**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-Q**


(Mark
      One)


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




For
      the
      quarterly period ended June 30, 2008 or




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




For
      the
      transition period from __________ to __________


Commission
      File Number: 001-12555




**New
      Motion, Inc.**


Doing
      business as





(Exact
                name of registrant as specified in its
                charter)




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





42
                Corporate Park, Suite 250, Irvine, California 92606(Address
                of principal executive offices and ZIP
                Code)




(949)
                777-3700(Registrant’s
                telephone number, including area
                code)





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


Yes   x No o


Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See
      the definitions of “large accelerated filer,” “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act.




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




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


Yes o No   x


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




As
      of
      August 13, 2008, the Company had 23,014,423 shares of Common Stock, $.01 par
      value, outstanding.








**New
      Motion, Inc.**


doing
      business as


**Atrinsic**


**Table
      of Contents**




PagePART
                  I
              FINANCIAL
                  INFORMATIONItem
                  1
              Financial
                  Statements
              2Item
                  2
              Management’s
                  Discussion and Analysis of Financial Condition and Results of
                  Operations
              14Item
                  3
              Quantitative
                  and Qualitative Disclosures about Market Risk
              21Item
                  4T
              Controls
                  and Procedures
              21PART
                  II
              OTHER
                  INFORMATIONItem
                  1A
              Risk
                  Factors
              22Item
                  2
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              28Item
                  6
              Exhibits
              29










**NEW
      MOTION, INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


**(in
      thousands, except share and per share amounts)**





**June 30,**
            
            **December 31,****2008**
            
            **2007****(Unaudited)****ASSETS****CURRENT
                ASSETS**Cash
                and cash equivalents
            
            $
            17,152
            
            $
            987Marketable
                securities
            
            
            -
            
            
            9,463Accounts
                receivable, trade, net of allowance for doubtful accounts of $1,303
                at
                June 30, 2008 and $565 at December 31, 2007
            
            
            22,269
            
            
            8,389Other
                current assets
            
            
            3,947
            
            
            2,278**TOTAL
                CURRENT ASSETS**
            
            
            43,368
            
            
            21,117**PROPERTY
                AND EQUIPMENT, NET**
            
            
            3,815
            
            
            860**MARKETABLE
                SECURITIES - NON CURRENT**
            
            
            8,050
            
            
            -**GOODWILL**
            
            
            101,373
            
            
            -**INDENTIFIED
                INTANGIBLES, NET**
            
            
            45,903
            
            
            599**OTHER
                ASSETS**
            
            
            560
            
            
            1,387**TOTAL
                ASSETS**
            
            $
            203,069
            
            $
            23,963**LIABILITIES
                AND STOCKHOLDERS' EQUITY****CURRENT
                LIABILITIES**Accounts
                payable
            
            $
            4,322
            
            $
            3,257Accrued
                expenses
            
            
            13,108
            
            
            3,720Other
                current liabilities
            
            
            375
            
            
            99**TOTAL
                CURRENT LIABILITIES**
            
            
            17,805
            
            
            7,076Deferred
                income taxes
            
            
            17,442
            
            
            -Notes
                payable
            
            
            1,771
            
            
            22**TOTAL
                LIABILITIES**
            
            
            37,018
            
            
            7,098Minority
                interest
            
            
            207
            
            
            283**COMMITMENTS
                AND CONTINGENCIES****STOCKHOLDERS'
                EQUITY**Common
                stock - par value $.01, 100,000,000 authorized, 22,774,327 and 12,021,184
                issued and outstanding, respectively
            
            
            228
            
            
            120Additional
                paid-in capital
            
            
            168,948
            
            
            19,583Accumulated
                other comprehensive loss
            
            
            -
            
            
            (38
            )Common
                stock, held in treasury, at cost, 232,300 shares
            
            
            (1,047
            )Accumulated
                deficit
            
            
            (2,285
            )
            
            (3,083
            )**TOTAL
                STOCKHOLDERS' EQUITY**
            
            
            165,844
            
            
            16,582**TOTAL
                LIABILITIES AND STOCKHOLDERS' EQUITY**
            
            $
            203,069
            
            $
            23,963




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




2




**NEW
      MOTION, INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**


**(UNAUDITED)**


**(in
      thousands, except share and per share amounts)**





**Three Months Ended**
            
            **Six Months Ended****June 30,**
            
            **June 30,****2008**
            
            **2007**
            
            **2008**
            
            **2007****NET
                REVENUES**
            
            $
            31,451
            
            $
            6,894
            
            $
            60,189
            
            $
            12,536**COST
                OF REVENUES**
            
            
            18,378
            
            
            1,494
            
            
            32,864
            
            
            2,220**GROSS
                PROFIT**
            
            
            13,073
            
            
            5,400
            
            
            27,325
            
            
            10,316**OPERATING
                EXPENSES**Selling
                and marketing
            
            
            2,581
            
            
            4,460
            
            
            9,154
            
            
            7,447General
                    and administrative (includes non-cash equity compensation of
                    $386, $278,
                    $1,080, and $472, respectively)
            
            
            8,029
            
            
            2,578
            
            
            15,768
            
            
            4,584Deprecation
                and amortization
            
            
            715
            
            
            320
            
            
            1,280
            
            
            51411,325
            
            
            7,358
            
            
            26,202
            
            
            12,545**INCOME
                (LOSS) FROM OPERATIONS**
            
            
            1,748
            
            
            (1,958
            )
            
            1,123
            
            
            (2,229
            )**OTHER
                (INCOME) EXPENSE**Interest
                income and dividends, net
            
            
            (75
            )
            
            (142
            )
            
            (360
            )
            
            (221
            )Other
                expense
            
            
            37
            
            
            -
            
            
            167
            
            
            21**INCOME
                (LOSS) BEFORE INCOME TAXES**
            
            
            1,786
            
            
            (1,816
            )
            
            1,316
            
            
            (2,029
            )**INCOME
                TAXES**
            
            
            768
            
            
            (909
            )
            
            594
            
            
            (905
            )**INCOME
                (LOSS) BEFORE MINORITY INTEREST**
            
            
            1,018
            
            
            (907
            )
            
            722
            
            
            (1,124
            )**MINORITY
                INTEREST**
            
            
            (48
            )
            
            (20
            )
            
            (76
            )
            
            135**NET
                INCOME (LOSS)**
            
            $
            1,066
            
            $
            (887
            )
            $
            798
            
            $
            (1,259
            )**EARNINGS
                (LOSS) PER SHARE:****Basic**
            
            $
            0.05
            
            $
            (0.08
            )
            $
            0.04
            
            $
            (0.12
            )**Diluted**
            
            $
            0.05
            
            $
            (0.08
            )
            $
            0.04
            
            $
            (0.12
            )**WEIGHTED
                AVERAGE SHARES OUTSTANDING:****Basic**
            
            
            22,664,860
            
            
            11,780,923
            
            
            20,613,896
            
            
            10,650,096**Diluted**
            
            
            23,176,573
            
            
            11,780,923
            
            
            21,209,564
            
            
            10,650,096




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




3





**NEW
      MOTION, INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(UNAUDITED)**


**(in
      thousands)**


**Six
                    Months Ended****June
                    30****2008**
                
                **2007****CASH
                    FLOWS FROM OPERATING ACTIVITIES**Net
                    income (loss)
                
                $
                798
                
                $
                (1,259
                )Adjustments
                    to reconcile net income (loss) to net cashused
                    in operating activities:Allowance
                    for doubtful accounts
                
                
                738
                
                
                (602
                )Depreciation
                    and amortization
                
                
                1,280
                
                
                514Stock-based
                    compensation expense
                
                
                1,080
                
                
                472Net
                    losses on sale of marketable securities
                
                
                175
                
                
                -Deferred
                    income taxes
                
                
                (88
                )
                
                (1,044
                )Minority
                    interest in net loss of consolidated joint venture
                
                
                (76
                )
                
                135Changes
                    in operating assets and liabilities of business, net of
                    acquisitions:Accounts
                    receivable
                
                
                1407
                
                
                (710
                )Other
                    current assets
                
                
                (646
                )
                
                (602
                )Other
                    assets
                
                
                (480
                )
                
                (10
                )Accounts
                    payable
                
                
                (6,692
                )
                
                (723
                )Other,
                    principally accrued expenses
                
                
                936
                
                
                892**Net
                    cash used in operating activities**
                
                
                (1,568
                )
                
                (2,937
                )**CASH
                    FLOWS FROM INVESTING ACTIVITIES**Purchases
                    of securities
                
                
                (6,332
                )
                
                -Proceeds
                    from sales of securities
                
                
                20,658
                
                
                -Cash
                    received in business combinations
                
                
                12,271
                
                
                -Cash
                    paid in business combinations
                
                
                (7,041
                )
                
                (1,006
                )Capital
                    expenditures
                
                
                (972
                )
                
                (118
                )**Net
                    cash provided by (used in) investing activities**
                
                
                18,584
                
                
                (1,124
                )**CASH
                    FLOWS FROM FINANCING ACTIVITIES**Repayments
                    of notes payable
                
                
                (1
                )
                
                (552
                )Expenditures
                    for equity financing
                
                
                -
                
                
                (470
                )Issuance
                    of warrants
                
                
                -
                
                
                57Issuance
                    of stock
                
                
                -
                
                
                18,471Purchase
                    of common stock held in treasury
                
                
                (1,047
                )
                
