold in 1997. Subsequently,  Mr. Walker headed
up Mindset Interactive, Inc., known


                                       33
<PAGE>


throughout the industry for its PC planner,  which  featured  brands such as the
N.Y.  Yankees and various Warner Bros.  properties.  Prior to taking the helm of
the newly formed New Motion and  MobileSidewalk(TM) in 2005, Mr. Walker was with
BroadSpring  Inc., a  multi-million  dollar new media  company,  which he helped
form.

         DREW LARNER.  Mr.  Larner  became a Director of the company on February
12,  2007.  Mr.  Larner is  currently a Managing  Director  at Europlay  Capital
Advisors,  a Los  Angeles-based  merchant bank and advisory firm specializing in
entertainment,  media and technology  companies.  Prior to Europlay,  Mr. Larner
spent over twelve  years as an executive in the motion  picture  industry,  most
recently as Executive  Vice-President at Spyglass  Entertainment  Group. In that
role, he was involved in all  operations of Spyglass with specific  oversight of
business development, international distribution and business and legal affairs.
Prior to  Spyglass,  Mr.  Larner  spent a total of five  years at  Morgan  Creek
Productions  during  which  time he headed  up the  business  and legal  affairs
department  and then moved on to run Morgan Creek  International,  the company's
international distribution subsidiary.  Additionally, Mr. Larner spent two years
as Vice  President/Business  Affairs at Twentieth  Century Fox. Mr. Larner began
his career as an attorney in the Century City office of  O'Melveny & Myers.  Mr.
Larner  currently  serves on the Board of Directors  of  BroadSpring,  Inc.,  an
online search and  advertising  company.  Mr. Larner  graduated with a B.A. from
Wesleyan University, after which he earned a J.D. from Columbia Law School.

         ROBERT S. ELLIN. Robert S. Ellin is a Managing Member of Trinad,  which
is a hedge fund dedicated to investing in micro-cap public companies, and served
as our Chief  Executive  Officer and President from October 24, 2006 to February
12, 2007.  Mr. Ellin has served as one of our directors  since October 24, 2006.
Mr. Ellin currently sits on the board of Command  Security  Corporation  (CMMD),
ProLink  Holdings  Corporation  (PLKH),  U.S.  Wireless  Data,  Inc.  (USWI) and
Mediavest,  Inc (MVSI).  Prior to joining  Trinad  Capital LP, Mr. Ellin was the
founder and President of Atlantis Equities, Inc., a personal investment company.
Founded in 1990, Atlantis has actively managed an investment  portfolio of small
capitalization public company as well as select private company investments. Mr.
Ellin frequently played an active role in Atlantis investee companies  including
Board representation, management selection, corporate finance and other advisory
services.   Through  Atlantis  and  related   companies  Mr.  Ellin  spearheaded
investments  into  ThQ,  Inc.  (OTC:THQI),   Grand  Toys  (OTC:  GRIN),  Forward
Industries, Inc. (OTC: FORD) and completed a leveraged buyout of S&S Industries,
Inc.  where he also  served as  President  from 1996 to 1998.  Prior to founding
Atlantis Equities,  Mr. Ellin worked in Institutional Sales at LF Rothschild and
prior to that he was the Manager of Retail Operations at Lombard Securities. Mr.
Ellin received a Bachelor of Arts from Pace University.

         BARRY I.  REGENSTEIN.  Barry I.  Regenstein  is the President and Chief
Financial  Officer of Command Security  Corporation and has served as one of our
directors since October 24, 2006. Trinad is a significant shareholder of Command
Security  Corporation and Mr. Regenstein has formerly served as a consultant for
Trinad.  Mr.  Regenstein  has over 28 years of experience  with 23 years of such
experience in the aviation services industry. Mr. Regenstein was formerly Senior
Vice  President  and Chief  Financial  Officer  of Globe  Ground  North  America
(previously   Hudson  General   Corporation),   and  previously  served  as  the
Corporation's  Controller  and as a Vice  President.  Prior  to  joining  Hudson
General  Corporation  in 1982, he had been with Coopers & Lybrand in Washington,
D.C. since 1978. Mr.  Regenstein  currently sits of the boards of GTJ Co., Inc.,
ProLink Corporation (PLKH), U.S. Wireless Data, Inc. (USWI) and Mediavest,  Inc.
(MVSI).  Mr.  Regenstein  is a Certified  Public  Accountant  and  received  his
Bachelor of Science in Accounting from the University of Maryland and an M.S. in
Taxation from Long Island University.

         JEROME A. CHAZEN.  Jerome A. Chazen has served as one of our  directors
since April 2005.  Mr. Chazen is also  Chairman of Chazen  Capital  Partners,  a
private investment company.  Prior to Chazen Capital,  Mr. Chazen was one of the
four founders of Liz Claiborne  Inc.,  where he is also Chairman  Emeritus.  Mr.
Chazen is also the founder and  Benefactor of the Jerome A. Chazen  Institute of
International  Business,  the  focal  point  of all  international  programs  at
Columbia  Business  School.  Mr.  Chazen  received his Bachelor  Degree from the
University of Wisconsin and his MBA from Columbia  Business  School.  Mr. Chazen
has been a director of Taubman Centers, Inc. since 1992.

         None of our officers or directors has had any bankruptcy petition filed
by or against  any  business  of which such  officer or  director  was a general
partner or executive  officer either at the time of the bankruptcy or within two
years prior to that time. None of our officers and directors have been convicted
in a criminal proceeding,  excluding traffic violations or similar misdemeanors,
nor have they been a party to any judicial or  administrative  proceeding during
the past five years,  except for matters that were dismissed without sanction or
settlement,  that  resulted in a judgment,  decree or final order  enjoining the
person from future violations of, or prohibiting  activities subject to, federal
or state  securities  laws,  or a finding of any  violation  of federal or state
securities laws. There are no family  relationships among our executive officers
and directors.

         SHANE MAIDY.  Shane Maidy became our Senior Vice  President,  Marketing
and Licensing in August 2005.  From 2003 to 2004, he served as Vice President of
National  Sales at  Universal  Music  and  Video  Distribution,  a  division  of


                                       34
<PAGE>


Universal  Music  Group,  where he managed  over $1.2 billion in sales with mass
market retailer clients, including Wal-Mart, Target, Best Buy, Kmart, Amazon and
Costco.  Prior to joining Universal,  from 2001 to 2003, he oversaw the category
sales management team at Brand Sense  Marketing,  a sister company to NASCAR and
was with  Precision  Entertainment  from 1998 to 2001. Mr. Maidy has worked with
numerous entertainment clients,  including MTV, Playboy, ABC, Sony Pictures, Fox
Family Worldwide,  Marvel Entertainment Group,  Precision  Entertainment,  Inc.,
O.S.P.  Publishing Inc., and J. Walter  Thompson.  Mr. Maidy holds a Bachelor of
Arts  degree  in  International   Relations  from  the  University  of  Southern
California,   and  a  Masters  in  Business   Administration   from   Pepperdine
University's Graziadio School of Business and Management.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

         Section  16(a) of the  Securities  Exchange  Act of 1934,  as  amended,
requires our directors and executive officers,  as well as persons  beneficially
owning  more  than 10% of our  outstanding  common  stock,  to file  reports  of
ownership and changes in ownership with the  Securities and Exchange  Commission
(the  "SEC")  within  specified  time  periods.  Such  officers,  directors  and
shareholders  are also  required to furnish us with copies of all Section  16(a)
forms they file.

         Based  solely on its  review of such forms  received  by us, or written
representations  from  certain  reporting  persons,  we believe that all Section
16(a)  filing  requirements  applicable  to  our  officers,  directors  and  10%
shareholders  were complied with during the fiscal year ended December 31, 2006,
except for the  following:  one Initial  Statement  of  Beneficial  Ownership of
Securities on Form 3, jointly filed by Trinad Capital  Master Fund Ltd.,  Robert
Ellin,  and Jay Wolf  was  filed  late;  one  Initial  Statement  of  Beneficial
Ownership  of  Securities  on Form 3 by Barry  Regenstein  was filed  late;  one
Statement of Changes in Beneficial Ownership on Form 4, reporting 1 transaction,
was  filed  late by Sid  Banon;  and one  Statement  of  Changes  in  Beneficial
Ownership on Form 4, reporting 1 transaction, was filed late by Jerome Chazen.

CODE OF ETHICS

         We have  adopted a Code of Ethics  (the  "Code")  that  applies  to our
principal  executive,  financial and accounting  officers and persons performing
similar duties. The Code is designed to deter wrong-doing and promote honest and
ethical behavior, full, fair, timely, accurate and understandable disclosure and
compliance with applicable governmental laws, rules and regulations.  It is also
designed to encourage prompt internal  reporting of violations of the Code to an
appropriate person and provides for accountability for adherence to the Code. We
will provide to any person without charge, upon written request to our principal
executive  offices, a copy of our Code. Any waiver of the Code pertaining to one
of our  executive  officers will be disclosed in a report on Form 8-K filed with
the SEC.

AUDIT COMMITTEE

         As of March 15, 2007,  the board of directors  has not  established  an
audit committee.  We are exempt from the listing  standards for audit committees
in reliance on Rule 10A-3,  Listing Standards  Relating to Audit Committees,  as
promulgated under the Exchange Act.  However,  for certain purposes of the rules
and  regulations  of the SEC,  our board of  directors is deemed to be its audit
committee.  Our board of directors has  determined  that Barry  Regenstein is an
"audit  committee  financial  expert"  within  the  meaning  of  the  rules  and
regulations of the SEC. The board of directors has  determined  that each of its
members is able to read and understand  fundamental financial statements and has
substantial   business  experience  that  results  in  that  member's  financial
sophistication.  Accordingly,  our board of directors  believes that each of its
members has sufficient  knowledge and experience necessary to fulfill the duties
and obligations that an audit committee would have.


