**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-Q**


(Mark
      One)


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




For
      the
      quarterly period ended March 31, 2008 or




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




For
      the
      transition period from __________ to __________


Commission
      File Number: 001-12555


**New
      Motion, Inc.**


(name
      of
      small business issuer in its charter)


doing
      business as




New Motion Logo





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


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





42
      Corporate Park, Suite 250, Irvine, California 92606





(Address
        of principal executive offices and ZIP Code)




(949)
      777-3700





(Registrant’s
      telephone number, including area code)




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





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


Yes   x No o





Indicate
        by check mark whether the registrant is a large accelerated filer, an
        accelerated filer, a non-accelerated filer, or a smaller reporting company.
        See
        the definitions of “large accelerated filer,” “accelerated filer” and “smaller
        reporting company” in Rule 12b-2 of the Exchange Act.
  Large
                  accelerated filer ̈
              Accelerated
                    filer ̈Non-accelerated
                  filer ̈(Do
                  not check if a smaller reporting company)
              Smaller reporting 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 May
      16, 2008, the Company has 22,560,064 shares of Common Stock, $.01 par value,
      outstanding.









**New
      Motion, Inc.**


doing
      business as


**Atrinsic**


**Table
      of Contents**





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




1





**SPECIAL
      NOTE REGARDING FORWARD-LOOKING STATEMENTS**





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





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


·
            limited
                operating history in some of our commercial activities;·
            our
                reliance on wireless carriers and aggregators to facilitate billing
                and
                collections for our subscription net sales;·
            the
                highly competitive market in which we operate;·
            our
                ability to develop new applications and services;·
            protection
                of our intellectual property rights;·
            hiring
                and retaining key employees;·
            successful
                completion, and integration of acquisitions;·
            increased
                costs and requirements encountered as a public company;
                and·
            other
                factors discussed under the headings “Risk Factors,” “Management’s
                Discussion and Analysis” and
              “Description
                of Business.”





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




2





**NEW
      MOTION, INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


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





**PART
      I - FINANCIAL INFORMATION**


**Item
      1. Financial Statements**





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





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





3




**NEW
      MOTION, INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**


**(UNAUDITED)**


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





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





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





4





**NEW
      MOTION, INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(UNAUDITED)**


**(in
      thousands)**





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





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


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





5





**NEW
      MOTION, INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY**


**FOR
      THE THREE MONTHS ENDED MARCH 31, 2008**


**(UNAUDITED)**


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




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





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





6




**NEW
      MOTION, INC. AND SUBSIDIARIES**


**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**





**A
      Note Concerning Presentation**





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





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





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





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





***Overview
      of Atrinsic***





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





***Recent
      Merger Discussion***





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





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





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





7





***Recent
      History***





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





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





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





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





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





8


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





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





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





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





**Note
      2** – **Summary**  **of
      Significant Accounting Policies**





*Basis
      of presentation*





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





*Principles
      of Consolidation*





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





9


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





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





*Use
      of Estimates*





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported carrying amounts of assets
      and liabilities, and disclosure of contingent assets and liabilities at the
      date
      of the financial statements, and the reported amounts of revenues and expenses
      during the reporting periods.





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





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





*Reclassifications*





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





*Marketable
      Security Investments*





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




10


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





*Risks
      and Uncertainties*





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





*Fair
      Value of Financial Instruments*





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





*Foreign
      Currency Risk*





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





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





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





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





*Concentration
      of Credit Risk*





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





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




11




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





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





*Accounts Receivable*





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





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





*Property
      and Equipment*





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





12




*Intangible
      Asset Measurement and Recognition*




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




*Impairment
      of Long-Lived Assets*





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





*Stock-Based
      Compensation*





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





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





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





13


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





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


*Revenue
        Recognition*
 
 New
        Motion has two principal types of revenue, (1) the sale of subscription-based
        services inherent in its Entertainment services, which the Company recognizes
        in
        accordance with Emerging Issues Task Force (“EITF”) No. 99-19, “Reporting
        Revenue Gross as a Principal Versus Net as an Agent,” and (2) sales from its
        Network activities, which are earned pursuant to marketing agreements with
        marketing partners and corporate customers, which the Company recognizes
        in
        accordance with Staff Accounting Bulletin (SAB) 101, “Revenue Recognition in
        Financial Statements,” as modified by SAB 104.
 