                -Proceeds
                    from exercise of stock options
                
                
                197
                
                
                -**Net
                    cash (used in) provided by financing activities**
                
                
                (851
                )
                
                17,506**NET
                    INCREASE IN CASH AND CASH EQUIVALENTS**
                
                
                16,165
                
                
                13,445**CASH
                    AND CASH EQUIVALENTS AT BEGINNING OF PERIOD**
                
                
                987
                
                
                544**CASH
                    AND CASH EQUIVALENTS AT END OF PERIOD**
                
                $
                17,152
                
                $
                13,989


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


4





**NEW
      MOTION, INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED)**


**(in
      thousands, except share amounts)**





**Accumulated****Additional**
            
            
            
            
            
            **Other**
            
            
            
            **Total****Common Stock**
            
            **Paid-in**
            
            **Treasury Stock**
            
            **Comprehensive**
            
            **Accumulated**
            
            **Stockholders'****Shares**
            
            **Amounts**
            
            **Capital**
            
            **Shares**
            
            **Amount**
            
            **Income(Loss)**
            
            **Deficit**
            
            **Equity****Balance,
                December 31, 2007**
            
            
            12,021,184
            
            $
            120
            
            $
            19,583
            
            
            
            
            $
            
            
            $
            (38
            )
            $
            (3,083
            )
            $
            16,582Net
                income for the six months ended June 30, 2008
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            798
            
            
            798Components
                of other comprehensive income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            38
            
            
            
            
            
            38Comprehensive
                lncome
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            836Stock-based
                compensation expense
            
            
            
            
            
            
            
            
            1,080
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,080Stock
                option exercises
            
            
            343,880
            
            
            4
            
            
            231
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            235Purchase
                of common stock, held in treasury, at cost
            
            
            
            
            
            
            
            
            
            
            
            232,300
            
            
            (1,047
            )
            
            
            
            
            
            
            
            (1,047
            )Common
                stock issued in connection with terms of current year
                merger
            
            
            10,409,358
            
            
            104
            
            
            148,054
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            148,158Miscellaneous
                share retirement
            
            
            (95
            )**Balance,
                June 30, 2008**
            
            
            22,774,327
            
            $
            228
            
            $
            168,948
            
            
            232,300
            
            $
            (1,047
            )
            $
            -
            
            $
            (2,285
            )
            $
            165,844




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




5




**NEW
      MOTION, INC. AND SUBSIDIARIES**


**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      1 – Basis of Presentation**




The
      accompanying Consolidated Balance Sheet as of June 30, 2008 , and the
      Consolidated Statements of Operations and the Consolidated Statements of Cash
      Flows for the three and six month periods ended June 30, 2008 and 2007 are
      unaudited, but in the opinion of management include all adjustments necessary
      for the fair presentation of financial position, the results of operations
      and
      cash flows for the periods presented and have been prepared in a manner
      consistent with the audited financial statements for the year ended
      December 31, 2007. Results of operations for interim periods are not
      necessarily indicative of annual results. These financial statements should
      be
      read in conjunction with the audited financial statements for the year ended
      December 31, 2007, included in the Company’s Annual Report on Form 10-KSB
      filed on March 31, 2008, and the amended Form 10-KSB, as filed on April 29,
      2008, for inclusion of part III, Directors, Executives Officers, Promoters,
      Control Persons and Corporate Governance; Compliance with Section 16(a) of
      the
      Exchange Act, and all other documents that have been filed with the Securities
      and Exchange Commission.




The
      preparation of financial statements in conformity with GAAP 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 revenue and expenses
      during the reporting period. On an ongoing basis, management evaluates its
      estimates, including, but not limited to, those related to: i) returns and
      allowances; ii) the allowance for doubtful accounts; iii) the assessment of
      other-than-temporary impairments related to the Company’s marketable securities;
      iv) the valuation of equity instruments granted by the Company; v) the value
      assigned to, recoverability and estimated useful lives of, goodwill and
      intangible assets acquired in business combinations; vi) the Company’s income
      tax expense, its deferred tax assets and liabilities and any valuation
      allowances recorded against deferred tax assets; and vii) the recognition and
      disclosure of contingent liabilities. These estimates and assumptions are based
      on historical data and experience, as well as various other factors that
      management believes to be reasonable under the circumstances. Actual results
      may differ from these estimates and assumptions.





Certain
      prior year amounts have been reclassified to conform to the current year’s
      presentation, specific to account groupings within the Company’s unaudited
      condensed consolidated financial statements.





**Six Months Ended**June 30,
            
            June 30,2008
            
            2007**Supplemental
                Cash Flow Disclosure**Cash
                paid during the six months ended for:Income
                taxes
            
            $
            1,776
            
            $
            40Interest
                expense
            
            
            16
            
            
            4




**Note
      2** – **Marketable Securities**





The
      Financial Accounting Standards Board issued FAS No. 157, Fair Value Measurements
      (“FAS 157”). FAS 157 defines fair value, establishes a framework for measuring
      fair value in generally accepted accounting principles (GAAP), and expands
      disclosures about fair value measurements. FAS 157 was adopted by the Company,
      as required, for fiscal periods ending after November 15, 2007 and for the
      interim period reporting therein. Although the adoption of FAS 157 did not
      materially impact the Company’s financial condition, results of operation, or
      cash flows, the Company is providing additional disclosures.





SFAS
      157
      establishes a three-tier fair value hierarchy, which prioritizes the inputs
      used
      in measuring fair value. These tiers are: Level I – fair value as measured based
      on observable inputs such as quoted prices in active markets for identical
      assets or liabilities; Level II – fair value as measured based on
      observable inputs such as quoted prices in active markets for similar assets
      or
      liabilities, and inputs other than quoted prices in active markets that are
      either directly or indirectly observable; and Level III – fair value as
      measured based on unobservable inputs in which little or no market data exists,
      thereby requiring an entity to develop its own fair value
      assumptions.


6




As
      of
      June 30, 2008, the Company held certain assets that are required to be measured
      at fair value on a recurring basis. These included the Company’s investments in
      marketable securities consisting of U.S. governmental agency, U.S. municipal
      agency, corporate obligations and auction-rate securities. In accordance with
      the SFAS No. 115, “Accounting for Certain Investments in Debt and Equity
      Securities”, our Marketable Securities are considered available-for-sale, based
      on our intentions to hold the related investment securities for varying and
      indefinite periods of time, pursuant to maturity dates, market conditions and
      other factors. The Company has not changed its investment intentions. Available
      for sale securities are carried at fair value, with unrealized gains or losses,
      net of tax, recorded in a separate component of stockholders’ equity within
      other accumulated comprehensive income.





Included
      in marketable securities at June 30, 2008 are auction-rate security instruments
      (ARS) with a par value of $8.05 million. Due to recent events in the credit
      markets, the auction events for some of the ARS the Company held failed when
      the
      ARS market first froze in February, 2008 and have continued to fail through
      June
      30, 2008. The ARS held by the Company at June 30, 2008 were collateralized
      by
      preferred securities in closed-ended tax-exempt mutual funds ($4.6 million),
      federally-guaranteed student loans ($1.45 million), and private student loans
      ($2.0 million). The Company reports the investments in ARS as non-current based
      on current market conditions and liquidity concerns. As of June 30, 2008, the
      Company continued to earn interest on its entire ARS portfolio based on
      contractually required “auction failure” rates, which are either variable based
      on short-term municipal bond or other market indices, or fixed based on issuer
      contract penalty rates and result in the Company earning a higher interest
      as a
      form of compensation for the lack of liquidity. The Company estimated fair
      value
      for its ARS portfolio by considering the collateralization of the underlying
      security investments, the creditworthiness of the issuer, the interest rates
      on
      the investments, any guarantee or insurance underlying the issuance, and any
      liquidity expectation or experience through redemption or successful auctions.
      Any future fluctuation in fair value related to ARS the Company deems to be
      temporary, including the recovery of any write-downs, would be recorded in
      accumulated other comprehensive income. If the Company determines that any
      impairment is other than temporary, the Company will be required to incur a
      charge to earnings in the period that the determination was made. All ARS are
      considered Level III for purposes of SFAS 157.





**June
                30,****2008**
            
            **Level
                I**
            
            **Level
                II**
            
            **Level
                III**Auction-rate
                Securities
            
            $
            8,050
            
            $
            -
            
            $
            -
            
            $
            8,050Other
                available-for-sale securities
            
            
            -
            
            
            -
            
            
            -
            
            
            -Total
                Assets Measured at Fair Value
            
            $
            8,050
            
            $
            -
            
            $
            -
            
            $
            8,050




**LEVEL
      III ASSET RECONCILIATION**





Beginning
                Balance, 12/31/2007
            
            $
            6,500Gains/(losses),
                realized
            
            
            -Gains/(losses),
                unrealized
            
            
            -Purchases
                & (sales), net
            
            
            (9,739
            )Transfers
                in/(out) of Level III Assets (1)
            
            
            11,289Ending
                Balance, 6/30/2008
            
            $
            8,050




(1)
      Transfers in from Traffix, Inc. acquisition, which was effective on February
      4,
      2008.