                                       35
<PAGE>


                         ITEM 10. EXECUTIVE COMPENSATION

EXECUTIVE OFFICERS

         Prior to the Closing of the  Exchange,  MPLC had its fiscal year end on
July 31. The following table sets forth, as to MPLC's named executive  officers,
information concerning all compensation paid to its named executive officers for
services rendered during its fiscal years ended July 31, 2006, 2005 and 2004. No
other executive officers received salary and bonus in excess of $100,000 for the
fiscal years ended July 31, 2006, 2005 and 2004.

<TABLE>
<CAPTION>
                                                                                   Long Term Compensation
                                                                        -------------------------------------------
                                        Annual Compensation                       Awards                Payouts
                              ----------------------------------------- ---------------------------- -------------- ----------------
                                                           Other        Restricted     Securities
                                                           Annual          Stock       Underlying                      All Other
 Name and Principal             Salary       Bonus      Compensation      Award(s)      Options/        LTIP          Compensation
      Position          Year      ($)         ($)            ($)            ($)       SARs (#) (2)    Payouts ($)         ($)
---------------------- ------ ----------- ----------- ----------------- ------------ --------------- -------------- ----------------
<S>                     <C>    <C>         <C>               <C>            <C>            <C>            <C>             <C>
Isaac Kier (1)          2006      --          --             --             --             --             --              --
President,              2005      --          --             --             --             --             --              --
Secretary, Treasurer    2004      --          --             --             --             --             --              --
and Director
---------------------- ------ ----------- ----------- ----------------- ------------ --------------- -------------- ----------------
David Allen (2)         2006      --          --             --             --             --             --              --
President, CEO, CFO     2005   $160,000    $100,000          --             --             --             --              --
and Secretary           2004   $160,000       --             --             --             --             --              --
---------------------- ------ ----------- ----------- ----------------- ------------ --------------- -------------- ----------------
</TABLE>

(1) Mr. Kier  received no  compensation  for his services as a director of MPLC.
    Mr. Kier resigned as a director on January 24, 2007.
(2) Mr.  Allen  served as  MPLC's  President,  Chief  Executive  Officer,  Chief
    Financial Officer and Secretary and resigned from these positions  effective
    April 26, 2005.

         OPTION/SAR  GRANTS IN LAST FISCAL YEAR.  MPLC granted no options during
the fiscal year ended July 31,  2006.  Pursuant to an order from the  Bankruptcy
Court, all outstanding  options were repurchased by MPLC for $0.01 per share and
cancelled.  Accordingly,  MPLC had no options  outstanding as of the fiscal year
ended July 31, 2006.

         AGGREGATED  OPTIONS/SARS  EXERCISED  IN LAST  FISCAL  YEAR  AND  FISCAL
YEAR-END  OPTION/SAR  VALUES. No executive officers exercised options during the
fiscal year ended July 31,  2006.  There were no  outstanding  options as of the
fiscal year ended July 31, 2006.

         EMPLOYMENT  CONTRACTS  WITH  EXECUTIVE  OFFICERS.  MPLC was party to an
employment  agreement  with Mr.  Allen.  Mr. Allen  voluntarily  terminated  his
employment  agreement  on April 26,  2005 and MPLC has no  obligation  remaining
under such agreement.

         DIRECTOR COMPENSATION.  MPLC did not pay any compensation to any of its
directors in fiscal 2006, 2005 or 2004.


                                       36
<PAGE>


NEW MOTION COMPENSATION

EXECUTIVE OFFICERS

         The following summary compensation table sets forth information,  as to
our named executive  officers,  information  concerning all compensation paid to
such named  executive  officers for services  rendered to New Motion  during the
fiscal ended December 31, 2006:

<TABLE>
<CAPTION>
----------------------------- ----------- ------------ -------------- --------------- --------------------- ----------
Name and Principal Position      Year     Salary ($)     Bonus ($)    Option Awards        All Other        Total ($)
                                                                          ($)(1)        Compensation ($)
----------------------------- ----------- ------------ -------------- --------------- --------------------- ----------
<S>                              <C>        <C>           <C>              <C>                <C>             <C>
Burton Katz                      2006        87,151        50,000          32,976               --            170,127
Chief Executive Officer(2)
----------------------------- ----------- ------------ -------------- --------------- --------------------- ----------
Raymond Musci                    2006       307,500          --              --                 --            307,500
President and Chief
Operating Officer(3)
----------------------------- ----------- ------------ -------------- --------------- --------------------- ----------
Allan Legator                    2006       175,833        34,220            --               21,835          231,888
Chief Financial Officer and
Secretary(4)
----------------------------- ----------- ------------ -------------- --------------- --------------------- ----------
Scott Walker                     2006       213,541       164,408            --               33,839          411,788
Senior Vice President of
Marketing(5)
----------------------------- ----------- ------------ -------------- --------------- --------------------- ----------
Shane Maidy                      2006       139,607        34,220            --               10,420          184,247
Senior Vice President of
Licensing(6)
----------------------------- ----------- ------------ -------------- --------------- --------------------- ----------
</TABLE>

(1) Assumptions  relating to the  estimated  fair value of these stock  options,
    which we are accounting  for in accordance  with SFAS 123(R) are as follows:
    risk-free  interest  rate  of 5%;  expected  dividend  yield  zero  percent;
    expected option life of seven years;  and current  volatility of 86%. Please
    see  Note  5 to our  financial  statements  for  further  discussion  of our
    assumptions relating to the estimated fair value of these stock options.
(2) Mr. Katz became New Motion's Chief Executive Officer on August 28, 2006. Mr.
    Katz is subject to an employment  agreement the terms of which are described
    hereafter.  Mr. Katz was granted an option to purchase 250,000 shares of the
    common  stock  of  New  Motion  at a per  share  exercise  price  of  $3.40.
    Subsequent  to the  Exchange,  this  option  entitles  Mr.  Katz to purchase
    363,185 shares of Common Stock at a per share exercise price of $2.34.
(3) Mr. Musci  became New  Motion's  President  and Chief  Operating  Officer on
    August 3, 2006. The compensation  information reported for Mr. Musci was all
    paid to Mr.  Musci as a  consultant.  Mr.  Musci is not an  employee  of New
    Motion.
(4) Mr. Legator became New Motion's  Chief  Financial  Officer on March 21, 2005
    and became New  Motion's  Secretary  on January  26,  2007.  Mr.  Legator is
    subject  to an  employment  agreement  the  terms  of  which  are  described
    hereafter.
(5) Mr. Walker  served as New Motion's  Chief  Executive  Officer from March 21,
    2005  through  August 28, 2006,  and has served as New Motion's  Senior Vice
    President of Marketing  since August 28, 2006.  Mr.  Walker is subject to an
    employment agreement the terms of which are described hereafter.
(6) Mr. Maidy became New Motion's  Senior Vice President of Licensing on October
    1, 2005. Mr. Maidy is subject to an employment  agreement the terms of which
    are described hereafter.

NARRATIVE DISCLOSURE TO SUMMARY COMPENSATION TABLE

         We compensate  our executive  officers  through a combination of a base
salary,  a cash bonus,  and options to purchase  shares of our common stock.  In
addition, we provide other perquisites to some of our executive officers,  which
primarily  consist of car  expenses  and  allowances.  The  bonuses  paid to our
executive  officers in 2006 were determined by our Board of Directors,  and were
based on the  performance  of the executive  officer and the company.  We do not
have a formal plan for determining the  compensation of our executive  officers.
Instead, each executive officer negotiates their respective employment agreement
with us.


                                       37
<PAGE>


EMPLOYMENT CONTRACTS

         We are subject to employment or consulting  contracts with Burton Katz,
Raymond Musci, Allan Legator,  Shane Maidy and Scott Walker. All agreements with
our new named  executive  officers  that  provide  for  payments  to such  named
executive  officers  at,  following  or  in  connection  with  the  resignation,
retirement or other termination of such named executive officers, or a change in
control  of our  company  or a  change  in the  responsibilities  of such  named
executive  officers  following  a  change  in  control  are  set  forth  in  the
description of the employment agreements below.

         BURTON KATZ

         Burton Katz is party to an Employment  Agreement  dated August 28, 2006
with New Motion. Mr. Katz's Employment Agreement has a term of three years which
term may be extended through December 31, 2009. Mr. Katz's Employment  Agreement
provides for an annual base salary of $300,000 with a guaranteed  increase of at
least 5% after each 12-month  period  during the term,  and also provides for an
advance of $30,000 for relocation  expenses which amount (or a portion  thereof)
must be repaid by Mr. Katz in the event that Mr.  Katz does not remain  employed
with the Company through the entire initial term of the Employment Agreement and
all  amounts  owed to Mr. Katz upon his  cessation  of service do not exceed the
amount of the advance.  Mr. Katz's  Employment  Agreement also provides that Mr.
Katz will be eligible for a bonus of up to 30% (but no less than $50,000) of the
amount set aside by New Motion, based on its earnings before interest and taxes,
for payment to executives.  Mr. Katz is also entitled to receive an allowance of
$1,000 per month for costs  associated  with the lease or purchase,  maintenance
and insurance of an  automobile,  and an additional  allowance of $300 per month
for costs associated with the use of cellular equipment and mobile communication
service or subscription  fees. Upon the termination of Mr. Katz' employment with
New Motion for good reason or without cause, Mr. Katz is entitled to receive the
base salary  that would have been paid to Mr. Katz from the date of  termination
of his service  through the  expiration of his Employment  Agreement,  continued
healthcare  coverage for the same period,  and a pro-rated  portion of any bonus
that  would have been  earned by Mr.  Katz  during the fiscal  year in which his
employment  terminated.  Mr.  Katz  has  agreed  not  to  solicit  New  Motion's
customers,  suppliers,  employees or licensors for a period  terminating  on the
earlier of two years  after the  termination  of Mr.  Katz  employment  with New
Motion or June 30, 2011. Mr. Katz's  Employment  Agreement also provides for the
arbitration of disputes.