 *Subscription
        Revenue.* As it
        pertains to its subscription-based Entertainment sales, the Company recognizes
        revenue from the sale or subscription of its applications to wireless
        subscribers under distribution agreements with wireless carriers and other
        distributors in the period in which the applications are purchased or over
        the
        period in which the applications are subscribed, assuming that: (a) fees
        are
        fixed and determinable; (b) we have no significant obligations remaining;
        and
        (c) collection of the related receivable is reasonably assured. For this
        subscription-based revenue, the Company makes estimates and creates reserves
        for
        future refunds, charge backs or credits in the period for which the sale
        occurs
        based on analyses of previous rates and trends, which have historically varied
        between zero and 17% of gross subscription revenue. This reserve is reconciled
        once a carrier remits total payment to the Company’s aggregator, who
        subsequently remits payment usually 45 to 180 days after billing. Management
        reviews the revenue by carrier on a monthly basis and gross billings on a
        daily
        basis to identify unusual trends that could indicate operational, carrier
        or
        market issues which could lead to a material misstatement in any reporting
        period. Additionally, on a weekly basis, management monitors cash settlements
        made by carriers to the aggregators. The Company’s policy is to record
        differences between recognized subscription revenue and actual revenue in
        the
        next reporting period once the actual amounts are determined. To date,
        differences between estimates and ultimate reconciled revenues have not been
        significant.
 
 Subscription
        revenue earned from certain aggregators may not be reasonably estimated.
        In
        these situations, New Motion’s policy is to recognize revenue upon the receipt
        of a carrier revenue report, which usually is received just prior to actual
        cash
        collection (i.e., on a cash basis). These revenue amounts are not
        significant.
 
 In
        accordance with Emerging Issues Task Force (“EITF”) No. 99-19, “Reporting
        Revenue Gross as a Principal Versus Net as an Agent,” the Company recognizes as
        revenue the net amount the wireless carrier or distributor pays to New Motion
        upon the sale of applications, net of any service or other fees earned and
        deducted by the wireless carrier or distributor. New Motion has evaluated
        its
        wireless carrier and distributor agreements and has determined that it is
        not
        the principal when selling its applications through wireless
        carriers.
 
 *Network
        Revenue* .
        The
        Company also earns net sales from its Network activities pursuant to marketing
        agreements with marketing partners and corporate customers. The provisions
        of
        each agreement determine the type and timing of revenue to be recorded. The
        Company invoices its customers in accordance with the terms of the underlying
        agreement. Revenue is recognized at the time the marketing activity is
        delivered, or service is provided, net of an estimated sales allowance, when
        applicable. Such sales allowance may include an estimate for duplications,
        invalid addresses, and/or age restrictions that are due from, but have not
        yet
        been reported to us by our customers. These sales allowances are recorded
        as
        contra-revenue. The Company’s net sales are adjusted in later fiscal periods if
        actual sales allowances vary from amounts previously estimated. Historically,
        the variance between actual sales allowances and previously estimated sales
        allowances has been immaterial. If events were to occur that would cause
        actual
        sales allowances (which are recorded as offsets against gross revenue, as
        contra-revenues, in arriving at reported net revenue) to vary significantly
        from
        those originally estimated and reflected in the financial statements, we
        could
        suffer material deterioration in future fiscal period gross margins, and,
        therefore, our profitability, cash flows and capital resources could be
        adversely affected.
  The
        customer agreements which comprise the Network revenue satisfy the “existence of
        persuasive evidence of an arrangement” required under the current revenue
        recognition rules under Staff Accounting Bulletin (SAB) 101 as modified by
        SAB
        104. The provisions of each agreement determines the (a) pricing characteristics
        of the revenue generating activity, the specific type of revenue activity
        (e.g.,
        Online Advertising or Search Engine Marketing), and (b) the method of the
        Company’s delivery obligations to, and acceptance obligations of its clients and
        customers, with (a) and (b) satisfying the criterion of SAB 101, that “sales
        price is fixed or determinable” and “delivery has occurred”. As a function of
        the Company’s client and customer acceptance process, the Company reviews bank
        and credit references, business financial statements, personal financial
        statements and/or obtain corporate officer guarantees (if appropriate), all
        of
        which satisfy the SAB 101 criteria, “collectibility is reasonably assured”.
        Based on this revenue recognition criteria, the Company believes it recognizes
        Network revenue when it is realizable and earned.