**Note
      3** – **Business
      Combinations**





For
      intangible assets acquired in the current, as well as prior fiscal years, such
      acquisitions were recorded in accordance with SFAS No. 142, “Goodwill and Other
      Intangible Assets.” The Company recognizes and measures the intangible assets
      acquired based on their fair value. In the case of an acquisition of a group
      of
      intangible assets, each asset’s fair value is determined. The Company has
      engaged an independent-third-party valuation advisor to assist in its effort,
      and internally uses a wide range of valuation methodologies, including
      discounted cash flow analysis to assess the value of acquired intangible assets.
      Discounted cash flow analysis requires assumptions about the timing and amount
      of future cash inflows and outflows, risk factors, alternative cost of capital
      considerations, and terminal value calculations. Each of these factors can
      significantly affect the value of the intangible asset. The estimates of future
      cash flows, based on reasonable and supportable assumptions and projections,
      require management’s judgment. Any changes in key assumptions about our
      businesses and their prospects, or changes in market conditions, could result
      in
      an impairment charge. Additionally, in accordance with generally accepted
      accounting principles the Company periodically evaluates whether it is more
      likely than not that the carrying amount of its reporting unit exceeds its
      fair
      value on an other than temporary basis. The Company believes it is possible
      that
      it may have an impairment of goodwill and identified intangibles in the future.


7




The
      respective valuations of the associated intangibles relating to both the Traffix
      (February 4, 2008) and Ringtone.com (June 30, 2008) acquisitions are in process.
      The Company’s balance sheet at June 30, 2008, and statement of operations for
      the three and six months ended June 30, 2008 reflects management’s best
      estimates of fair values of the intangible assets acquired and the related
      estimated useful lives. Modification to these estimates could affect fair values
      ascribed to the identified amortizable assets acquired and cause changes to
      prospective balance sheets and statements of operations.





*Ringtone.com*





On
      June
      30, 2008, the Company entered into an Asset Purchase Agreement (“APA”) with
      Ringtone.com, LLC (“Ringtone.com”) and W3i Holdings, LLC. (“W3i”) pursuant to
      which the Company acquired certain net-assets from Ringtone.com, including
      but
      not limited to short code, subscriber database, covenant not to compete, working
      capital, and certain domain names. The Company at the closing paid to
      Ringtone.com approximately $7.0 million in cash and delivered a convertible
      promissory note (the “Note”) with the aggregate principal amount of $1.75
      million, which accrues interest at a rate of 10% per annum. The Note is payable
      on the earlier to occur of either (i) July 1, 2009, or (ii) 5 days after the
      Company gives written notice to Ringtone.com of its intent to prepay the Note
      (the “Maturity Date”). The Note is optionally convertible by Ringtone.com on the
      Maturity Date into the Company’s common stock at a conversion price of $5.42 per
      share. The payment of principal and interest on the Note is subject to certain
      recoupment provisions contained in the Note and in the APA. At June 30, 2008,
      all amounts paid in excess of working capital have been ascribed to the
      estimated fair value of the identifiable intangibles.





The
      purchase price was allocated to the assets acquired and the liabilities assumed
      based on their estimated fair values at the closing date as summarized
      below:




**ESTIMATED
                  FAIR VALUE OF**
                **ASSETS
                  ACQUIRED & LIABILITIES ASSUMED**Subscriber
                  Database
              
              $
              3,956,414Domain
                  names
              
              
              1,173,585Proprietary
                  Software
              
              
              270,000Net
                  working capital
              
              
              3,252,663**ESTIMATED
                  FAIR VALUE****OF
                  ASSETS ACQUIRED**
              
              $
              8,652,662




The
      acquired intangible assets identified above include a subscriber database which
      has a 1 year weighted- average useful life and domain names that are indefinite
      lived and not subject to amortization.





*Unaudited
      Pro Forma Summary*




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


8




**Pro
      Forma Consolidated Statement of Operations**


**For
      the Three and Six Months Ending June 30, 2008 and 2007**


**(In
      thousands)**




**Three
                Months Ended**
            
            **Six
                Months Ended****June
                30, 2008**
            
            **June
                30, 2007**
            
            **June
                30, 2008**
            
            **June
                30, 2007**Net
                revenues
            
            $
            34,797
            
            $
            27,836
            
            $
            74,726
            
            $
            52,574Cost
                of revenues
            
            
            20,605
            
            
            16,476
            
            
            44,563
            
            
            30,084Gross
                proft
            
            
            14,192
            
            
            11,360
            
            
            30,163
            
            
            22,489Operating
                expense net of interest income and other expense
            
            
            11,575
            
            
            12,222
            
            
            26,809
            
            
            24,657Income
                tax expense (benefit)
            
            
            1,054
            
            
            (353
            )
            
            1,381
            
            
            (889
            )Net
                income (loss)
            
            $
            1,563
            
            $
            (509
            )
            $
            1,973
            
            $
            (1,279
            )Basic
                and Diluted earnings per share
            
            $
            0.07
            
            $
            (0.02
            )
            $
            0.09
            
            $
            (0.06
            )




**Note
      4 -**  **Significant
      Economic Dependence**





The
      Company’s revenue may at times be dependent on a limited number of major
      customers within its Network activities; additionally the Company uses several
      billing partners, also known as aggregators, in order to provide content and
      subsequent billings to its Entertainment activity subscription customers. These
      aggregator companies have not had long operating histories in the United States,
      or operations within traditional and proven business models. These aggregators
      face a greater business risk in the market place, due to a constantly evolving
      business environment that stems from the infancy of the United States mobile
      entertainment content industry. During the three and six month periods ended
      June 30, 2008, the Company had one customer within its Network activities which
      represented 13% and 12% of revenues, respectively, with no other single customer
      accounting for revenue in excess of 4%. This concentration resulted from the
      acquisition of Traffix, Inc., which was effective on February 4, 2008, therefore
      fiscal 2007 doesn’t have a comparable measure. During the three months ended
      June 30, 2008 and 2007, the Company had one aggregator within its Entertainment
      activities which represented 26% and 85% of revenues, respectively, with no
      other single aggregator accounting for revenue in excess of 6% and 8%,
      respectively. During the six months ended June 30, 2008, the Company had one
      aggregator within its Entertainment activities which represented 26% of
      revenues, with no other single aggregator accounting for revenue in excess
      of
      6%. During the six months ended June 30, 2007, the Company had two aggregators
      within its Entertainment activities which represented 85% and 10% of revenues,
      with no other single aggregator accounting for revenue in excess of
      5%.




**Note
      5**–**Income
      Taxes**





The
      Company is subject to taxation in states and domiciles in which it has nexus.
      The Traffix, Inc, subsidiary, which was acquired on February 4, 2008, is
      currently under federal audit for fiscal 2005 and 2006. With a few exceptions,
      the Company is no longer subject to U.S. federal, state or local income tax
      examinations for years prior to 2005.





**Note
      6—Stock options and other share-based compensation**





The
      fair
      value of share-based awards granted is estimated on the date of grant using
      the
      Black-Scholes option pricing model. The key assumptions for this model are
      expected term, expected volatility, risk-free interest rate, forfeiture rate,
      and dividend yield. Many of these assumptions are judgmental and highly
      sensitive. The following table set forth the key assumptions used in the
      valuation calculations for the three and six month periods ending June 30,
      2008
      and June 30, 2007 and a discussion of our methodology for developing each
      assumption used in the valuation model.


9





Three Months Ended
            
            Six Months EndedJune 30,
            
            June 30,2008
            
            2007
            
            2008
            
            2007Expected
                Volatility
            
            
            32
            %
            
            25
            %
            
            29
            %
            
            25
            %Dividend
                Yield
            
            
            0
            %
            
            0
            %
            
            0
            %
            
            0
            %Expected
                Term (Yrs)
            
            
            6.5
            
            
            7.0
            
            
            6.8
            
            
            7.0Risk-Free
                Interest Rate
            
            
            3.87
            %
            
            3.50
            %
            
            3.69
            %
            
            3.50
            %Forfeiture
                Rate
            
            
            20
            %
            
            5
            %
            
            13
            %
            
            5
            %




Expected
      Volatility .
      Actual
      changes in the market value of our stock are used to calculate the expected
      volatility assumption (previously, the Company based volatility on changes
      in
      the market prices of a peer group of publicly traded entities used to calculate
      the volatility assumption). The Company calculated daily market value changes
      during the period that the grant was issued to determine volatility, which
      are
      then annualized. An increase in the expected volatility will increase
      share-based compensation expense.





Dividend
      Yield .
      This is
      the annual rate of dividends per share over the exercise price of the award.
      The
      Company has no history of paying a dividend, so this has been 0%. An increase
      in
      the dividend yield will increase share-based compensation expense.





Expected
      Term .
      This is
      the period of time over which the awards granted are expected to remain
      outstanding. Awards granted have a maximum term of ten years. The Company lacks
      sufficient historical exercise data that it may rely on to determine expected
      term for the grants issued through June 30, 2008. Therefore the Company relied
      on the simplified method for expected term as defined by the SAB 107, where
      expected term equals the sum of the vesting term and the original contractual
      term, which is then divided by two. SAB 107’s simplified method for estimating
      expected term was only available for award grants through December 31, 2007.
      However, SAB 110 allows for the continued use of the simplified method beyond
      December 31, 2007 for companies where award exercises are not sufficient to
      base
      an expected term beyond that date, such as the Company. An increase in the
      expected term will increase share-based compensation expense.





Risk-Free
      Interest Rate .
      This is
      the average of the ten-year US Treasury zero coupon bond interest rate for
      the
      period reported. An increase in the risk-free interest rate will increase
      share-based compensation expense.