         RAYMOND MUSCI

         Raymond Musci is not an employee of New Motion. Mr. Musci is party to a
Contractor  Agreement dated January 11, 2006 with New Motion.  While Mr. Musci's
Contractor  Agreement  terminated on December 11, 2006, New Motion and Mr. Musci
continue to view the Contractor Agreement as the document governing the parties'
relationship. Under the terms of the Contractor Agreement, Mr. Musci is entitled
to receive a fee of $30,000 per month for services rendered under the Contractor
Agreement.

         ALLAN LEGATOR

         Allan Legator is party to an Employment Agreement dated October 1, 2005
with New Motion. Mr. Legator's  Employment Agreement terminates on June 1, 2008.
In the current year, Mr. Legator's base salary is $185,000,  which will increase
to $205,000 on June 1, 2007. Mr.  Legator's  Employment  Agreement also provides
that Mr.  Legator  will be eligible to receive an annual bonus of up to $120,000
based on an accrual of 1% of each calendar  month's net profits as determined in
accordance with generally accepted  accounting  principals.  Mr. Legator is also
entitled  to  reimbursement  for costs  associated  with the lease or  purchase,
maintenance and insurance of an automobile in an amount of up to $800 per month,
and  reimbursement  of an  additional  amount  of up to $300 per month for costs
associated with the use of cellular equipment and mobile  communication  service
or subscription fees. Upon the termination of Mr. Legator's  employment with New
Motion without cause, Mr. Legator is entitled to receive the base salary and the
bonus that would have been paid to Mr.  Legator from the date of  termination of
his  service  through  the  expiration  of the  initial  term of his  Employment
Agreement.   After  the  expiration  of  his  Employment  Agreement,   upon  the
termination of Mr.  Legator's  employment  with New Motion  without  cause,  Mr.
Legator is entitled to receive one  month's pay at Mr.  Legator's  then  current
base  salary.  Mr.  Legator's   Employment   Agreement  also  provides  for  the
arbitration of disputes.

         SHANE MAIDY

         Shane Maidy is party to an Employment  Agreement  dated October 1, 2005
with New Motion. Mr. Maidy's Employment Agreement terminates on August 25, 2007.
In the current year, Mr. Maidy's base salary is $160,000. Mr. Maidy's Employment
Agreement  also  provides  that Mr.  Maidy will be eligible to receive an annual
bonus of up to $120,000  based on an accrual of 1% of each calendar  month's net
profits as determined in accordance with generally accepted


                                       38
<PAGE>


accounting principals. Mr. Maidy is also eligible to receive a bonus equal to 1%
of the monthly net profits of New Motion's licensing division. Mr. Maidy is also
entitled  to  receive  commissions  according  to the terms set forth  under his
Employment  Agreement.  Pursuant to the terms of his Employment  Agreement,  Mr.
Maidy is  entitled  to  reimbursement  for  costs  associated  with the lease or
purchase,  maintenance and insurance of an automobile in an amount of up to $800
per month, and reimbursement of an additional amount of up to $300 per month for
costs  associated  with the use of cellular  equipment and mobile  communication
service or subscription  fees.  Upon the  termination of Mr. Maidy's  employment
with New Motion without cause, Mr. Maidy is entitled to receive the base salary,
bonus and  commissions  that would have been paid to Mr.  Maidy from the date of
termination  of his service  through the  expiration  of the initial term of his
Employment Agreement. After the expiration of his Employment Agreement, upon the
termination of Mr. Maidy's  employment with New Motion without cause,  Mr. Maidy
is entitled to receive one month's pay at Mr.  Maidy's then current base salary.
Mr. Maidy's Employment Agreement also provides for the arbitration of disputes.

         SCOTT WALKER

         Scott Walker is party to an  Employment  Agreement  dated March 8, 2007
with New Motion. Mr. Walker's Employment  Agreement  terminates on June 1, 2008.
In the current year, Mr. Walker base salary is $225,000,  which will increase to
$250,000 on June 1, 2007. Mr. Walker's  Employment  Agreement also provides that
Mr. Walker will be eligible to participate in the Company's Management Incentive
Program, pursuant to which the Company will set aside in a fund each fiscal year
for payment to Mr.  Walker and other  members of management an amount based upon
the Company's  EBIT for such fiscal year. The portion of the fund payable to Mr.
Walker will be  determined in the sole  discretion  of the Board.  Mr. Walker is
also  entitled to receive an option to purchase  37,500  shares of the Company's
common stock at an exercise  price per share of $6.60 (on a  post-Reverse  Split
basis),  however,  all options to purchase equity securities of New Motion, Inc.
which were previously granted to Mr. Walker were cancelled pursuant to the terms
of the Employment  Agreement.  Mr. Walker is also entitled to reimbursement  for
costs  associated  with the lease or purchase,  maintenance  and insurance of an
automobile  in an amount of up to $1,200  per  month,  and  reimbursement  of an
additional  amount  of up to $300 per month  for  costs  associated  with use of
cellular equipment and mobile  communication  service or subscription fees. Upon
the  termination of Mr. Walker's  employment with New Motion without cause,  Mr.
Walker is entitled to receive the base salary and the bonus that would have been
paid to Mr.  Walker  from the date of  termination  of his  service  through the
expiration of the initial term of his Employment Agreement. After the expiration
of his Employment  Agreement,  upon the termination of Mr.  Walker's  employment
with New Motion without cause, Mr. Walker is entitled to receive one month's pay
at Mr. Walker's then current base salary. Mr. Walker's Employment Agreement also
provides for the arbitration of disputes.  Mr. Walker is also party to a lock-up
agreement with the Company  whereby he agrees not to sell or otherwise  transfer
any shares of Common Stock which he owns or later acquires until March 8, 2009.

INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY

         The Delaware  General  Corporation  Law and certain  provisions  of our
bylaws under certain  circumstances provide for indemnification of our officers,
directors and controlling  persons against  liabilities  which they may incur in
such capacities. A summary of the circumstances in which such indemnification is
provided  for is  contained  herein,  but this  description  is qualified in its
entirety by reference to our bylaws and to the statutory provisions.

         In general, any officer, director, employee or agent may be indemnified
against expenses,  fines,  settlements or judgments arising in connection with a
legal  proceeding to which such person is a party, if that person's actions were
in good faith, were believed to be in our best interest,  and were not unlawful.
Unless  such  person  is   successful   upon  the  merits  in  such  an  action,
indemnification  may be  awarded  only  after  a  determination  by  independent
decision  of the  board  of  directors,  by legal  counsel,  or by a vote of the
stockholders,  that the applicable  standard of conduct was met by the person to
be indemnified.

         The circumstances under which  indemnification is granted in connection
with an action  brought on our behalf is  generally  the same as those set forth
above;  however,  with respect to such actions,  indemnification is granted only
with respect to expenses  actually  incurred in  connection  with the defense or
settlement of the action.  In such actions,  the person to be  indemnified  must
have  acted in good  faith  and in a manner  believed  to have  been in our best
interest, and have not been adjudged liable for negligence or misconduct.

         Indemnification may also be granted pursuant to the terms of agreements
which may be entered into in the future or pursuant to a vote of stockholders or
directors.  The statutory  provision  cited above also grants the power to us to
purchase  and maintain  insurance  which  protects  our  officers and  directors
against any  liabilities  incurred in  connection  with their  service in such a
position, and such a policy may be obtained by us.


                                       39
<PAGE>


         A stockholder's  investment may be adversely  affected to the extent we
pay the costs of settlement and damage awards against  directors and officers as
required by these indemnification  provisions.  At present,  there is no pending
litigation or proceeding  involving any of our directors,  officers or employees
regarding  which  indemnification  by us is  sought,  nor  are we  aware  of any
threatened litigation that may result in claims for indemnification.

         Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors,  officers or persons  controlling us pursuant
to the foregoing  provisions,  we have been informed that, in the opinion of the
SEC,  this  indemnification  is  against  public  policy  as  expressed  in  the
Securities Act and is therefore unenforceable.

         We do not have any indemnification agreements with any of our directors
or executive officers.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

         The following table presents information  regarding outstanding options
held by our named  executive  officers as of the end of New Motion's fiscal year
ending December 31, 2006. The information  below assumes that New Motion's named
executive  officers  were  entitled  to  purchase  shares of common  stock as of
December 31, 2006,  and reflects  per share  exercise  prices on a  post-Reverse
Split basis.