14
 
 Certain
            revenue related obligations pertaining to the Company’s Network activities are
            recorded at the time revenue is recognized. They include costs payable
            to other
            online, as well as off-line, media companies for generating registered
            users and
            consumer data for the Company, database fee sharing costs under third-party
            database use agreements, email message delivery costs, contingent-based
            prize
            indemnification coverage (i.e. sweepstakes payout indemnification), estimated
            premium fulfillment costs related to the respective promotion (when and
            if
            applicable) and all other variable costs directly associated with completing
            the
            Company’s obligations relative to the revenue being recognized. When our
            estimates vary from that which was originally accrued, the associated
            variance
            is deemed a change in management’s estimate, and accordingly the Company takes
            the increase or decrease to sales, costs, or overhead in the fiscal period
            that
            the variance is determinable.
 
 Should
            the Internet operating landscape change resulting in (a) higher costs
            of
            acquiring consumer data and registered users for the Company’s websites; (b)
            higher costs of acquiring data for the Company’s marketing partners,
            compromising such marketing partners' ability to maintain adequate sized
            databases to allow for continued third-party database use agreements;
            (c)
            failure to maintain a lower cost of email delivery activities and web
            development and web hosting service costs as compared to our competitors,
            or
            being required to depend on third-party emailing service bureaus, to
            a degree
            higher, and/or at a cost in excess of our anticipated internally-generated
            costs, (d) the Company’s contingent-based prize indemnification premiums for
            indemnification coverage increasing due to an increase in the number
            of prize
            winners at the sites; or (e) unpredictable technology changes or commercial
            technology applications; then, if any one, or a combination, of the above
            factors were to materialize the Company could suffer material deterioration
            in
            future fiscal period revenue growth and gross margins and, therefore,
            the
            Company’s profitability, cash flows and capital resources could be materially
            adversely affected.
 
 Network
            activities revenue recognition is also subject to provisions based on
            the
            probability of collection of the related trade accounts receivable. Management
            continuously evaluates the potential of the collectibility of trade receivables
            by reviewing such factors as deterioration in the operating results,
            financial
            condition, or bankruptcy filings, of the Company’s customers. As a result of
            this review process, the Company records bad debt provisions to adjust
            the
            related receivables' carrying amount to an estimated realizable value.
            Provisions for bad debts are also recorded due to the review of other
            factors,
            including the length of time the receivables are past due, historical
            experience
            and other factors obtained during the conduct of collection efforts.
            If
            circumstances change regarding our specific customers on an individual
            basis, or
            if demand for Internet direct marketing softens, or if the U.S. economy
            stumbles, our estimates for bad debt provisions could be further increased,
            which could adversely affect the Company’s operating margins, profitability,
            cash flows and capital resources.
  *Software
            Development Costs*





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





*Advertising
      and Marketing Expense*





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





*Income
      Taxes*





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




15




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





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





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





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





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





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




16




*Net
      Income Per Share*




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




*New
      Accounting Pronouncements*





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


17


**Note
      3** – **Goodwill
      and Identifiable Intangible Asset**





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





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





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





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





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





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





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





18





**Note
      4—Merger and Restructuring Activity**




**Traffix,
      Inc.**




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




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





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





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




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




(2)
            
            The
                Company intends to aggregate goodwill and use the entity’s market
                capitialization in measuring for future potential impairments. Our
                book
                value at March 31, 2008 was approximately $165 million; our market
                capitalization at March 31, 2008 and May 12, 2008 was approximately$99
                million and $114 million, respectively. Management has determined
                that
                based on the current market conditions affecting all domestic equities,coupled
                with the $15 million, or over 15% increase in our market capitalization
                from March 31, 2008 to May 12, 2008, that it is premature toconsider
                an impairment charge during the first quarter ended March 31, 2008,
                predicated on the February 4, 2008 merger closing. Managementwill
                continue to review the prospects for the business, as well as general
                market conditions, and will assess the likelihood of a requiredimpairment
                charge in future fiscal periods based on facts, circumstances and
                market
                valuations at that time.(3)
            