Forfeiture
      Rate .
      This is
      the estimated percentage of awards granted that are expected to be forfeited
      before becoming fully vested, i.e. service-based awards where the full award
      does not vest due to non-completion of the service by the employee, director,
      or
      consultant. For the three month period ending June 30, 2008, the Company revised
      its forfeiture rate percentage based on current experience. An increase in
      the
      forfeiture rate will decrease share-based compensation expense.


10





The
      Company’s stock option activity during the six month period ended June 30, 2008
      follows:





**Shares**
            
            **Weighted**
              **Average**
              **Exercise Price**
            
            **Aggregate**
              **Intrinsic**
              **Value**Awards
                outstanding at December 31, 2007
            
            
            1,508,538
            
            $
            3.31Granted
                during the period
            
            
            2,288,552
            
            $
            8.31Exercised
                during the period
            
            
            343,880
            
            $
            0.72Forfeited,
                expired, or cancelled during the period
            
            
            82,925
            
            $
            8.09Awards
                outstanding at June 30, 2008
            
            
            3,370,285
            
            $
            6.85Awards
                exercisable at June 30, 2008
            
            
            2,450,988
            
            $
            6.16
            
            $
            1,989,424Awards
                authorized
            
            
            5,145,389Awards
                available to grant
            
            
            905,192





The
      aggregate intrinsic value of exercisable awards represents the total pre-tax
      intrinsic value (the difference between the Company’s closing stock price on the
      last day of the second quarter of fiscal 2008 and the grant exercise price,
      multiplied by the number of in-the-money awards) that would have been received
      by the award holders had all award holders exercised their vested grants on
      June
      30, 2008.





Additional
      summarized information related to awards outstanding at June 30, 2008,
      segregated by grant price range, follows:





**Awards**
              **Exercise
                Prices**
              **Ranges**
            
            **Awards**
              **Outstanding**
              **Shares**
            
            **Awards**
              **Outstanding
                Weighted**
              **Average**
              **Exercise Price**
            
            **Awards**
              **Outstanding**
              **Remaining**
              **Weighted**
              **Average**
              **Contractual**
              **Life (Yrs)**
            
            **Awards**
              **Exercisable**
              **Shares**
            
            **Awards**
              **Exercisable**
              **Weighted**
              **Average**
              **Exercise Price**$0.00-$2.58
            
            
            813,799
            
            $
            1.25
            
            
            7.8
                yrs
            
            
            702,348
            
            $
            1.25$2.59-$4.43
            
            
            132,853
            
            $
            3.53
            
            
            2.7
                yrs
            
            
            132,853
            
            $
            3.53$4.44-$14.00
            
            
            2,423,633
            
            $
            8.91
            
            
            5.8
                yrs
            
            
            1,615,787
            
            $
            7.95**Total**
            
            
            3,370,285
            
            $
            6.85
            
            
            6.2
                yrs
            
            
            2,450,988
            
            $
            6.16




**Note
      7 – Earnings per Share** **




Basic
      earnings per common share (“EPS”) is calculated using the weighted average
      number of shares outstanding during each period and excludes all dilutive
      instruments. Diluted earnings per share reflects the potential dilution that
      would occur if all dilutive financial instruments that may be exchanged for
      equity securities were exchanged for common stock.




The
      Company has issued options, a convertible note payable and warrants, which
      may
      have a dilutive effect on reported earnings if they are exercised or converted
      to common stock. The following numbers of shares related to such instruments
      were added to the basic weighted average shares outstanding to arrive at the
      diluted weighted average shares outstanding for each period :


11




Diluted
      EPS Disclosure




**Three Months Ended**
            
            **Six Months Ended****June 30, 2008**
            
            **June 30, 2007**
            
            **June 30, 2008**
            
            **June 30, 2007**Convertible
                note payable
            
            
            -
            
            
            -
            
            
            -
            
            
            -Options
            
            
            506,169
            
            
            -
            
            
            579,795
            
            
            -Warrants
            
            
            5,544
            
            
            -
            
            
            15,873
            
            
            -





Financial
      instruments, which may be exchanged for equity securities are excluded in
      periods in which they are anti-dilutive. The following shares were excluded
      from
      the calculation of diluted earnings per share:





**Three Months Ended**
            
            **Six Months Ended****June 30, 2008**
            
            **June 30, 2007**
            
            **June 30, 2008**
            
            **June 30, 2007**Convertible
                note payable
            
            
            322,878
            
            
            -
            
            
            322,878
            
            
            -Options
            
            
            2,470,857
            
            
            2,712,200
            
            
            2,453,957
            
            
            2,712,200Warrants
            
            
            290,909
            
            
            314,446
            
            
            -
            
            
            314,446





The
      per
      share exercise prices of the options were $0.00-$14.00 and $0.48-$6.00 for
      the
      three months, and $0.00-$14.00 and $0.48-$6.00 for the six months ended June
      30,
      2008 and 2007, respectively. The per share exercise prices of the warants were
      $3.44-$5.50 and $3.44-$5.50 for the three and six month periods ended June
      30,
      2008 and 2007, respectively. The convertible note payable with a face value
      of
      $1,750,000, and a conversion price of $5.42, has a post conversion effect of
      322,878 shares.





**Note
      8—Equity**




In
      April,
      2008, the Company’s Board of Directors authorized a stock repurchase program
      allowing it to purchase up to $10.0 million of its outstanding shares of common
      stock, depending on market conditions, share prices, and other factors.
      Repurchases may take place in the open market or in privately negotiated
      transactions and may be made under a Rule 10b5-1 plan.





In
      the
      three month period ended June 30, 2008, the Company repurchased 232,300 shares
      of its common stock at an average purchase price of $4.51 per share. Total
      cash
      consideration for the repurchased stock was $1,046,719.





These
      repurchased shares are recorded as part of Treasury Stock. Treasury Stock is
      accounted for under the cost method.





There
      is
      no guarantee as to the exact number of shares that will be repurchased by the
      Company, and the Company may discontinue repurchases at any time that
      management or the Company’s board of directors determines additional repurchases
      are not warranted. The amounts authorized by the Company’s board of directors
      exclude broker commissions.




**Note
      9—Recent Accounting Pronouncements**





On
      February 12, 2008, the FASB issued FASB Staff Position (“FSP”) SFAS No. 157-2,
“Effective Date of SFAS No. 157,” which defers the effective date of SFAS 157
      for nonfinancial assets and liabilities, except for items that are recognized
      or
      disclosed at fair value in the financial statements on a recurring basis. This
      FSP will delay the implementation of SFAS 157 for the Company’s accounting of
      goodwill, acquired intangibles, and other nonfinancial assets and liabilities
      that are measured at the lower of cost or market until January 1, 2009.





In
      December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
      Combinations” (“SFAS 141R”). SFAS 141R establishes the principles and
      requirements for how an acquirer: (i) recognizes and measures in its financial
      statements the identifiable assets acquired, the liabilities assumed and any
      non-controlling interest in the acquiree; (ii) recognizes and measures the
      goodwill acquired in the business combination or a gain from a bargain purchase;
      and (iii) determines what information to disclose to enable users of the
      financial statements to evaluate the nature and financial effects of the
      business combination. SFAS 141R is to be applied prospectively to business
      combinations consummated on or after the beginning of the first annual reporting
      period on or after December 15, 2008, with early adoption prohibited. We are
      currently evaluating the impact SFAS 141R will have on adoption on our
      accounting for future acquisitions. Previously, any release of valuation
      allowances for certain deferred tax assets would serve to reduce goodwill,
      whereas under the new standard any release of the valuation allowance related
      to
      acquisitions currently or in prior periods will serve to reduce our income
      tax
      provision in the period in which the reserve is released. Additionally, under
      SFAS 141R transaction-related expenses, which were previously capitalized,
      will
      be expensed as incurred.


12




In
      December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
      Consolidated Financial Statements — an Amendment of ARB No. 51” (“SFAS 160”).
      SFAS 160 establishes accounting and reporting standards that require (i)
      non-controlling interests to be reported as a component of equity, (ii) changes
      in a parent’s ownership interest while the parent retains its controlling
      interest to be accounted for as equity transactions, and (iii) any retained
      non-controlling equity investment upon the deconsolidation of a subsidiary
      to be
      initially measured at fair value. SFAS 160 is effective for fiscal years and
      interim periods within those fiscal years, beginning on or after December 15,
      2008, with early adoption prohibited. We do not expect the adoption of SFAS
      160
      to have a material effect on our financial position or results of
      operations.





In
      February 2007, FASB issued FAS No. 159, The Fair Value Option for Financial
      Assets and Financial Liabilities (“SFAS 159”), which gives companies the option
      to measure eligible financial assets, financial liabilities and firm commitments
      at fair value (i.e., the fair value option), on an instrument-by-instrument
      basis, that are otherwise not permitted to be accounted for at fair value under
      other accounting standards. The election to use the fair value option is
      available when an entity first recognizes a financial asset or liability or
      upon
      entering into a firm commitment. Subsequent changes in fair value must be
      recorded in earnings. SFAS159 is effective for financial statements issued
      for
      fiscal year beginning after November 15, 2007. On January 1, 2008, we adopted
      SFAS 159. The adoption of SFAS 159 did not have a material effect on our
      financial condition or results of operations.