<TABLE>
<CAPTION>
                                                         EQUITY
                                                       INCENTIVE
                                                      PLAN AWARDS:
                     NUMBER OF        NUMBER OF        NUMBER OF
                     SECURITIES      SECURITIES        SECURITIES
                     UNDERLYING      UNDERLYING        UNDERLYING
                    UNEXERCISED      UNEXERCISED      UNEXERCISED      OPTION       OPTION
                    OPTIONS (#)      OPTIONS (#)        UNEARNED      EXERCISE    EXPIRATION
NAME                EXERCISABLE     UNEXERCISABLE     OPTIONS (#)     PRICE ($)      DATE
------------------ --------------- ---------------- ----------------- --------- ---------------
<S>                   <C>                 <C>           <C>             <C>        <C>
Burton Katz (1)          -                -             363,185         2.34        9/1/16
Raymond Musci            -                -                -             -            -
Allan Legator (2)     145,274             -             145,274         0.48       11/15/15
Scott Walker (3)      290,548             -             290,548         0.53       11/15/10
Shane Maidy (4)        38,740             -              48,425         0.48       11/15/15
</TABLE>

(1) On August 3, 2006, Mr. Katz was granted an option to purchase 250,000 shares
    of the common  stock of New Motion at a per share  exercise  price of $3.40.
    Subsequent  to the  Exchange,  this  option  entitles  Mr.  Katz to purchase
    363,185 shares of Common Stock at a per share exercise price of $2.34.  This
    option vests as follows:  33.3% of the shares subject to the option vests on
    August 1, 2007, and the remaining  66.7% of the shares subject to the option
    vest monthly over the next 24 months thereafter.
(2) On June 1, 2005,  Mr.  Legator  was  granted an option to  purchase  200,000
    shares of the common  stock of New Motion at a per share  exercise  price of
    $0.70.  Subsequent  to the  Exchange,  this option  entitles Mr.  Legator to
    purchase  290,548  shares of Common Stock at a per share  exercise  price of
    $0.48.  This  option  vests as follows:  33.3% of the shares  subject to the
    option vested on June 1, 2006, and the remaining 66.7% of the shares subject
    to the option vest monthly over the next 24 months thereafter.
(3) On June 1, 2005, Mr. Walker was granted an option to purchase 400,000 shares
    of the common  stock of New Motion at a per share  exercise  price of $0.77.
    Subsequent  to the  Exchange,  this option  entitles Mr.  Walker to purchase
    581,096 shares of Common Stock at a per share exercise price of $0.53.  This
    option was cancelled on March 8, 2007 and, on the same date,  Mr. Walker was
    granted  an  option  to  purchase   37,500  shares  of  common  stock  on  a
    post-Reverse  Split  basis at an exercise  price of $6.60 per share.  Thirty
    three and one-third percent (33.3%) of the shares subject to the option vest
    on the  first  anniversary  of the  grant  date  (March  8,  2008),  and the
    remaining sixty six and  seven-tenths  percent (66.7%) of the shares subject
    to the option vest monthly in equal  installments  over the next twenty four
    (24) months thereafter.
(4) On August 1, 2005, Mr. Maidy was granted an option to purchase 60,000 shares
    of the common  stock of New Motion at a per share  exercise  price of $0.70.
    Subsequent  to the  Exchange,  this option  entitles  Mr.  Maidy to purchase
    87,165 shares of Common Stock at a per share exercise  price of $0.48.  This
    option vests as follows: 33.3% of the shares subject to the option vested on
    August 1, 2006, and the remaining  66.7% of the shares subject to the option
    vest monthly over the next 24 months thereafter.


                                       40
<PAGE>


DIRECTOR COMPENSATION AND INDEPENDENCE

         Our  non-employee  directors  do not  receive  compensation  for  their
services but are reimbursed for travel  expenses  associated  with attendance at
meetings  of our board of  directors.  There were no  reimbursements  for travel
expenses  for  the  fiscal  year  ended  December  31,  2006.  We do not  have a
separately  designated audit,  compensation or nominating committee of our board
of  directors.  Although we are not a "listed  company"  under SEC rules and are
therefore  not required to have  separate  committees  comprised of  independent
directors,  we have,  however,  determined that Drew Larner is  "independent" as
that term is defined in Section 4200 of the Marketplace Rules as required by the
NASDAQ Stock Market.

     ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
                        AND RELATED STOCKHOLDER MATTERS

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

         The  following  table  sets  forth  information  concerning  our equity
compensation  plans as of December 31, 2006, after giving effect to the exchange
transaction with MPLC.

<TABLE>
<CAPTION>
                                                    (a)                    (b)                    (c)
                                                                                              NUMBER OF
                                                                                              SECURITIES
                                                 NUMBER OF                                REMAINING AVAILABLE
                                              SECURITIES TO BE                            FOR FUTURE ISSUANCE
                                                ISSUED UPON           WEIGHTED-AVG.           UNDER EQUITY
                                                EXERCISE OF         EXERCISE PRICE OF      COMPENSATION PLANS
                                                OUTSTANDING            OUTSTANDING             (EXCLUDING
                                             OPTIONS, WARRANTS      OPTIONS, WARRANTS     SECURITIES REFLECTED
PLAN CATEGORY                                   AND RIGHTS (#)         AND RIGHTS ($)       IN COLUMN (A)) (#)
-----------------------------------------   --------------------   --------------------   --------------------
<S>                                                    <C>                         <C>                 <C>
Equity compensation plans approved
      by security holders ...............              1,349,593                   0.50                103,145
Equity compensation plans not
      approved by security holders ......                363,185                   2.34                   --
                                            --------------------   --------------------   --------------------
Total ...................................              1,712,778                   0.89                103,145
                                            --------------------   --------------------   --------------------
</TABLE>

         On  August 3,  2006,  Burton  Katz was  granted  an option to  purchase
250,000  shares of Common Stock of New Motion at a per share  exercise  price of
$3.40.  Subsequent  to the Exchange,  this option  entitles Mr. Katz to purchase
363,185  shares of Common  Stock at a per share  exercise  price of $2.34.  This
option  vests as  follows:  33.3% of the shares  subject  to the option  vest on
August 1, 2007 and the remaining  66.7% of the shares subject to the option vest
monthly over the next 24 months thereafter.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

         The following table sets forth certain information regarding our common
stock  beneficially owned on March 15, 2007 for (i) each stockholder known to be
the beneficial  owner of 5% or more of our outstanding  common stock,  (ii) each
executive officer and director,  and (iii) all executive  officers and directors
as a group,  on a pro forma basis to reflect  the  conversion  of our  Preferred
Stock into common stock,  assuming such  transactions  were completed as of such
date.  Based  on the  foregoing  assumptions,  the  table  reflects  a total  of
3,504,103,805  shares of  common  stock and  11,680,346  shares of common  stock
outstanding  as of  March  15,  2007 on a pre-  and  post-Reverse  Split  basis,
respectively.  In general,  a person is deemed to be a  "beneficial  owner" of a
security  if that person has or shares the power to vote or direct the voting of
such  security,  or the power to dispose or to direct  the  disposition  of such
security.  A person is also deemed to be a beneficial owner of any securities of
which the person has the right to acquire  beneficial  ownership within 60 days.
Unless  otherwise  indicated,  each  person  in the table  has sole  voting  and
investment power with respect to the shares shown.  Unless otherwise  indicated,
the  address of each of the  executive  officers  and  directors  and 5% or more
shareholders named below is c/o New Motion,  Inc., 42 Corporate Park, Suite 250,
Irvine CA, 92606.


                                       41
<PAGE>


<TABLE>
<CAPTION>
                                                      AMOUNT OF      AMOUNT OF
                                                      BENEFICIAL     BENEFICIAL
                                                      OWNERSHIP      OWNERSHIP
                                                     PRE-REVERSE    POST-REVERSE    PERCENT
   NAME AND ADDRESS OF BENEFICIAL OWNER (1)             SPLIT           SPLIT       OF CLASS
--------------------------------------------------------------------------------------------
<S>                                                  <C>               <C>            <C>
Burton Katz ....................................            --              --          *
Allan Legator (2) ..............................      56,012,623         186,709      1.6%
Scott Walker (3) ...............................     475,172,199       1,583,907     13.5%
Raymond Musci (4) ..............................     130,746,384         435,821      3.7%
Shane Maidy (5) ................................      14,527,231          48,424        *
Drew Larner (6) ................................      14,324,738          47,749        *
Barry I. Regenstein ............................       1,250,100           4,167        *
Robert S. Ellin (7) ............................     429,750,000       1,432,500     12.3%
     c/o Trinad Management LLC
     2121 Avenue of the Stars, Suite 1650
     Los Angeles, California 90067
Jerome Chazen (8) ..............................       2,737,911           9,126        *
     c/o Chazen Capital Partners
     676 Fifth Avenue
     New York, New York 10153
All Executive Officers and Directors as a Group
   (9 persons) (9) .............................   1,124,521,186       3,748,403     32.1%

5% STOCKHOLDERS:
MPLC Holdings, LLC (10) ........................     821,507,861       2,738,360     23.4%
     15260 Ventura Boulevard, 20th Floor
     Sherman Oaks, California 91403
Jeffrey Akres (10) .............................     832,170,229       2,773,901     23.7%
     c/o MPLC Holdings, LLC
Trinad Capital Master Fund, Ltd. (7) ...........     429,750,000       1,432,500     12.3%
Trinad Management, LLC
Trinad Capital LP
Trinad Advisors GP, LLC
Jay A. Wolf (11) ...............................     364,999,800       1,216,666     10.4%
     c/o Trinad Management LLC
Brad Greenspan .................................     229,098,173         763,661      6.5%
Destar LLC (12) ................................     371,134,935       1,237,116     10.6%
     2450 Colorado Avenue, Suite 100, East Tower
     Santa Monica, California 90404
Europlay Capital Advisors, LLC (13) ............     217,910,640         726,369      6.2%
     15260 Ventura Boulevard, 20th Floor
     Sherman Oaks, California 91403
Lyrical Opportunity Partners II LP (14) ........     341,619,602       1,138,732      9.7%
Lyrical Opportunity Partners II Ltd.
     405 Park Avenue, 6th Floor
     New York, NY 10022
</TABLE>

* Less than 1.0%

(1)      Unless  otherwise  stated,  the  address is c/o New  Motion,  Inc.,  42
         Corporate Park, Suite 250, Irvine, California 92606.

(2)      Includes  2,745,674 shares (9,152 shares on a post-Reverse Split basis)
         of Common  Stock that may be acquired  within 60 days of March 15, 2007
         upon  the  exercise  of  outstanding  warrants  and  53,266,949  shares
         (177,557 shares on a post-Reverse Split basis) of Common Stock that may
         be  acquired  within 60 days of March 15,  2007  upon the  exercise  of
         outstanding stock options.