            Management
                considers the following factors in recording goodwill arising from
                the
                merger transaction described above, and includes, but is not limited
                to:
                (a) the positive reputation of the acquired business; (b) the methods
                of
                operations that have defined its prior success which were acquired
                in the
                transaction under the basis of going concern principals; (c) the
                business
                processes which were acquired in the transaction under the basis
                of going
                concern principals; (d) the customer relationships acquired; and
                (e) the
                market position and accompanying competitive advantage
                acquired.





19




*Unaudited
      Pro Forma Summary*




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





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





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





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





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





20





*Merger
      and Restructuring Charges*




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




*Exit
      Costs Reserves*




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




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





**Exit
      Costs and Restructuring Reserves**





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





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




**Note
      5—Stock options and other stock based compensation**





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





21





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





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





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





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





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





**Note
      6—Segments**





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





22




**Note
      7—Commitments and contingencies**




*Litigation*




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




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


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





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





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





23





***Overview
      of Atrinsic***





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





***Recent
      Merger Discussion***





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





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





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





***Recent
      History***





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





24





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





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





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





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





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





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





25





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





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





**Business
      Strategy**




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





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





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





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





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





26





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





**Application
      of Critical Accounting Policies and Estimates**




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




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


Subscription
        Revenue
 As
        it
        pertains to our subscription-based Entertainment sales, we recognize revenue
        from the sale or subscription of its applications to wireless subscribers
        under
        distribution agreements with wireless carriers and other distributors in
        the
        period in which the applications are purchased or over the period in which
        the
        applications are subscribed, assuming that: (a) fees are fixed and determinable;
        (b) we have no significant obligations remaining; and (c) collection of the
        related receivable is reasonably assured. For this subscription-based revenue,
        we make estimates and create reserves for future refunds, charge backs or
        credits in the period for which the sale occurs based on analyses of previous
        rates and trends, which have historically varied between zero and 17% of
        gross
        subscription revenue. This reserve is reconciled once a carrier remits total
        payment to our aggregator, who subsequently remits payment usually 45 to
        180
        days after billing. Management reviews the revenue by carrier on a monthly
        basis
        and gross billings on a daily basis to identify unusual trends that could
        indicate operational, carrier or market issues which could lead to a material
        misstatement in any reporting period. Additionally, on a weekly basis,
        management monitors cash settlements made by carriers to the aggregators.
        Our
        policy is to record differences between recognized subscription revenue and
        actual revenue in the next reporting period once the actual amounts are
        determined. To date, differences between estimates and ultimate reconciled
        revenues have not been significant.
 
 Subscription
        revenue earned from certain aggregators may not be reasonably estimated.
        In
        these situations, our policy is to recognize revenue upon the receipt of
        a
        carrier revenue report, which usually is received just prior to actual cash
        collection (i.e., on a cash basis). These revenue amounts are not
        significant.
 
 In
        accordance with Emerging Issues Task Force (“EITF”) No. 99-19, “Reporting
        Revenue Gross as a Principal Versus Net as an Agent,” we recognize as revenue
        the net amount the wireless carrier or distributor pays to us upon the sale
        of
        applications, net of any service or other fees earned and deducted by the
        wireless carrier or distributor. We have evaluated our wireless carrier and
        distributor agreements and has determined that we are not the principal when
        selling our applications through wireless carriers.
 