**Note
      10—Commitments and contingencies**


From
        time
        to time the Company is named as a defendant in litigation matters which arise
        in
        the ordinary course of business, as described in its periodic reports filed
        pursuant to the Securities Exchange Act of 1934. The defense of these
        claims may divert financial and management resources that would otherwise
        be
        used to benefit the Company’s operations. Although the Company believes that it
        has meritorious defenses to the claims made in each and all of the litigation
        matters to which it has been a named party, including claims relating to
        recently acquired Traffix, Inc., and although management is of the opinion
        that
        the ultimate outcome of these matters would not have a material adverse impact
        on the financial condition and/or the results of operations of the Company,
        no
        assurances can be given that the results of these matters will be favorable.
        A
        materially adverse resolution of any of these lawsuits could have a material
        adverse affect on the Company’s financial position and results of operations.
        The Company believes it has adequately provided for such litigation risks
        and
        costs, and has accounted for such amounts as pre-acquisition contingencies,
        which are included in accrued expenses.
  13




**Item
      2. Management’s Discussion and Analysis**





**CAUTIONARY
      STATEMENT**





*This
      discussion summarizes the significant factors affecting our consolidated
      operating results, financial condition and liquidity and cash flows for the
      three and six month periods ended June 30, 2008 and the three and six month
      periods ended June 30, 2007. Except for historical information, the matters
      discussed in this*  *“Management’s
      Discussion and Analysis” are forward-looking statements that involve risks and
      uncertainties and are based upon judgments concerning various factors that
      are
      beyond our control. Actual results could differ materially from those projected
      in the “*  *forward-looking
      statements” as a result of, among other things, the factors described under the
“Cautionary Statements and Risk Factors” included elsewhere in this report. The
      information contained in this Form 10-Q, as at and for the three and six month
      periods ended June 30, 2008 and 2007, and is intended to update the information
      contained in our Annual Report on Forms 10-KSB and 10-KSB/A for the year ended
      December 31, 2007 of New Motion, Inc. (“we,” “our,” “us”, the “Company,” or “New
      Motion”) and presumes that readers have access to, and will have read, the
“Management’s Discussion and Analysis” and other information contained in our
      Annual Report on Forms 10-KSB and 10-KSB/A. The following discussion and
      analysis also should be read together with our consolidated financial statements
      and the notes to the consolidated financial statements for Traffix, Inc. and
      subsidiaries and any other information related to the companies, their business
      combination, and the like as filed with the Securities and Exchange
      Commission.*





**A
      NOTE CONCERNING PRESENTATION**





This
      Quarterly Report on Form 10-Q contains information concerning New Motion, Inc.
      as it pertains to the periods covered by this report - for the three and
      six month periods ended June 30, 2008 and 2007. As a result of the acquisition
      of Traffix, Inc., a Delaware corporation (“Traffix”), by New Motion, Inc. on
      February 4, 2008, this Quarterly Report on Form 10-Q also contains information
      concerning the combination of New Motion and Traffix, as of June 30, 2008,
      and
      for the three and six month periods ended June 30, 2008. To assist the reader
      where practicable, when reference is made to New Motion, it pertains to the
      Company’s activities for the three and six month periods ended June 30, 2008
      inclusive of Traffix for all periods presented after February 4, 2008.





***Executive
      Overview***





New
      Motion, Inc., doing business as Atrinsic, is one of the leading digital
      advertising and entertainment network and marketing services companies in the
      United States. Atrinsic is organized as a single segment with two principal
      offerings: (1) Networks services - offering full service online marketing and
      distribution services which are targeted and measurable online campaigns and
      programs for marketing partners, corporate advertisers, or their agencies,
      generating qualified customer leads, online responses and activities, or
      increased brand recognition, and (2) Entertainment services - offering our
      portfolio of subscription based content applications direct to users working
      with wireless carriers and other distributors.





Atrinsic
      brings together the power of the Internet, the latest in mobile technology,
      and
      traditional marketing/advertising methodologies, creating a fully integrated
      multi platform vehicle for the advanced generation of qualified leads monetized
      by the sale and distribution of entertainment content, brand-based distribution
      and pay-for-performance advertising. Atrinsic’s Entertainment service’s content
      is organized into four strategic service groups - digital music, casual games,
      interactive contests, and communities/lifestyles. The Atrinsic brands include
      GatorArcade, a premium online and mobile gaming site, Bid4Prizes, a low-bid
      mobile auction interactive game, and iMatchUp, one of the first integrated
      web-mobile dating services. Feature-rich Network advertising services include
      a
      mobile ad network, extensive search capabilities, email marketing, one of the
      largest and growing publisher networks, and proprietary entertainment content.
      Services are provided on a variety of pricing models including cost per action,
      fixed fee, or commission based arrangements.





New
      Motion, Inc. is operating under the trade name of Atrinsic and is in the process
      of formally changing its name. In addition, Atrinsic is moving its headquarters
      to New York City, and will continue to maintain offices in Irvine, CA, Seattle,
      WA, and Moncton, Canada.





Our
      goal
      is to maximize the value of our available media (primarily qualified leads)
      to
      optimize revenues regardless of the nature of the services provided. Over an
      extended period of time our ability to generate incremental revenues relies
      on
      our ability to increase in the size and scope of our media, our ability to
      target campaigns, and our ability to convert qualified leads into appropriate
      revenue generating opportunities.


14




In
      managing our business, we internally develop programming or partner with online
      content providers to match users with our service offerings, and those of our
      advertising clients. Our continued success and prospects for growth are
      dependent on our ability to acquire content in a cost effective manner. Our
      results may also be impacted by overall economic conditions, trends in the
      online marketing and telecommunications industry, competition, and risks
      inherent in our customer database, including customer attrition.





There
      are
      a variety of factors that influence the Company’s revenues on a periodic basis
      including but not limited to; (1) economic conditions and the relative strengths
      and weakness of the U.S economy; (2) client spending patterns and their overall
      demand for our service offerings; (3) increases or decreases in our portfolio
      of
      service offerings; and (4) competitive and alternative programs and advertising
      mediums.





Similar
      to other media based companies, our ability to specifically isolate the relative
      historical aggregate impact of price and volume regarding our revenue is not
      practical as the majority of our services are sold and managed on an order
      by
      order basis and our revenues are greatly impacted by our decisions regarding
      qualified lead monetization. Factors impacting the pricing of our services
      include, but are not limited to: (1) the dollar value, length and breadth of
      the
      order; (2) the quality of the desired action; (3) the quantity of actions or
      services requested by our clients; and (4) the level of customization required
      by our clients.





The
      principal components of operating expenses are labor, media and media related
      expenses (including affiliate compensation, content development and licensing
      fees), marketing and promotional expenses (including sales commissions and
      customer acquisition and retention expenses) and corporate general and
      administrative expenses. We consider the Company’s operating cost structure to
      be predominantly variable in nature over a short time horizon, and as a result,
      the Company is immediately able to make modifications to its cost structure
      to
      what it believes to be increases or decreases in revenue and market trends.
      This
      factor is important in monitoring the Company’s performance in periods when
      revenues are increasing or decreasing. In periods where revenues are increasing
      as a result of improved market conditions, the Company will make every effort
      to
      best utilize existing resources, but there can be no guarantee that the Company
      will be able to increase revenues without incurring additional marketing or
      operating costs and expenses. Conversely, in a period of declining market
      conditions the Company is immediately able to reduce certain operating expenses
      and preserve operating income. Furthermore, if the Company perceives a decline
      in market conditions to be temporary, it may choose to maintain or increase
      operating expenses for the future maximization of operating results.





**STRATEGIC
      INITIATIVES**




Our
      business strategy involves increasing our overall scale and profitability by
      offering a large number of diversified products through a unique distribution
      network in the most cost effective manner possible. To achieve this goal, we
      are
      pursuing the following objectives.





*Achieve
      Cross Media Benefits* *.* One
      of
      our strategic objectives is to leverage the cross media benefit derived
      primarily from the combination of New Motion and Traffix which was consummated
      on February 4, 2008. The Company’s premium-billed subscriptions allow Atrinsic
      to integrate and to leverage online and mobile distribution channels to deliver
      compelling media and entertainment. The advantage of the fixed Internet is
      that
      from a marketing expense standpoint, the cost of customer acquisitions is
      generally determinable. In addition, the Internet is full of free content that
      is advertisement supported. The Internet also allows for the delivery of rich
      media over broadband. The advantage of mobile media is that it already has
      a
      well established customer activation and customer retention capability and
      is
      accessible and portable for those using it to access content. Our cross media
      strategy seamlessly enables our subscriber to realize true convergence. Atrinsic
      enables subscribers to interact with our content at work, at home or on a remote
      basis.





*Vertically
      Integrate and Expand Distribution Channels* .
      We own
      a large library of wholly owned content, proprietary premium billed services,
      and our own media and distribution. By allocating a large proportion of the
      qualified leads acquired by our entertainment properties to our owned marketing
      and distribution networks, we expect to generate cost savings through the
      elimination of third-party margins. These cost savings are expected to result
      in
      lower customer acquisition costs throughout our business. We also expect to
      continue to enhance our distribution channels by expanding existing channels
      to
      market and sell our products and services online and explore alternative
      marketing mediums. We also expect, with limited modification, to market and
      sell
      our existing online-only content directly to wireless customers. Finally, we
      expect to continue to drive a portion of our consumer traffic directly to our
      proprietary products and services without the use of third-party media outlets
      and media publishers.





*Multiple
      Revenue Streams and Advertiser Networks* .
      Our
      recent merger has allowed for a reduction in customer concentration and more
      diversification of the combined company’s revenue streams. The Company will
      continue to generate recurring revenue streams from a subscription-based model,
      which is targeted at end user mobile subscribers. The Company will also have
      the
      traditional revenue streams inherent in it’s online performance-based model,
      which is targeted to publishers and advertisers. Further revenue diversification
      is expected to result from the larger distribution reach, and of the opportunity
      to generate ad revenue across the combined company’s portfolio of web
      properties.