(3)      Includes 4,314,631 shares (14,382 shares on a post-Reverse Split basis)
         of Common  Stock that may be acquired  within 60 days of March 15, 2007
         upon the  exercise  of  outstanding  warrants  and  470,857,569  shares
         (1,569,525


                                       42
<PAGE>


         shares on a  post-Reverse  Split  basis) of  Common  Stock  that may be
         acquired  within  60 days of March  15,  2007  upon the  conversion  of
         108,039 shares of Series C Preferred Stock.

(4)      Includes  130,746,384  shares (435,821  shares on a post-Reverse  Split
         basis) of Common Stock that may be acquired within 60 days of March 15,
         2007 upon the conversion of 30,000 shares of Series C Preferred Stock.

(5)      Includes  14,527,231  shares  (48,424  shares on a  post-Reverse  Split
         basis) of Common Stock that may be acquired within 60 days of March 15,
         2007 upon the exercise of outstanding stock options.

(6)      Includes  14,324,738  shares  (47,749  shares on a  post-Reverse  Split
         basis) of Common Stock that may be acquired within 60 days of March 15,
         2007 upon the exercise of outstanding stock options.

(7)      Includes  69,750,000  shares  (232,500  shares on a post-Reverse  Split
         basis) of Common Stock, and 360,000,000  shares  (1,200,000 shares on a
         post-Reverse  Split basis) of Common Stock that may be acquired  within
         60 days of March 15, 2007 upon the conversion of Series A Stock,  owned
         by Trinad Capital Master Fund, Ltd.

         Trinad  Management,  LLC (as the manager of the Trinad  Capital  Master
         Fund,  Ltd. and Trinad Capital LP), Robert S. Ellin and Jay A. Wolf (as
         a  Managing  Member  and  Managing  Director,  respectively  of  Trinad
         Advisors  GP, LLC and Trinad  Management,  LLC) may be deemed to be the
         beneficial owners of these shares.

         Trinad  Capital LP (as the owner of 90% of the shares of Trinad Capital
         Master Fund,  Ltd.) and Trinad Advisors GP, LLC (as the general partner
         of Trinad Capital LP), each may be deemed to be the beneficial owner of
         90% of the shares of the 1,432,500 shares of the Common Stock (on an as
         converted basis) held by Trinad Capital Master Fund, Ltd., representing
         12.9% of the outstanding Common Stock on an as converted basis. Each of
         Trinad Capital LP, Trinad  Management,  LLC and Trinad Advisors GP, LLC
         disclaim  beneficial  ownership of the shares of Common Stock  directly
         beneficially owned by Trinad Capital Master Fund, Ltd.

         Each of Robert S. Ellin and Jay A. Wolf disclaim  beneficial  ownership
         of the shares of Common  Stock  directly  beneficially  owned by Trinad
         Capital  Master  Fund,  Ltd.  except  to the  extent  of his  pecuniary
         interests therein. Robert S. Ellin and Jay A. Wolf have shared power to
         direct the vote and shared  power to direct  the  disposition  of these
         shares.

(8)      Includes  2,737,911 shares (9,126 shares on a post-Reverse Split basis)
         of Common  Stock that may be acquired  within 60 days of March 15, 2007
         upon the exercise of an outstanding options.

(9)      Includes  85,868,918  shares  (286,230  shares on a post-Reverse  Split
         basis) of Common Stock that may be acquired within 60 days of March 15,
         2007  upon  the  exercise  of  outstanding  options  and  warrants  and
         1,038,652,268  shares (3,462,173 shares on a post-Reverse  Split basis)
         of Common  Stock that is held by, or may be acquired  within 60 days of
         March 15,  2007  upon the  conversion  of shares of Series C  Preferred
         Stock.

(10)     In addition to exercising  voting and dispositive power over the shares
         owned by MPLC Holdings, LLC, Jeffrey Akres individually owns 10,662,368
         shares (35,541  shares on a  post-Reverse  Split basis) of Common Stock
         that  may be  acquired  within  60 days of  March  15,  2007  upon  the
         conversion of 2,447 shares of Series C Stock.

(11)     Jay A. Wolf  disclaims  beneficial  ownership  of the  shares of Common
         Stock directly  beneficially  owned by Trinad Capital Master Fund, Ltd.
         except to the  extent of his  pecuniary  interests  therein.  Robert S.
         Ellin and Jay A. Wolf have  shared  power to direct the vote and shared
         power to  direct  the  disposition  of shares  owned by Trinad  Capital
         Master  Fund,  Ltd.  Jay A. Wolf  individually  owns  4,999,800  shares
         (16,666 shares on a post-Reverse  Split basis) of Common Stock that may
         be  acquired  within 60 days of March 15, 2007 upon the  conversion  of
         83.33 shares of Series D Stock.

(12)     Includes  225,789,000  shares (752,630  shares on a post-Reverse  Split
         basis) of Common Stock that may be acquired within 60 days of March 15,
         2007 upon the conversion of 376.315 shares of Series B Preferred  Stock
         and 134,013,135  shares (446,710 shares on a post-Reverse  Split basis)
         of Common  Stock that may be acquired  within 60 days of March 15, 2007
         upon the  conversion of 30,750  shares of Series C Preferred  Stock and
         11,332,800  shares  (37,776  shares on a post  Reverse  Split basis) of
         Common Stock that may be acquired within 60 days of March 15, 2007 upon
         the conversion of 188.88 shares of Series D Preferred Stock. Dave Smith
         exercises voting and dispositive power over these shares.  While Trinad
         Capital Master Fund, Ltd. has an economic interest in Destar


                                       43
<PAGE>


         LLC,  it has no power to vote or dispose  of the shares  held by Destar
         LLC and, accordingly, disclaims beneficial ownership of the shares held
         by Destar LLC except to the extent of its pecuniary interest therein.

(13)     Joseph M.  Miller,  one of the Managing  Directors of Europlay  Capital
         Advisors,  LLC,  exercises  voting  and  dispositive  power  over these
         shares.

(14)     Includes  133,420,800  shares (444,736  shares on a post-Reverse  Split
         basis) of Common Stock that may be acquired within 60 days of March 15,
         2007 upon the  conversion  of 222 shares of Series B  Preferred  Stock,
         77,530,802  shares  (258,436  shares on a post-Reverse  Split basis) of
         Common Stock that may be acquired within 60 days of March 15, 2007 upon
         the  conversion  of  17,790  shares of Series C  Preferred  Stock,  and
         130,668,000  shares (435,560  shares on a post-Reverse  Split basis) of
         Common Stock that may be acquired within 60 days of March 15, 2007 upon
         the  conversion  of 2,177.8  shares of Series D Preferred  Stock.  Jeff
         Keswin, as managing member, exercises voting and dispositive power over
         these securities.


          ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
                             DIRECTOR INDEPENDENCE

         Other than the employment  arrangements  described  above in "Executive
Compensation" and the transactions described below, since January 1, 2005, there
has not been,  nor is there  currently  proposed,  any  transaction or series of
similar transactions to which we were or will be a party:

         o        in which the amount involved exceeds the lesser of $120,000 or
                  1% of the average of our assets at year-end for the last three
                  completed fiscal years; and

         o        in which any  director,  executive  officer,  shareholder  who
                  beneficially owns 5% or more of our common stock or any member
                  of  their  immediate  family  had or  will  have a  direct  or
                  indirect material interest.

MPLC

         On March 8, 2007, MPLC entered into an employment  agreement with Scott
Walker,  the terms of which are  described  above on page 39 under the  heading,
"Employment Contracts."

         On February 28, 2007, MPLC entered into a Securities Purchase Agreement
with various  accredited  investors  as listed on the  signature  pages  thereto
pursuant to which MPLC  agreed to sell to the  investors  in a private  offering
approximately 8,334 shares of its Series D Stock for an aggregate purchase price
of approximately ten million eight hundred dollars ($10,000,800).  Trinad has an
economic  interest in Destar LLC,  one of the Series D Investors  who  purchased
188.88  shares of Series D Stock with an aggregate  purchase  price of $226,651.
Trinad  has no  power  to  vote or  dispose  of such  shares  and,  accordingly,
disclaims beneficial ownership of the shares held by Destar LLC.

         On February 16, 2007,  MPLC granted Jerome Chazen an option to purchase
50,000 shares of common stock on a post-Reverse Split basis at an exercise price
of  $6.00.  On the  same  date,  MPLC  granted  each of Drew  Larner  and  Barry
Regenstein an option to purchase 25,000 shares of common stock on a post-Reverse
Split  basis at an exercise  price of $6.00.  Also on February  16,  2007,  MPLC
granted  Burton Katz an option to purchase  81,250  shares of common  stock on a
post-Reverse Split basis at an exercise price of $6.00.

         On February 12, 2007, MPLC  consummated the  transactions  contemplated
under the Series B Purchase Agreement with the Series B Investors. Trinad has an
economic  interest in Destar LLC,  one of the Series B Investors  who  purchased
376.315 shares of Series B Preferred  Stock with an aggregate  purchase price of
$3,763,150.  Trinad  has no  power  to  vote or  dispose  of  such  shares  and,
accordingly, disclaims beneficial ownership of the shares held by Destar LLC.

         On January 24, 2007, MPLC entered into a Series A Convertible Preferred
Stock  Purchase   Agreement  with  Trinad  Capital  Master  Fund,  Ltd.,  MPLC's
controlling  shareholder,  pursuant  to which MPLC agreed to sell to Trinad in a
private  offering one share of its Series A  Convertible  Preferred  Stock,  par
value $0.10 per share, for an aggregate purchase price of $3.5 million.