 Network
        Revenue
 We
        also
        earn net sales from our Network activities pursuant to marketing agreements
        with
        marketing partners and corporate customers. The provisions of each agreement
        determine the type and timing of revenue to be recorded. We invoice our
        customers in accordance with the terms of the underlying agreement. Revenue
        is
        recognized at the time the marketing activity is delivered, or service is
        provided, net of an estimated sales allowance, when applicable. Such sales
        allowance may include an estimate for duplications, invalid addresses, and/or
        age restrictions that are due from, but have not yet been reported to us
        by our
        customers. These sales allowances are recorded as contra-revenue. Our net
        sales
        are adjusted in later fiscal periods if actual sales allowances vary from
        amounts previously estimated. Historically, the variance between actual sales
        allowances and previously estimated sales allowances has been immaterial.
        If
        events were to occur that would cause actual sales allowances (which are
        recorded as offsets against gross revenue, as contra-revenues, in arriving
        at
        reported net revenue) to vary significantly from those originally estimated
        and
        reflected in the financial statements, we could suffer material deterioration
        in
        future fiscal period gross margins, and, therefore, our profitability, cash
        flows and capital resources could be adversely affected.
  The
        customer agreements which comprise the Network revenue satisfy the “existence of
        persuasive evidence of an arrangement” required under the current revenue
        recognition rules under Staff Accounting Bulletin (SAB) 101 as modified by
        SAB
        104. The provisions of each agreement determines the (a) pricing characteristics
        of the revenue generating activity, the specific type of revenue activity
        (e.g.,
        Online Advertising or Search Engine Marketing), and (b) the method of the
        Company’s delivery obligations to, and acceptance obligations of its clients and
        customers, with (a) and (b) satisfying the criterion of SAB 101, that “sales
        price is fixed or determinable” and “delivery has occurred”. As a function of
        our client and customer acceptance process, we review bank and credit
        references, business financial statements, personal financial statements
        and/or
        obtain corporate officer guarantees (if appropriate), all of which satisfy
        the
        SAB 101 criteria, “collectibility is reasonably assured”. Based on this revenue
        recognition criteria, we recognize Network revenue when it is realizable
        and
        earned.


27


Certain
        revenue related obligations pertaining to our Network activities are recorded
        at
        the time revenue is recognized. They include costs payable to other online,
        as
        well as off-line, media companies for generating registered users and consumer
        data, database fee sharing costs under third-party database use agreements,
        email message delivery costs, contingent-based prize indemnification coverage
        (i.e. sweepstakes payout indemnification), estimated premium fulfillment
        costs
        related to the respective promotion (when and if applicable) and all other
        variable costs directly associated with completing our obligations relative
        to
        the revenue being recognized. When our estimates vary from that which was
        originally accrued, the associated variance is deemed a change in management’s
        estimate, and accordingly we take the increase or decrease to sales, costs,
        or
        overhead in the fiscal period that the variance is determinable.
 
 Should
        the Internet operating landscape change resulting in (a) higher costs of
        acquiring consumer data and registered users for our websites; (b) higher
        costs
        of acquiring data for our marketing partners, compromising such marketing
        partners' ability to maintain adequate sized databases to allow for continued
        third-party database use agreements; (c) failure to maintain a lower cost
        of
        email delivery activities and web development and web hosting service costs
        as
        compared to our competitors, or being required to depend on third-party emailing
        service bureaus, to a degree higher, and/or at a cost in excess of our
        anticipated internally-generated costs, (d) our contingent-based prize
        indemnification premiums for indemnification coverage increasing due to an
        increase in the number of prize winners at the sites; or (e) unpredictable
        technology changes or commercial technology applications; then, if any one,
        or a
        combination, of the above factors were to materialize we could suffer material
        deterioration in future fiscal period revenue growth and gross margins and,
        therefore, our profitability, cash flows and capital resources could be
        materially adversely affected.
 