15




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





**Results
      of Operations for the three months ended June 30, 2008 compared to the three
      months ended June 30, 2007.**





Revenues
      presented by type of activity are as follows for the three month periods ending
      June 30:





**THREE
                MONTHS ENDED**
            
            **CHANGE**
            
            **CHANGE****JUNE
                30,**
            
            **INC(DEC)**
            
            **INC(DEC)****2008**
            
            **2007**
            
            $$$
            
            **%**%**%******Entertainment
                Services
            
            $
            9,982
            
            $
            6,894
            
            $
            3,088
            
            
            45
            %Network
                Activities
            
            
            21,469
            
            
            -
            
            
            21,469
            
            
            100
            %**Total
                Revenues (1)**
            
            $
            31,451
            
            $
            6,894
            
            $
            24,557
            
            
            356
            %




(1)
            As
                described above, the Company currently aggregates revenues based
                on the
                type of user activity monetized. The Company’s objective is to optimize
                total revenues from the user experience. Accordingly, this factor
                should
                be considered in evaluating the relative revenues generated from
                our
                Entertainment and Network Services.





Revenues
      increased approximately $24.6 million, or 356%, to $31.5 million for the three
      months ended June 30, 2008, compared to $6.9 million for the three months ended
      June 30, 2007. Entertainment Service revenue increased by approximately $3.1
      million, or 45%, to $10 million for the three months ended June 30, 2008,
      compared to $6.9 million for the three months ended June 30, 2007. The increase
      in entertainment service revenue was principally attributable to an increase
      in
      the net conversion of new customers to our recurring subscriber database,
      coupled with our efforts to improve subscriber retention. We ended the second
      quarter of 2008 with approximately 850,000 subscribers, compared to
      approximately 840,000 at the end of the fourth quarter of fiscal 2007.
      Approximately 87% of the increase in revenue, or $21.5 million, was attributable
      to revenue included in the second quarter of fiscal 2008 arising from our
      acquisition of Traffix, Inc., which was effective as of February 4, 2008.
      Revenues derived from the Traffix, Inc. subsidiary have increased relative
      to
      the comparable interim period of the prior year, primarily as a result of
      increased service offerings, penetration into new categories of clients and
      markets, and increased acceptance of the CPA (cost per action) pricing models.





**Cost
      of Revenues**





Cost
      of
      revenues consists principally of the amounts we pay to website publishers,
      content owners, and distribution partners. In addition, certain
      telecommunications, revenue producing technology related, licensing, and labor
      are included in cost of revenues. The vast majority of cost of revenues are
      variable and directly related to revenue producing activities. Gross margin
      is
      computed by the Company allowing management to evaluate the overall productivity
      of our resources and is largely dependent on the mix of internal and external
      resources utilized to secure qualified leads and product mix. Since the
      Company’s goal is to maximize the yield on the total population of qualified
      leads, the Gross Margins attributable to each product or service are not
      computed. Gross profit for the second quarter of 2008 totaled $13.1 million
      (or
      41.6% of Revenues) as compared to $5.4 million (or 78.3% of Revenues) for the
      second quarter of 2007. This increase is largely attributable to the acquisition
      of Traffix, Inc. on February 4, 2008, the resulting change in the Company’s mix
      of service offerings, and the convergence of our content and distribution
      platform.


16





**Operating
      Expenses**





**THREE
                MONTHS ENDED**
            
            **CHANGE**
            
            **CHANGE****JUNE
                30,**
            
            **INC(DEC)**
            
            **INC(DEC)****2008**
            
            
            **2007**
            
            
            **$$$**
            
            
            **%%%****Operating
                Expenses**Selling
                and marketing
            
            $
            2,581
            
            $
            4,460
            
            $
            (1,879
            )
            
            -42
            %General
                and administrative
            
            
            8,029
            
            
            2,578
            
            
            5,451
            
            
            211
            %Depreciation
                and amortization
            
            
            715
            
            
            320
            
            
            395
            
            
            123
            %**Total
                Operating Expenses**
            
            $
            11,325
            
            $
            7,358
            
            $
            3,967
            
            
            54
            %




Sales
      and
      marketing expense declined as a result of management’s decision to decrease
      discretionary customer acquisition and retention activities by approximately
      $2.9 million in response to market conditions coupled with management’s focus on
      post merger integration matters when compared to the prior year’s comparable
      quarter, offset by an increase of approximately $1.0 million attributable to
      the
      acquisition of the Traffix subsidiary, which was principally comprised of
      compensation related expenses.





General
      and administration expenses increased by approximately $5.5 million, of which
      approximately $3.5 million is attributable to the acquisition of Traffix, Inc.,
      which was effective as of February 4, 2008. Management has taken action to
      gain
      approximately $4 million of efficiencies resulting from the acquisition of
      Traffix, however the Company continues to make appropriate and modest
      investments in labor, facilities, technology infrastructure, and utilization
      of
      3 rd party
      professional service providers to support its continued growth, business
      development and corporate governance initiatives. In addition, non-cash equity
      based compensation expense, which is included as a component of General &
administrative expense, increased concurrent with the grant of stock options
      deemed necessary to attract and retain talent.





Depreciation
      and amortization expense increased when compared to the prior year’s three month
      period principally as the result of the amortization of intangible assets
      acquired in connection with the acquisition of the Traffix, Inc.
      subsidiary.





**Income
      (Loss) from Operations**





Operating
      income increased to approximately $1.8 million during the three months ended
      June 30, 2008, when compared to an operating loss of approximately $1.9 million
      for the prior year’s comparable period. This increase was principally
      attributable to the Traffix merger transaction which occurred on February 4,
      2008. The merger’s attendant synergies allowed for the linkage of distribution
      and content, coupled with the opportunity to eliminate duplicative operating
      expenses.





**Income
      Taxes**





Income
      tax expense for the three months ended June 30, 2008 was $0.8 million and
      reflects an effective tax rate of 43%, which was computed taking into
      consideration the effects of the merger with Traffix, Inc. which occurred on
      February 4, 2008, and includes the result of changes in the weighted average
      statutory rate attributable to the addition of certain local jurisdictions
      resulting from the merger. ****


17





**Results
      of Operations for the six months ended June 30, 2008 compared to the six months
      ended June 30, 2007.**





Revenues
      presented by type of activity are as follows for the six month periods ending
      June 30:





**SIX
                MONTHS ENDED**
            
            **CHANGE**
            
            **CHANGE****JUNE
                30, 2008**
            
            **INC(DEC)**
            
            **INC(DEC)****2008**
            
            **2007**
            
            $$$
            
            **%%%**Entertainment
                Services
            
            $
            23,089
            
            $
            12,536
            
            $
            10,553
            
            
            84
            %Network
                Activities
            
            
            37,100
            
            
            -
            
            
            37,100
            
            
            100
            %**Total
                Revenues (1)**
            
            $
            60,189
            
            $
            12,536
            
            $
            47,653
            
            
            380
            %




(1)
            As
                described above, the Company currently aggregates revenues based
                on the
                type of user activity monetized. The Company’s objective is to optimize
                total revenues from the user experiences. Accordingly, this factor
                should
                be considered in evaluating the relative revenues generated from
                our
                Entertainment and Network Services.





Revenues
      increased approximately $47.7 million, or 380%, to $60.2 million for the six
      months ended June 30, 2008, compared to $12.5 million for the six months ended
      June 30, 2007.





Entertainment
      Service revenue increased by approximately $10.6 million, or 84%, to $23.1
      million for the six months ended June 30, 2008, compared to $12.5 million for
      the six months ended June 30, 2007. The increase in entertainment service
      revenue was principally attributable to an increase in the net conversion of
      new
      customers to our recurring subscriber database, coupled with our efforts to
      improve subscriber retention. We ended the second quarter of 2008 with
      approximately 850,000 subscribers, compared to approximately 840,000 at the
      end
      of the fourth quarter of fiscal 2007.





Approximately
      78% of the increase in revenue, or $37.1 million, was attributable to revenue
      included in the six months ended June 30, 2008 arising from our acquisition
      of
      Traffix, Inc., which was effective as of February 4, 2008. Revenues derived
      from
      the Traffix, Inc. subsidiary have increased relative to the comparable interim
      period of the prior year primarily as a result of increased service offerings,
      penetration into new categories of clients and markets, and increased acceptance
      of the CPA (cost per action) pricing models.





**Cost
      of Revenues**





Cost
      of
      revenues consists principally of the amounts we pay to website publishers,
      content owners, and distribution partners. In addition, certain
      telecommunications, revenue producing technology related, licensing, and labor
      are included in cost of revenues. The vast majority of cost of revenues are
      variable and directly related to revenue producing activities. Gross margin
      is
      computed by the Company allowing management to evaluate the overall productivity
      of our resources and is largely dependent on the mix of internal and external
      resources utilized to secure qualified leads and product mix. Since the
      Company’s goal is to maximize the yield on the total population of qualified
      leads, the Gross Margins attributable to each product or service are not
      computed. Gross profit for the six months ended June 30, 2008 totaled $27.3
      million (or 45% of Revenues) as compared to $10.3 million (or 82% of Revenues)
      for the comparable period ending June 30, 2007. This increase is largely
      attributable to the acquisition of Traffix, Inc. on February 4, 2008 and the
      resulting change in the Company’s mix of service offerings, and the convergence
      of our content and distribution platform.