         In addition,  pursuant to a Registration  Rights Agreement with Trinad,
dated as of January 24, 2007,  MPLC granted Trinad certain  registration  rights
with respect to all of the shares of Common Stock owned by Trinad, including the
Common Stock  underlying the Series A Preferred Stock sold in the offering.  If,
at any time after the date of the Series A Convertible  Preferred Stock Purchase
Agreement,  MPLC proposes to file a  Registration  Statement  with respect to an
offering of equity securities, or securities or other obligations exercisable or
exchangeable for, or convertible into,  equity  securities,  MPLC is required to
offer to Trinad the  opportunity to register its shares of MPLC's stock.  Trinad
may, additionally, at any time and


                                       44
<PAGE>


from  time to time  after  the  first  anniversary  of the date of the  Series A
Convertible  Preferred  Stock Purchase  Agreement,  request in writing that MPLC
register the resale of any or all of such registrable  securities on Form S-3 or
any similar  short-form  registration,  but MPLC is not obligated to effect such
request through an underwritten offering.

         On October 24, 2006, MPLC and certain of its stockholders  entered into
a Common Stock Purchase  Agreement  with Trinad,  pursuant to which we agreed to
redeem  23,448,870  shares of Common  Stock  from the  stockholders  and sell an
aggregate of  69,750,000  shares of our Common  Stock,  representing  93% of our
issued and outstanding  shares of Common Stock on the closing date, to Trinad in
a private placement  transaction for aggregate gross proceeds to us of $750,000,
$547,720 of which was used for the redemption  described below, and $202,280 was
used to pay all loans to MPLC from Isaac Kier, a former  director and the former
president, treasurer and secretary of MPLC.

         Simultaneously  with the sale of shares of Common Stock to Trinad, MPLC
redeemed 23,448,870 shares of Common Stock from certain stockholders of MPLC for
a purchase price of $547,720. In addition,  following closing, Mr. Kier or First
Americas  Management  LLC ("First  Americas"),  an affiliate of Mr. Kier, was no
longer obligated to provide office space or services to MPLC.

         On April 26,  2005,  MPLC issued  25,828,983  restricted  shares of its
common  stock to First  Americas in exchange  for $75,000 in cash.  Mr.  Kier, a
former  director of MPLC, is the sole member of First  Americas.  First Americas
subsequently  distributed  shares to Mr. Kier who sold shares to Mr.  Chazen and
three other individuals.

         In February 2005,  MPLC paid David Allen, a former officer and director
of  MPLC,  a  $100,000  bonus  for  continuing   with  MPLC  during   bankruptcy
proceedings. This payment was approved by the Bankruptcy Court.

NEW MOTION

         New Motion had Secured Convertible  Promissory Notes outstanding in the
principal  amounts of $15,000,  $100,000 and $50,000  which were issued to Scott
Walker,  its Chief Executive Officer and President,  on June 10, 2005, August 2,
2005, and August 24, 2005, respectively. In addition, we had Secured Convertible
Notes in the principal amounts of $35,000, $50,000 and $20,000 which were issued
to SGE, a corporation  owned by Allan Legator,  our Chief Financial  Officer and
Secretary, on June 10, 2005, August 2, 2005, and August 24, 2005,  respectively.
The notes are convertible into securities issued in the next financing resulting
in gross  proceeds of at least  $500,000  ("Qualified  Financing") at 80% of per
share price in Qualified Financing.  On January 26, 2007, New Motion agreed with
each of Scott Walker and SGE that the  warrants  would  entitle  Scott Walker to
purchase 9,900 shares of New Motion's common stock at an exercise price of $5.00
per share and SGE to purchase  6,300 shares of New  Motion's  common stock at an
exercise price of $5.00 per share.  After the Exchange and the assumption of the
warrants,  Mr.  Walker's  warrant now entitles him to purchase  14,384 shares of
Common Stock (on a  post-Reverse  Split basis) at an exercise price of $3.44 per
share and SGE's  warrant now  entitles  SGE to purchase  9,153  shares of Common
Stock (on a  post-Reverse  Split basis) at an exercise price of $3.44 per share.
All notes  referenced  above were paid in full with  interest  according  to the
terms of the notes by September 2006.

         Burton Katz is party to an Employment  Agreement  with New Motion dated
August  28,  2006.  The  terms of Mr.  Katz's  Employment  Agreement  have  been
disclosed under Item 10, "Executive  Compensation,"  "New Motion  Compensation."
Mr. Katz received  compensation,  not including option awards,  in the amount of
$137,151 in fiscal 2006 pursuant to the terms of his Employment Agreement.

         Raymond Musci is party to a Contractor  Agreement with New Motion dated
January  11,  2006.  The terms of Mr.  Musci's  Contractor  Agreement  have been
previously  disclosed.  Mr. Musci  received a fee of $307,500 under the terms of
the Contractor Agreement during fiscal 2006.

PROMOTERS AND CONTROL PERSONS

         Prior to February 12,  2007,  MPLC  existed as a "shell  company"  with
nominal  assets whose sole  business was to identify,  evaluate and  investigate
various  companies to acquire or with which to merge.  On February 12, 2007,  we
consummated an exchange  transaction in which we acquired all of the outstanding
ownership interests of New Motion, a Delaware  corporation from its stockholders
in  exchange  for an  aggregate  of 500,000  shares of our series C  convertible
preferred stock. At the closing of the exchange  transaction,  New Motion became
our  wholly-owned  subsidiary.  The exchange  transaction was accounted for as a
reverse  merger  (recapitalization)  with New Motion deemed to be the accounting
acquirer, and MPLC the legal acquirer.


                                       45
<PAGE>


         In  addition,  please see the  description  of the  transactions  which
occurred on October 24, 2006  between MPLC and certain of its  stockholders  set
forth above.

DIRECTOR INDEPENDENCE

         Our board of directors currently consists of six members:  Burton Katz,
Raymond Musci,  Drew Larner,  Barry I.  Regenstein,  Robert S. Ellin, and Jerome
Chazen.  Each  director was elected  either at a meeting of  shareholders  or by
written consent of the  shareholders and serves until our next annual meeting or
until his or her successor is duly elected and qualified.

         We  do  not  have  a  separately  designated  audit,   compensation  or
nominating  committee of our board of directors  and the  functions  customarily
delegated to these  committees are performed by our full board of directors.  We
are not a "listed  company"  under SEC rules and are  therefore  not required to
have separate committees comprised of independent  directors.  We have, however,
determined that Drew Larner is  "independent" as that term is defined in Section
4200 of the Marketplace  Rules as required by the NASDAQ Stock Market.  Although
we do not maintain an audit committee,  we do have an audit committee "financial
expert", Barry Regenstein, within the meaning of Item 401(d) of Regulation S-B.

         We intend to establish an audit committee,  compensation committee, and
nominating  and corporate  governance  committee  following the expansion of our
board  to  include  at least  three  directors  who are  independent  under  the
applicable rules of the SEC and NASDAQ.

                                ITEM 13. EXHIBITS

         The exhibits as indexed  immediately  following the  signature  page of
this Report are included as part of this Form 10-KSB.


                                       46
<PAGE>


                                   SIGNATURES

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


                                      MPLC, INC.


         Date: March 30, 2007         /s/ Allan Legator
                                      ---------------------------------------
                                      By:  Allan Legator
                                      Its: Chief Financial Officer (Principal
                                           Financial and Accounting Officer)



                                POWER OF ATTORNEY

         The  undersigned  directors  and  officers  of  MPLC,  Inc.  do  hereby
constitute and appoint  Raymond Musci and Allan Legator,  and each of them, with
full  power  of  substitution  and  resubstitution,  as their  true  and  lawful
attorneys  and agents,  to do any and all acts and things in our name and behalf
in our  capacities  as  directors  and  officers  and to  execute  any  and  all
instruments  for us and in our names in the capacities  indicated  below,  which
said  attorney  and  agent,  may deem  necessary  or  advisable  to enable  said
corporation to comply with the  Securities  Exchange Act of 1934, as amended and
any  rules,   regulations  and  requirements  of  the  Securities  and  Exchange
Commission,  in  connection  with this Annual  Report on Form 10-KSB,  including
specifically but without  limitation,  power and authority to sign for us or any
of us in our names in the  capacities  indicated  below,  any and all amendments
(including  post-effective  amendments)  hereto,  and we do  hereby  ratify  and
confirm all that said attorneys and agents, or either of them, shall do or cause
to be done by virtue hereof.

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities and on the dates indicated.

              NAME                             TITLE                   DATE
              ----                             -----                   ----

        /S/ BURTON KATZ              Chief Executive Officer      March 30, 2007
-----------------------------        and Director (Principal
          Burton Katz                Executive Officer)

       /S/ ALLAN LEGATOR             Chief Financial Officer      March 30, 2007
-----------------------------        and Secretary (Principal
         Allan Legator               Financial and Accounting
                                     Officer)

       /S/ RAYMOND MUSCI             President, Director          March 30, 2007
-----------------------------
         Raymond Musci

        /S/ DREW LARNER              Director                     March 30, 2007
-----------------------------
          Drew Larner

      /S/ ROBERT S. ELLIN            Director                     March 30, 2007
-----------------------------
        Robert S. Ellin

    /S/ BARRY I. REGENSTEIN          Director                     March 30, 2007
-----------------------------
      Barry I. Regenstein

       /S/ JEROME CHAZEN             Director                     March 30, 2007
-----------------------------
         Jerome Chazen


                                       47
<PAGE>


                                  EXHIBIT INDEX

EXHIBIT
  NO.                                     TITLE
-------  -----------------------------------------------------------------------

2.1      Exchange  Agreement  dated  January 31,  2007,  among MPLC,  Inc.,  New
         Motion,  Inc., the Stockholders of New Motion,  Inc. and Trinad Capital
         Master Fund, Ltd. Incorporated by reference to the Registrant's Current
         Report on Form 8-K (File No.  34-51353)  filed with the  Commission  on
         February 1, 2007. **

3.1      Restated  Certificate of  Incorporation.  Incorporated  by reference to
         Exhibit 3.1 to the  Registrant's  Form 10-SB (File No.  34-51353) filed
         with the Commission on June 10, 2005.