 Network
        activities revenue recognition is also subject to provisions based on the
        probability of collection of the related trade accounts receivable. Management
        continuously evaluates the potential of the collectibility of trade receivables
        by reviewing such factors as deterioration in the operating results, financial
        condition, or bankruptcy filings, of our customers. As a result of this review
        process, we record bad debt provisions to adjust the related receivables'
        carrying amount to an estimated realizable value. Provisions for bad debts
        are
        also recorded due to the review of other factors, including the length of
        time
        the receivables are past due, historical experience and other factors obtained
        during the conduct of collection efforts. If circumstances change regarding
        our
        specific customers on an individual basis, or if demand for Internet direct
        marketing softens, or if the U.S. economy stumbles, our estimates for bad
        debt
        provisions could be further increased, which could adversely affect our
        operating margins, profitability, cash flows and capital resources.
  *Intangibles
        Assets Measurement and Recognition* .
        For
        intangible assets acquired in the current, as well as prior fiscal years,
        such
        acquisitions were recorded in accordance with SFAS No. 142, “Goodwill and Other
        Intangible Assets.” We recognize and measure the intangible assets acquired
        based on their fair value; in the case of an acquisition of a group of
        intangible assets, each asset’s relative fair value is used. We use independent
        third party valuation experts, and internally we use a wide range of valuation
        methodologies, including performing discounted cash flow analysis to assess
        the
        value of acquired intangible assets. Discounted cash flow analysis requires
        assumptions about the timing and amount of future cash inflows and outflows,
        risk factors, alternative cost of capital considerations, and terminal value
        calculations. Each of these factors can significantly affect the value of
        the
        intangible asset. The estimates of future cash flows, based on reasonable
        and
        supportable assumptions and projections, require management’s judgment. Any
        changes in key assumptions about our businesses and their prospects, or changes
        in market conditions, could result in an impairment charge. As a result of
        the
        Traffix merger, New Motion recorded approximately $41 million in identifiable
        intangibles and approximately $86 million in goodwill. Some of the more
        significant estimates and assumptions inherent in the intangible asset valuation
        process include: the timing and amount of projected future cash flows; the
        discount rate selected to measure the risks inherent in the future cash flow
        projections; and the assessment of the asset’s life cycle and the competitive
        trends impacting the asset, including consideration of any technical, legal
        or
        regulatory trends. At March 31, 2008 our book value was approximately $165
        million and its market capitalization was approximately $113 million. We
        deem
        that the current decline in its share price is temporary, and has not impaired
        its goodwill and other intangible as at March 31, 2008.




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




28





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




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




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




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





29





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




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




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




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





30





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




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





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





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




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




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





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





31





**SELECTED
      FINANCIAL DATA**





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





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





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





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


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





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




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





32





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





**Net
      Sale Components – Entertainment Services and Network
      Activities**


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





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





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




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





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





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





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





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





33




Our
        cost
        of sales, and disclosure of the cost of sale components, for each of the
        three-month periods ended March 31, 2008 and March 31, 2007, are set forth
        below:
  **Cost
        of Sale Components – Entertainment Services and Network
        Activities**
 
 **THREE
                  MONTHS ENDED**
              
              **CHANGE**
              
              **CHANGE****MARCH
                  31,**
              
              **INC(DEC)**
              
              **INC(DEC)****2008**
              
              **2007**
              
              **$$$**
              
              **%%%**Entertainment
                  Services
              
              $
              3,816
              
              $
              726
              
              $
              3,090
              
              
              426
              %Network
                  Activities
              
              
              10,670
              
              
              -
              
              
              10,670
              
              
              100
              %Total
                  Net Sales
              
              $
              14,486
              
              $
              726
              
              $
              13,760
              
              
              1895
              %
 
 Cost
        of
        sales increased approximately $13.8 million, or over 18 fold, to approximately
        $14.5 million for the three months ended March 31, 2008, compared to $0.7
        million for the three months ended March 31, 2007. Entertainment Service
        cost of
        sales increased by approximately $3.1 million, or 426%, to $3.8 million for
        the
        three months ended March 31, 2008, compared to $0.7 million for the three
        months
        ended March 31, 2007. Approximately 97% of the increase in cost of sales,
        or
        $13.4 million, was attributable to cost of sales included in the first quarter
        of fiscal 2008 arising from our acquisition of Traffix, Inc., which was
        effective as of February 4, 2008. Regarding this cost of sale increase of
        $13.4
        million attributable to the Traffix, Inc. merger: (a) approximately $2.7
        million
        was incurred subsequent to the merger date to March 31, 2008, for the
        acquisition of Entertainment Services customers through Traffix media vendors;
        and (b) approximately $10.7 million was incurred subsequent to the merger
        date
        to March 31, 2008, for the acquisition of Network Activity clients.
  The
        Entertainment cost of sale increase of approximately $3.1 million, or 426%,
        was
        directly attributable to increased costs associated with the fixed fee payments
        earned by our vendors in connection with their acquisition of Entertainment
        Service subscribers during the three month period ended March 31, 2008, when
        compared to the three months ended March 31, 2007. Of the $3.8 million in
        cost
        of sales, approximately $1.1 million was attributable to vendors that New
        Motion, Inc. had conducted business with prior to the merger, and $2.7 million
        was attributable to vendors associated with our Traffix, Inc. subsidiary,
        and
        incurred subsequent to the February 4, 2008, effective merger date.
 