18





**Operating
      Expenses**





**SIX MONTHS ENDED**
            
            **CHANGE**
            
            **CHANGE****JUNE 30,**
            
            **INC(DEC)**
            
            **INC(DEC)****2008**
            
            **2007**
            
            **$$$**
            
            **%%%****Operating
                Expenses**Selling
                and marketing
            
            $
            9,154
            
            $
            7,447
            
            $
            1,707
            
            
            23
            %General
                and administrative
            
            
            15,768
            
            
            4,584
            
            
            11,184
            
            
            244
            %Depreciation
                and amortization
            
            
            1,280
            
            
            514
            
            
            766
            
            
            149
            %**Total
                Operating Expenses**
            
            $
            26,202
            
            $
            12,545
            
            $
            13,657
            
            
            109
            %





Sales
      and
      marketing expense increased as a result of management’s decision to maintain a
      modest level of customer acquisition and retention activities earlier in the
      year. Approximately $1.5 million of the increase is attributable to the
      acquisition of the Traffix, Inc. subsidiary, which was principally comprised
      of
      the costs of labor.





General
      and administration expenses increased by approximately $11.2 million, of which
      approximately $6.6 million is attributable to the acquisition of Traffix, Inc.,
      which was effective as of February 4, 2008. Management has taken action to
      gain
      $4 million of efficiencies resulting from the acquisition of Traffix, however
      the Company continues to make appropriate and modest investments in labor,
      facilities, technology infrastructure, and utilization of 3 rd party
      professional service providers to support its continued growth, business
      development and corporate governance initiatives. In addition, non-cash equity
      based compensation expense increased concurrent with the grant of stock options
      deemed necessary to attract and maintain talent.





Depreciation
      and amortization expense increased when compared to the prior year’s six month
      period principally as a result of the amortizable of intangible assets acquired
      in connection with the acquisition of the Traffix, Inc. subsidiary.





**Operating
      income**





Operating
      income increased to $1.3 million during the six months ended June 30, 2008,
      when
      compared to an operating loss of approximately $2.0 million for the prior year’s
      comparable period. This increase was principally attributable to the Traffix
      merger transaction which occurred on February 4, 2008. The merger’s attendant
      synergies allowed for the linkage of distribution and content, coupled with
      the
      opportunity to eliminate duplicative operating expenses.




**Income
      taxes**





Income
      tax expense for the six months ended June 30, 2008 was $0.6 million, for an
      effective tax rate of 45.1%, as compared to an income tax benefit for the six
      months ended June 30, 2007 of $0.9 million, for an effective tax rate of 44.6%.
      This increase is primarily the result of changes in the weighted average
      statutory rate attributable to the addition of certain local jurisdictions
      in
      the current period when compared with the prior year’s comparable
      period.





**Liquidity
      and Capital Resources**





The
      Company continually projects anticipated cash requirements, which may include
      share repurchases, business combinations, capital expenditures, principal and
      interest payments on its outstanding and future indebtedness, and working
      capital requirements. Funding requirements have been financed through business
      combinations, cash flow from operations, the issuance of preferred stock,
      option exercises and the issuance of long-term debt. As of June 30, 2008, the
      Company had cash and cash equivalents of approximately $17.2 million, marketable
      securities of approximately $8.05 million and a working capital balance of
      approximately $25.6 million. The Company has and continues to expect to generate
      sufficient cash flows from operating activities.





In
      conjunction with the Company’s objective of enhancing shareholder value, the
      Company’s Board of Directors authorized a share repurchase program. Under this
      share repurchase program, the Company purchased 232,300 shares of the Company’s
      common stock for an aggregate price of $1.047 million during the first six
      months of fiscal 2008.


19





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





**New
      Accounting Standards and Interpretations Not Yet Adopted**





On
      February 12, 2008, the FASB issued FASB Staff Position (“FSP”) SFAS No. 157-2,
“Effective Date of SFAS No. 157,” which defers the effective date of SFAS 157
      for nonfinancial assets and liabilities, except for items that are recognized
      or
      disclosed at fair value in the financial statements on a recurring basis. This
      FSP will delay the implementation of SFAS 157 for the Company’s accounting of
      goodwill, acquired intangibles, and other nonfinancial assets and liabilities
      that are measured at the lower of cost or market until January 1, 2009.





In
      December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
      Combinations” (“SFAS 141R”). SFAS 141R establishes the principles and
      requirements for how an acquirer: (i) recognizes and measures in its financial
      statements the identifiable assets acquired, the liabilities assumed and any
      non-controlling interest in the acquiree; (ii) recognizes and measures the
      goodwill acquired in the business combination or a gain from a bargain purchase;
      and (iii) determines what information to disclose to enable users of the
      financial statements to evaluate the nature and financial effects of the
      business combination. SFAS 141R is to be applied prospectively to business
      combinations consummated on or after the beginning of the first annual reporting
      period on or after December 15, 2008, with early adoption prohibited. We are
      currently evaluating the impact SFAS 141R will have on adoption on our
      accounting for future acquisitions. Previously, any release of valuation
      allowances for certain deferred tax assets would serve to reduce goodwill,
      whereas under the new standard any release of the valuation allowance related
      to
      acquisitions currently or in prior periods will serve to reduce our income
      tax
      provision in the period in which the reserve is released. Additionally, under
      SFAS 141R transaction-related expenses, which were previously capitalized,
      will
      be expensed as incurred.





In
      December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
      Consolidated Financial Statements — an Amendment of ARB No. 51” (“SFAS 160”).
      SFAS 160 establishes accounting and reporting standards that require (i)
      non-controlling interests to be reported as a component of equity, (ii) changes
      in a parent’s ownership interest while the parent retains its controlling
      interest to be accounted for as equity transactions, and (iii) any retained
      non-controlling equity investment upon the deconsolidation of a subsidiary
      to be
      initially measured at fair value. SFAS 160 is effective for fiscal years and
      interim periods within those fiscal years, beginning on or after December 15,
      2008, with early adoption prohibited. We do not expect the adoption of SFAS
      160
      to have a material effect on our financial position or results of
      operations.





In
      February 2007, FASB issued FAS No. 159, The Fair Value Option for Financial
      Assets and Financial Liabilities (“SFAS 159”), which gives companies the option
      to measure eligible financial assets, financial liabilities and firm commitments
      at fair value (i.e., the fair value option), on an instrument-by-instrument
      basis, that are otherwise not permitted to be accounted for at fair value under
      other accounting standards. The election to use the fair value option is
      available when an entity first recognizes a financial asset or liability or
      upon
      entering into a firm commitment. Subsequent changes in fair value must be
      recorded in earnings. SFAS159 is effective for financial statements issued
      for
      fiscal year beginning after November 15, 2007. On January 1, 2008, we adopted
      SFAS 159. The adoption of SFAS 159 did not have a material effect on our
      financial condition or results of operations.




20





**Item
      3. Quantitative and Qualitative Disclosures about Market
      Risk**





Not
      Required.




**Item
      4. Disclosure Controls and Procedures**





*Evaluation
      of Disclosure Controls and Procedures*





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





Members
      of the our management, including our Chief Executive Officer, Burton Katz,
      and
      Chief Financial Officer Andrew Zaref, have evaluated the effectiveness of our
      disclosure controls and procedures, as defined by paragraph (e) of Exchange
      Act
      Rules 13a-15 or 15d-15, as of June 30, 2008, the end of the period covered
      by
      this report. Based upon that evaluation, Messrs. Katz and Zaref concluded that
      our disclosure controls and procedures were effective for the period ended
      June
      30, 2008.




21





INTERNAL
      CONTROL OVER FINANCIAL REPORTING





There
      were no changes in our internal control over financial reporting or in other
      factors identified in connection with the evaluation required by paragraph
      (d)
      of Exchange Act Rules 13a-15 or 15d-15 that occurred during the second quarter
      ended June 30, 2008 that have materially affected, or are reasonably likely
      to
      materially affect, our internal control over financial reporting.




**PART
      II**   **–
      OTHER INFORMATION**





**Item
      1A. Risk Factors**





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





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





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




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





•
            maintain
                and develop new wireless carrier and billing aggregator relationships
                upon
                which our mobile entertainment business currently
                depends;•
            maintain
                a compliance based control system to render our products and services
                compliant with carrier and aggregator demands, as well as marketing
                practices imposed by private marketing rule makers, such as the Mobile
                Marketing Association (MMA), and to conform with the stringent marketing
                demands as imposed by various States’ Attorneys
                General;•
            respond
                effectively to competitive pressures in order to maintain our market
                position;•
            increase
                brand awareness and consumer recognition to secure continued
                growth;•
            attract
                and retain qualified management and employees for the expansion of
                the
                operating platform;•
            continue
                to upgrade our technology to process increased usage and remain
                competitive with message delivery;•
            continue
                to upgrade our information processing systems to assess marketing
                results
                and customer satisfaction ;•
            continue
                to develop and source high-quality mobile content that achieves
                significant market acceptance;•
            maintain
                and grow our off-deck distribution (“off-deck” refers primarily to
                services delivered through the Internet, which are independent of
                the
                carriers own product and service offers), including such distribution
                through our web sites and third-party direct-to-consumer
                distributors;




22





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





If
      we are
      unable to address these risks, and respond accordingly, our operating results
      may not meet our publicly forecasted company goals, and/or the expectations
      as
      derived by our investors, which could cause the price of our common stock to
      decline. The potential for a decline in our stock price could also have a
      negative impact on our recorded goodwill and intangible asset values, and
      potentially subject us to a non-cash impairment write-down on such assets.
      At
      June 30, 2008, our approximate book value was $165.8 million, and our
      market value was approximately $91 million on the close of business on
      August 12, 2008.