3.2      Certificate of Amendment to the Restated  Certificate of Incorporation,
         dated October 12, 2004. Incorporated by reference to Exhibit 3.2 to the
         Registrant's  Form 10-SB (File No.  34-51353) filed with the Commission
         on June 10, 2005.

3.3      Certificate of Amendment to the Restated  Certificate of Incorporation,
         dated April 8, 2005.  Incorporated  by  reference to Exhibit 3.3 to the
         Registrant's  Form 10-SB (File No.  34-51353) filed with the Commission
         on June 10, 2005.

3.4      Bylaws.  Incorporated  by reference to Exhibit 3.4 to the  Registrant's
         Form 10-SB (File No.  000-51353)  filed with the Commission on June 10,
         2005.

4.1      Certificate  of  Designation,   Preferences  and  Rights  of  Series  A
         Convertible Preferred Stock.  Incorporated by reference to Exhibit 99.3
         to the  Registrant's  Current  Report on Form 8-K  (File No.  34-51353)
         filed with the Commission on January 26, 2007.

4.2      Certificate  of  Designation,   Preferences  and  Rights  of  Series  B
         Convertible Preferred Stock.  Incorporated by reference to Exhibit 99.2
         to the  Registrant's  Current  Report on Form 8-K  (File No.  34-51353)
         filed with the Commission on February 1, 2007.

4.3      Certificate  of  Designation,   Preferences  and  Rights  of  Series  C
         Convertible Preferred Stock. Incorporated by reference to Exhibit 3.1.6
         to the  Registrant's  Current  Report on Form 8-K  (File No.  34-51353)
         filed with the Commission on February 13, 2007.

4.4      Certificate  of  Designation,   Preferences  and  Rights  of  Series  D
         Convertible  Preferred Stock.  Incorporated by reference to Exhibit 4.1
         to the  Registrant's  Current  Report on Form 8-K  (File No.  34-51353)
         filed with the Commission on March 6, 2007.

4.5      Series A Convertible  Preferred Stock  Registration  Rights  Agreement.
         Incorporated by reference to Exhibit 99.2 to the  Registrant's  Current
         Report on Form 8-K (File No.  34-51353)  filed with the  Commission  on
         January 26, 2007.

4.6      Series D Convertible  Preferred Stock  Registration  Rights  Agreement.
         Incorporated by reference to Exhibit 10.2 to the  Registrant's  Current
         Report on Form 8-K (File No.  34-51353)  filed with the  Commission  on
         March 6, 2007.

4.7      2005 Stock Incentive Plan.  Incorporated by reference to Exhibit 4.3 to
         the  Registrant's  Current Report on Form 8-K (File No. 34-51353) filed
         with the  Commission  on February  13, 2007. *

4.8      Form of Stock Option  Agreement.  Incorporated  by reference to Exhibit
         4.4 to the Registrant's  Current Report on Form 8-K (File No. 34-51353)
         filed with the Commission on February 13, 2007. *

10.1     Common Stock  Purchase  Agreement,  dated  October 24, 2006,  among the
         Registrant,  Trinad Capital Master Fund,  Ltd.,  Isaac Kier,  Jerome A.
         Chazen,  Sid Banon,  Lawrence S. Coben and Ralph Kier.  Incorporated by
         reference to Exhibit 10.1 to the  Registrant's  Current  Report on Form
         8-K (File No. 34-51353) filed with the Commission on October 30, 2006.

10.2     Series A Convertible  Preferred Stock Purchase  Agreement dated January
         24, 2007,  between the Registrant and Trinad Capital Master Fund,  Ltd.
         Incorporated by reference to Exhibit 99.1 to the  Registrant's  Current
         Report on Form 8-K (File No.  000-51353)  filed with the  Commission on
         January 26, 2007.

10.3     Series B Convertible  Preferred Stock Purchase  Agreement dated January
         30, 2007, among the Registrant, Watchung Road Associates, L.P., Lyrical
         Opportunity  Partners II LP, Lyrical  Opportunity  Partners II Ltd. and
         Destar  LLC.   Incorporated   by  reference  to  Exhibit  99.1  to  the
         Registrant's  Current Report on Form 8-K (File No. 33-51353) filed with
         the Commission on February 13, 2007.

10.4     Series D Convertible  Preferred Stock Purchase Agreement dated February
         28, 2007, between the Registrant and various  purchasers.  Incorporated
         by reference to Exhibit 10.1 to the Registrant's Current Report on Form
         8-K (File No. 33-51353) filed with the Commission on March 6, 2007.


                                       48
<PAGE>


10.5     Voting  Agreement  dated  February 21, 2007 among Trinad Capital Master
         Fund, Raymond Musci, MPLC Holdings, LLC, Europlay Capital Advisors, LLC
         and Scott  Walker.  Incorporated  by reference to Exhibit  10.34 to the
         Registrant's  Current Report on Form 8-K (File No. 34-51353) filed with
         the Commission on March 6, 2007.

10.6     Master SMS Services Agreement dated April 19, 2005, between New Motion,
         Inc. and Mobile Messenger Pty Ltd. Incorporated by reference to Exhibit
         10.1 to the Registrant's Current Report on Form 8-K (File No. 34-51353)
         filed with the Commission on February 13, 2007.

10.7     Addendum  dated April 28, 2005 to Master SMS Services  Agreement  dated
         April 19, 2005, between New Motion,  Inc. and Mobile Messenger Pty Ltd.
         Incorporated by reference to Exhibit 10.2 to the  Registrant's  Current
         Report on Form 8-K (File No.  34-51353)  filed with the  Commission  on
         February 13, 2007.

10.8     Amendment to Mobile Gateway  Agreement dated July 1, 2005,  between New
         Motion,  Inc. and Mobile Messenger Australia Pty Ltd. This amendment is
         an addendum to the Master SMS Services  Agreement dated April 19, 2005,
         between New Motion, Inc. and Mobile Messenger Pty Ltd.  Incorporated by
         reference to Exhibit 10.3 to the  Registrant's  Current  Report on Form
         8-K (File No. 34-51353) filed with the Commission on February 13, 2007.
10.9     Standard  Multi-Tenant  Office  Lease  dated July 6, 2005,  between New
         Motion,  Inc.  and  Dolphinshire,  L.P.  Incorporated  by  reference to
         Exhibit 10.4 to the  Registrant's  Current Report on Form 8-K (File No.
         34-51353) filed with the Commission on February 13, 2007.

10.10    Software  Development  and  Consulting  Agreement  dated July 19, 2005,
         between  New  Motion,   Inc.  and  e4site,   Inc.   d/b/a   Visionaire.
         Incorporated by reference to Exhibit 10.5 to the  Registrant's  Current
         Report on Form 8-K (File No.  34-51353)  filed with the  Commission  on
         February 13, 2007.

10.11    Engagement  Letter dated  August 2, 2005 and amended  January 10, 2006,
         between New Motion, Inc. and Anest Financial Solutions. Incorporated by
         reference to Exhibit 10.6 to the  Registrant's  Current  Report on Form
         8-K (File No. 34-51353) filed with the Commission on February 13, 2007.

10.12    Master  Equipment  Lease  Schedule  dated  August 5, 2005,  between New
         Motion, Inc. and VAResources, Inc. Incorporated by reference to Exhibit
         10.7 to the Registrant's Current Report on Form 8-K (File No. 34-51353)
         filed with the Commission on February 13, 2007.

10.13    Premium Service Agreement dated September 1, 2005,  between New Motion,
         Inc. and Mobile Messenger Australia Pty Ltd.  Incorporated by reference
         to Exhibit 10.8 to the  Registrant's  Current  Report on Form 8-K (File
         No. 34-51353) filed with the Commission on February 13, 2007.

10.14    Executive  Employment  Agreement  dated  October 1, 2005,  between  New
         Motion,  Inc. and Allan Legator.  Incorporated  by reference to Exhibit
         10.9 to the Registrant's Current Report on Form 8-K (File No. 34-51353)
         filed with the Commission on February 13, 2007. *

10.15    Executive  Employment Agreement dated March 8, 2007, between MPLC, Inc.
         and Scott  Walker.  Incorporated  by  reference  to Exhibit 10.1 to the
         Registrants  Current Report on Form 8-K (File No.  34-51353) filed with
         the Commission on March 14, 2007. *

10.16    Executive  Employment  Agreement  dated  October 1, 2005,  between  New
         Motion,  Inc. and Shane Maidy. .  Incorporated  by reference to Exhibit
         10.11 to the Registrants Current Report on Form 8-K (File No. 34-51353)
         filed with the Commission on February 13, 2007. *

10.17    Employment  Agreement dated October 1, 2005,  between New Motion,  Inc.
         and Brian Singleton.  Incorporated by reference to Exhibit 10.12 to the
         Registrants  Current Report on Form 8-K (File No.  34-51353) filed with
         the Commission on February 13, 2007. *

10.18    Letter Agreement dated October 20, 2005,  between New Motion,  Inc. and
         The Strickholm  Company.  Incorporated by reference to Exhibit 10.13 to
         the  Registrants  Current Report on Form 8-K (File No.  34-51353) filed
         with the Commission on February 13, 2007.

10.19    License Agreement dated December 1, 2005, between New Motion,  Inc. and
         Jaytu Technologies, LLC dba SigAlert.com.  Incorporated by reference to
         Exhibit 10.14 to the  Registrants  Current Report on Form 8-K (File No.
         34-51353) filed with the Commission on February 13, 2007.