 The
        Network Activities cost of sales, for each of the three-month periods ended
        March 31, 2008 and March 31, 2007, were generated within the following
        categories, as set forth below:
 **Network
          Activities Cost of Sales**
  **THREE
                  MONTHS ENDED**
              
              **CHANGE**
              
              **CHANGE****MARCH
                  31,**
              
              **INC(DEC)**
              
              **INC(DEC)****2008**
              
              **2007**
              
              **$$$**
              
              **%%%**Online
                  Promtional and Content
              
              $
              2,412
              
              $
              -
              
              $
              2,412
              
              
              100
              %Search
                  Engine Marketing
              
              
              6,499
              
              
              -
              
              
              6,499
              
              
              100
              %Affiliate
                  Networks
              
              
              1,744
              
              
              -
              
              
              1,744
              
              
              100
              %Email
                  and data
              
              
              15
              
              
              -
              
              
              15
              
              
              100
              %Total
                    Network ActivitiesCost
                    of Sales
              
              $
              10,670
              
              $
              -
              
              $
              10,670
              
              
              100
              %
 
 34
 
 The
        Network Activities cost of sales of approximately $10.7 million was directly
        attributable to: (a) $6.5 million in costs associated with conducting our
        search
        engine marketing activities, with such costs representing fees incurred from
        the
        major search engines; (b) approximately $2.4 million incurred in procuring
        marketing media in the acquisition of customers for our Online Promotional
        and
        Content client offerings; and (c) approximately $1.7 million incurred in
        fees
        paid to affiliates if the conduct of our Affiliate Network activities, with
        all
        the above incurred during the three months ended March 31, 2008.
  Our
        gross
        profit in terms of dollars, on a consolidated basis and a component basis,
        and
        our gross profit percentage, on a consolidated basis and a component basis,
        for
        each of the three-month periods ended March 31, 2008 and March 31, 2007,
        for our
        Entertainment Services and Network Activities, are set forth below:
 
 **Consolidated
                  Gross Profit****THREE
                  MONTHS ENDED**
              
              **CHANGE**
              
              **CHANGE****MARCH
                  31,**
              
              **INC(DEC)**
              
              **INC(DEC)****2008**
              
              **2007**
              
              **$$$**
              
              **%%%**Entertainment
                  Services
              
              $
              9,291
              
              
              4,916
              
              $
              4,375
              
              
              89
              %Network
                  Activities
              
              
              4,961
              
              
              -
              
              
              4,961
              
              
              100
              %Consolidated
                  Gross Profit
              
              $
              14,252
              
              $
              4,916
              
              $
              9,336
              
              
              190
              %
 
 **Consolidated
          Gross Profit**
 **ABSOLUTE**
              
              **RELATIVE****THREE
                  MONTHS ENDED**
              
              **CHANGE**
              
              **CHANGE****MARCH
                  31,**
              
              **INC(DEC)**
              
              **INC(DEC)****2008**
              
              **2007**
              
              **$$$**
              
              **%%%**Entertainment
                  Services
              
              
              71
              %
              
              87
              %
              
              -16
              %
              
              -19
              %Network
                  Activities
              
              
              32
              %
              
              0
              %
              
              32
              %
              
              100
              %Consolidated
                  Gross Profit
              
              
              50
              %
              
              87
              %
              
              -37
              %
              
              -42
              %
  **Network
                  Activities Gross Profit****THREE
                  MONTHS ENDED**
              
              **CHANGE**
              
              **CHANGE****MARCH
                  31,**
              
              **INC(DEC)**
              
              **INC(DEC)****2008**
              
              **2007**
              
              **$$$**
              
              **%%%**Online
                  Promtional and Content
              
              $
              2,418
              
              $
              -
              
              $
              2,418
              
              
              100
              %Search
                  Engine Marketing
              
              
              1,833
              
              
              -
              
              
              1,833
              
              
              100
              %Affiliate
                  Networks
              
              
              535
              
              
              -
              
              
              535
              
              
              100
              %Email
                  and data
              
              
              175
              
              
              -
              
              
              175
              
              
              100
              %Total
                    Network ActivitiesGross
                    Profit
              