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





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





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





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




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


•
            a
                carrier’s decision to suspend delivery of our products and services to our
                customer base;•
            a
                carrier’s decision to offer its own competing entertainment applications,
                products and services;•
            a
                carrier’s decision to offer similar entertainment applications, products
                and services to its subscribers for price points less than our offered
                price points, or for free;•
            a
                network encountering technical problems that disrupt the delivery
                of, or
                billing for, our applications;•
            the
                potential for concentrations of credit risk embedded in the amounts
                receivable from the aggregator should any one, or group of aggregators,
                encounter financial difficulties, directly or indirectly, as a result
                of
                the current period of slowed-economic-growth currently affecting
                the
                United States; or•
            A
                decision to increase the fees it charges to market and distribute
                our
                applications, thereby increasing its own revenue and decreasing our
                share
                of revenue.





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


23





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





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





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





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





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




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





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





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


24





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





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





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





Our
      business may be adversely affected by the proliferation of "spam" or unwanted
      internet solicitations. In response to the proliferation of spam, Internet
      Service Providers ("ISPs") have been adopting technologies, and individual
      computer users are installing software on their computers that are designed
      to
      prevent the delivery of certain Internet advertising, including legitimate
      solicitations such as the ones we deliver. We cannot assure you that the number
      of ISPs and individual computer users who employ these or other similar
      technologies and software will not increase, thereby diminishing the efficacy
      of
      our network, as well as our entertainment service activities. In the case that
      one or more of these technologies, or software applications, realize continued
      and/or widely increased adoption, demand for our services could decline in
      response. During 2007 Traffix, (our recently merged subsidiary) recognized
      a
      decline in a component of its network activity revenue attributable to email
      marketing compared to the prior year, and further noted declines in such revenue
      during the six months ended June 30, 2008, as compared with that period a year
      ago. We believe that such decline is the result of the factors mentioned above,
      and such decline may continue at higher rates in future fiscal
      periods.





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





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





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





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





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





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


25




Some
      of
      our competitors’ advantages include the following:


•
            substantially
                greater revenues and financial resources;•
            stronger
                brand names, broader distribution networks and enhanced consumer
                recognition;•
            the
                capacity to leverage their marketing expenditures across a broader
                portfolio of wireless and non-wireless products;•
            pre-existing
                and long standing relationships with marquee brand
                holders;•
            deeper
                resources, both financial and otherwise, to effectively execute on
                acquisition identification, closing and integration;
                and•
            broader
                geographic presence potentially allowing for entrance into new markets,
                both domestically and
                internationally.





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





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





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




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





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





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





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


26





**We
      recorded a significant amount of goodwill and other intangible assets in
      connection with the merger with Traffix and the acquisition of Ringtone.com,
      which may result in significant future charges against earnings if the goodwill
      and other intangible assets become impaired.**





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





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





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





**We
      may be impacted by reduced growth or recession of the United States
      economy.**





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





**New
      technologies could block our advertisements, which would harm our operating
      results.**




Technologies
      have been developed and are likely to continue to be developed that can block
      the display of our advertisements or our other service offerings. Much of our
      revenue is derived from fees paid to us by advertisers in connection with the
      display of advertisements or through other service offerings. As a result,
      advertisement-blocking technology could reduce the number of advertisements
      and
      search results that we are able to deliver and, in turn, our advertising
      revenues and operating results maybe negatively impacted.




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





We
      derive
      a significant portion of our revenue from a limited number of applications
      and
      we expect to continue to derive a substantial portion of our mobile
      entertainment revenue from 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 prior application offerings, our future
      revenue could be limited and our business will suffer.


27




**The
      requirements of the Sarbanes-Oxley Act of 2002, including Section 404, are
      burdensome, and our failure to comply with them could have a material adverse
      affect on our business and stock price.**





Effective
      internal control over financial reporting is necessary so we can provide
      reliable financial reports and effectively prevent fraud. Section 404 of the
      Sarbanes-Oxley Act of 2002 requires us to evaluate and report on our internal
      control over financial reporting beginning with our Annual Report on Form 10-KSB
      for the fiscal year ending December 31, 2007. Our independent registered public
      accounting firm will need to annually attest to our evaluation, and issue their
      own opinion on our internal control over financial reporting beginning with
      our
      Annual Report on Form 10-K for the fiscal year ending December 31, 2009. The
      process of complying with Section 404 is expensive and time consuming, and
      requires significant management attention. We cannot be certain that the
      measures we will undertake will ensure that we will maintain adequate controls
      over our financial processes and reporting in the future. Furthermore, if we
      continue to rapidly grow our business, the internal controls over financial
      reporting we require will become more complex and significantly more resources
      will be required to ensure that our internal controls over financial reporting
      remain effective. Failure to implement required controls, or difficulties
      encountered in their implementation, could harm our operating results or cause
      us to fail to meet our reporting obligations. If we or our auditors discover
      a
      material weakness in our internal control over financial reporting, the
      disclosure of that fact, even if the weakness is quickly remedied, could
      diminish investors’ confidence in our financial statements and harm our stock
      price. In addition, non-compliance with Section 404 could subject us to a
      variety of administrative sanctions, including the suspension of trading,
      ineligibility for listing on one of the NASDAQ Stock Markets or national
      securities exchanges, and the inability of registered broker-dealers to make
      a
      market in our common stock, which would further reduce our stock
      price.




**Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds.**





***Common
      Stock Repurchases.***




On
      April
      8, 2008, the Company’s Board of Directors authorized management to repurchase up
      to $10 million worth of its common stock in the open market over the balance
      of
      its current fiscal year ending December 31, 2008. The amount and timing of
      specific repurchases are subject to market conditions, applicable legal
      requirements, and other factors, including management’s discretion. Repurchases
      may be made through privately negotiated transactions or in the open market.
      The
      Board of Directors of the Company may modify, extend, or terminate the share
      repurchase program at any time, and there is no guarantee of the exact number
      of
      shares that will be repurchased under the program. Repurchases will be funded
      from available working capital.




During
      the three months ended June 30, 2008, the Company repurchased an aggregate
      of
      232,200 shares of its common stock at a cost of $1.047 million, at an average
      of
      $4.51 per share.




28




**Issuer
                Purchases of Equity Securities**(c) TotalNumber of
            
            (d) ApproximateShares
            
            Dollar ValuePurchased
            
            of Sharesas Part of
            
            That May Yet(a) Total
            
            (b) Average
            
            Publicly
            
            Be PurchasedNumber
                of
            
            Price
                Paid
            
            Announced
            
            UnderShares
            
            per
            
            Plans
                or
            
            Plans
                orPurchased
            
            Share
            
            Programs
            
            Programs**Period**Month
                #1(April
                1, 2008 toApril
                30, 2008)
            
            
            -
            
            $
            -
            
            
            -
            
            $
            10,000,000Month
                #2(May
                1, 2008 toMay
                31, 2008)
            
            
            40,500
            
            $
            4.67
            
            
            40,500
            
            $
            9,810,865Month
                #3(June
                1, 2008 toJune
                30, 2008)
            
            
            191,800
            
            $
            4.47
            
            
            191,800
            
            $
            8,953,519Total
            
            
            232,200
            
            
            
            
            
            232,000




**Item
      6. Exhibits**




**Exhibit****Number**
            
            **Description
                of Exhibit**2.1
            
            Asset
                Purchase Agreement entered into on June 30, 2008, by and among New
                Motion,
                Inc., a Delaware corporation, Ringtone.com, LLC, a Minnesota limited
                liability company, and W3i Holdings, LLC, a Minnesota limited liability
                company incorporated by reference to our current report on Form 8-K
                filed
                with the Securities and Exchange Commission on July 7,
                2008.*10.1
            
            Form
                of Convertible Promissory Note Issued to Ringtone.com incorporated
                by
                reference to our current report on Form 8-K filed with the Securities
                and
                Exchange Commission on July 7, 2008.31.1
            
            Certification
                of Principal Executive Officer pursuant to Securities Exchange Act
                Rules
                13a-14(a) and
              15d-14(a)
                as adopted pursuant to section 302 of the Sarbanes-Oxley Act of
                2002.31.2
            
            Certification
                of Principal Financial Officer pursuant to Securities Exchange Act
                Rules
                13a-14(a) and
              15d-14(a)
                as adopted pursuant to section 302 of the Sarbanes-Oxley Act of
                2002.32.1
            
            Certification
                of Principal Executive Officer and Principal Financial Officer pursuant
                to
                18 U.S.C. Section 1350, as adopted pursuant to section 906 of the
                Sarbanes-Oxley Act of 2002.




*
        Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of
        Regulation S-K. New Motion, Inc. hereby undertakes to furnish supplementally
        copies of any of the omitted schedules and exhibits upon request by the
        SEC.


29





**Signatures**





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





Dated:
      August 14, 2008




BY:
            /s/
                Burton Katz
            
            BY:
            /s/
                Andrew ZarefBurton
              Katz
            
            Andrew
              ZarefChief
              Executive Officer
            
            Chief
              Financial Officer(Principal
              Financial and Accounting Officer)





30