10.20    Master  Agreement  for Products and Services  dated  December 29, 2005,
         between New Motion, Inc. and GoldPocket Wireless,  Inc. Incorporated by
         reference to Exhibit 10.15 to the  Registrants  Current  Report on Form
         8-K (File No. 34-51353) filed with the Commission on February 13, 2007.

10.21    Marketing  Agreement dated January 10, 2006,  between New Motion,  Inc.
         and Buongiorno USA, Inc.  Incorporated by reference to Exhibit 10.16 to
         the  Registrants  Current Report on Form 8-K (File No.  34-51353) filed
         with the Commission on February 13, 2007.

10.22    Contractor  Agreement dated January 11, 2006, between New Motion,  Inc.
         and Raymond  Musci.  Incorporated  by reference to Exhibit 10.17 to the
         Registrants  Current Report on Form 8-K (File No.  34-51353) filed with
         the Commission on February 13, 2007. *


                                       49
<PAGE>


10.23    US Premium Master Service Agreement dated January 17, 2006, between New
         Motion,  Inc. and Mobile  Messenger  Americas Pty Ltd.  Incorporated by
         reference to Exhibit 10.18 to the  Registrants  Current  Report on Form
         8-K (File No. 34-51353) filed with the Commission on February 13, 2007.

10.24    Addendum dated January 17, 2006 to US Premium Master Service  Agreement
         dated January 17, 2006,  between New Motion,  Inc. and Mobile Messenger
         Americas Pty Ltd.  Incorporated  by  reference to Exhibit  10.19 to the
         Registrants  Current Report on Form 8-K (File No.  34-51353) filed with
         the Commission on February 13, 2007.

10.25    Addendum dated January 18, 2006 to US Premium Master Service  Agreement
         dated January 17, 2006,  between New Motion,  Inc. and Mobile Messenger
         Americas Pty Ltd.  Incorporated  by  reference to Exhibit  10.20 to the
         Registrants  Current Report on Form 8-K (File No.  34-51353) filed with
         the Commission on February 13, 2007.

10.26    Sublease  Agreement dated July 12, 2006,  between New Motion,  Inc. and
         Aeronet  Worldwide.  Incorporated  by reference to Exhibit 10.21 to the
         Registrants  Current Report on Form 8-K (File No.  34-51353) filed with
         the Commission on February 13, 2007.

10.27    Engagement  Letter dated August 4, 2006,  between New Motion,  Inc. and
         Sanders Morris Harris Inc.  Incorporated  by Eeference to Exhibit 10.22
         to the Registrants Current Report on Form 8-K (File No. 34-51353) filed
         with the rommission on February 13, 2007.

10.28    Executive  Employment  Agreement  dated  August 28,  2006,  between New
         Motion,  Inc.  and Burton  Katz.  Incorporated  by reference to Exhibit
         10.23 to the Registrants Current Report on Form 8-K (File No. 34-51353)
         filed with the rommission on February 13, 2007. *

10.29    Employment  Agreement dated October 24, 2006, between New Motion,  Inc.
         and Derrin Griffiths. Incorporated by reference to Exhibit 10.24 to the
         Registrants  Current Report on Form 8-K (File No.  34-51353) filed with
         the Commission on February 13, 2007. *

10.30    Executive  Employment  Agreement  dated  October 28, 2006,  between New
         Motion, Inc. and Zach Greenberger. Incorporated by reference to Exhibit
         10.26 to the Registrants Current Report on Form 8-K (File No. 34-51353)
         filed with the Commission on February 13, 2007. *

10.31    Employment  Agreement dated October 31, 2006, between New Motion,  Inc.
         and Farlan  Dowell.  Incorporated  by reference to Exhibit 10.27 to the
         Registrants  Current Report on Form 8-K (File No.  34-51353) filed with
         the Commission on February 13, 2007. *

10.32    Asset Purchase  Agreement  dated January 19, 2007,  between New Motion,
         Inc. and Index Visual & Games Ltd. Incorporated by reference to Exhibit
         10.28 to the Registrants Current Report on Form 8-K (File No. 34-51353)
         filed with the Commission on February 13, 2007.

10.33    Secured  Convertible  Promissory Note issued on January 19, 2007 by New
         Motion in favor of Index Visual & Games Ltd.  Incorporated by reference
         to Exhibit 10.29 to the  Registrants  Current  Report on Form 8-K (File
         No. 34-51353) filed with the Commission on February 13, 2007.

10.34    Messing  Agreement dated November 17, 2003,  between Mobliss,  Inc. and
         Cingular  Wireless  LLC,  assigned to New  Motion,  Inc. on January 19,
         2007.  Incorporated  by reference to Exhibit  10.30 to the  Registrants
         Current  Report  on  Form  8-K  (File  No.  34-51353)  filed  with  the
         Commission on February 13, 2007.

10.35    SMS Connectivity Agreement dated January 8, 2004, between Mobliss, Inc.
         and Cingular Wireless LLC, assigned to New Motion,  Inc. on January 19,
         2007.  Incorporated  by reference to Exhibit  10.31 to the  Registrants
         Current  Report  on  Form  8-K  (File  No.  34-51353)  filed  with  the
         Commission on February 13, 2007.

10.36    Heads of Agreement dated January 19, 2007, between New Motion, Inc. and
         Index Visual & Games Ltd. Incorporated by reference to Exhibit 10.32 to
         the  Registrants  Current Report on Form 8-K (File No.  34-51353) filed
         with the Commission on February 13, 2007.

14.1     Code of  Ethics.  Incorporated  by  reference  to  Exhibit  14.1 to the
         Registrants Annual Report on Form 10-KSB (File No. 34-51353) filed with
         the Commission on July 31, 2005.

16.1     Letter  regarding  change of  certifying  accountant.  Incorporated  by
         reference to Exhibit 16.1 to the Registrants Current Report on Form 8-K
         (File No. 34-51353) filed with the Commission on February 13, 2007.

21.1     Subsidiaries of the registrant

31.1     Certification   of   Chief   Executive   Officer   pursuant   to   Rule
         13a-14(a)/15d-14(a)

31.2     Certification   of   Chief   Financial   Officer   pursuant   to   Rule
         13a-14(a)/15d-14(a)

32.1     Certification of Chief Financial Officer pursuant to 18 U.S.C.  Section
         1350

* Each a management contract or compensatory plan or arrangement  required to be
filed as an exhibit to this annual report on Form 10-KSB.

** Pursuant to Item  601(b)(2) of Regulation  S-B, the schedules to the Exchange
Agreement have been omitted. The Registrant undertakes to supplementally furnish
a copy of the omitted  schedules to the Securities and Exchange  Commission upon
request.


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<PAGE>


                ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

         Effective  February 12, 2007,  Windes & McClaughry became our principal
independent  accounting  firm.  All audit  work was  performed  by the full time
employees of Windes & McClaughry.  Our board of directors does not have an audit
committee.  The  functions  customarily  delegated  to an  audit  committee  are
performed by our full board of  directors.  Our board of  directors  approves in
advance,  all services performed by Windes & McClaughry.  Our board of directors
has considered  whether the provision of non-audit  services is compatible  with
maintaining  the  principal  accountant's  independence,  and has approved  such
services. Prior to February 12, 2007, the principal auditors of the Company were
Carlin, Charron & Rosen, LLP.

         The following table sets forth fees billed to us by our auditors during
the last two fiscal  years for:  services  rendered  for the audit of our annual
financial  statements  and the  review of our  quarterly  financial  statements,
services by our auditors that are reasonably  related to the  performance of the
audit or review of our financial  statements  and that are not reported as Audit
Fees,  services  rendered in connection with tax compliance,  tax advice and tax
planning, and all other fees for services rendered.

                                                             December 31,
                                                     ---------------------------
                                                       2006               2005
                                                     --------           --------
Audit Fees ...............................           $ 88,000           $108,977
Audit Related Fees .......................           $ 90,500           $   --
Tax Fees .................................           $ 78,000           $  4,000
All Other Fees ...........................           $   --             $   --

         The  audit  fees in 2006  include  $88,000  of fees  billed by Windes &
McClaughry  and related to the audit of our financial  statements for the fiscal
years ended  December 31, 2005 and 2006.  Audit related fees include  $82,000 of
fees billed by Windes & McClaughry for accounting services related to the review
of our quarterly financial statements.  Our former auditors,  Carlin,  Charron &
Rosen,  LLP provided audit services to MPLC in 2005 and 2006, which consisted of
audit fees of $0 in 2006 and $108,977 in 2005 and which  related to the audit of
MPLC's  financial  statements for the fiscal years ended July 31, 2005 and 2006.
Audit related fees include $8,500 of fees billed by Carlin, Charron & Rosen, LLP
for  accounting  services  related to the review of MPLC's  quarterly  financial
statements.

         Tax fees billed in 2005 and 2006, for $72,000 and $4,000, respectively,
were for tax return  preparation and financial  statement tax disclosure for New
Motion and was  performed by Deloitte  and Touche,  LLP. Tax fees billed in 2006
for $6,000 was for MPLC's tax return and tax  preparation  and was  performed by
David Allan, CPA.

         Raymond Musci (the  President and a member of the Board of Directors of
MPLC) and Allan Legator (the Chief Financial Officer and Secretary of MPLC) were
directly responsible for interviewing and retaining the independent  accountant,
considering  the  accounting   firm's   independence  and   effectiveness,   and
pre-approving the engagement fees and other  compensation to be paid to, and the
services to be  conducted  by, the  independent  accountant.  Messrs.  Musci and
Legator did not delegate these  responsibilities,  and pre-approved  100% of the
services described above.


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