              $
              4,961
              
              $
              -
              
              $
              4,961
              
              
              100
              %
 
 35
  **Network
                  Activities Gross Profit****ABSOLUTE**
              
              **RELATIVE****THREE
                  MONTHS ENDED**
              
              **CHANGE**
              
              **CHANGE****MARCH
                  31,**
              
              **INC(DEC)**
              
              **INC(DEC)****2008**
              
              **2007**
              
              **$$$**
              
              **%%%**Online
                  Promtional and Content
              
              
              50
              %
              
              0
              %
              
              50
              %
              
              100
              %Search
                  Engine Marketing
              
              
              22
              %
              
              0
              %
              
              22
              %
              
              100
              %Affiliate
                  Networks
              
              
              23
              %
              
              0
              %
              
              23
              %
              
              100
              %Email
                  and data
              
              
              92
              %
              
              0
              %
              
              92
              %
              
              100
              %Total
                    Network ActivitiesGross
                    Profit
              
              
              32
              %
              
              0
              %
              
              32
              %
              
              100
              %
 
 Our
        consolidated gross profit, in absolute dollars, increased by approximately
        $9.3
        million, or 190%, and was partially the result of the gross profit attributable
        to our Network Activities, specifically as they relate to our Traffix, Inc.
        merger acquisition, which occurred within the current quarter. The Network
        Activities accounted for approximately 53% of the quarter-over-quarter increase
        in consolidated gross profit. This increase was supplemented by an increase
        in
        the gross profit attributable to our Entertainment Services, which is directly
        the result of our increased revenues; note that gross margin for our
        Entertainment Services increased 89% on a quarter-over-quarter basis, compared
        to a 132% increase in the related Entertainment Service net sales on a
        quarter-over-quarter basis. The differing relationship in the previously
        mentioned percentages, was attributable to a decline in our gross margin
        generated from our Entertainment Service activities of approximately 16%
        in
        absolute terms, and 19% in relative terms, which directly resulted from amounts
        included in our cost of sale accounts for customer acquisition costs incurred
        for our benefit by our Traffix, Inc. subsidiary’s media vendors in the first
        quarter of fiscal 2008; prior to the merger transaction such costs were treated
        as marketing expenses, within our selling expense category, on a separate
        company basis, and therefore were excluded from having an impact on margin.
 
 Our
        consolidated gross profit as a percentage of net sales was 50% during the
        three
        months ended March 31, 2008, compared to 87% in the prior year’s first quarter,
        representing an absolute decline of 37%, and a relative decline of 42% when
        compared to our prior year’s first quarter. The variance in our reported gross
        profit percentage is the result of the contribution to gross margin from
        our
        Network Activities arising from our Traffix, Inc. merger, which are less,
        in
        terms of gross margin percentages, then that which was historically recognized
        by New Motion, Inc., coupled with the inclusion in cost of sales for customer
        acquisition costs incurred on our behalf by our Traffix, Inc. subsidiary
        for the
        benefit of our Entertainment Service activities, which were previously treated
        as a marketing expense, and included in our selling expense category, prior
        to
        the consummation of the merger.
 
 Regarding
        the single month of January 2008, as it relates to Traffix, Inc., prior to
        the
        merger, Traffix, Inc. recorded approximately $10.6 million in net sales,
        of
        which approximately $1.9 million was attributable to net sales made to New
        Motion, Inc.
 
 Traffix,
        Inc. incurred costs of approximately $7.4 million in generating such sales
        in
        January 2008, yielding a gross profit of approximately $3.2 million, with
        a
        corresponding gross profit margin of approximately 30%. The $1.9 million
        in net
        sales generated in January 2008 for New Motion, Inc. by Traffix, Inc. yielded
        a
        gross profit of approximately $0.41 million, with a corresponding gross profit
        margin of approximately 21%.
 
 Our
        selling expense, on a consolidated basis, for each of the three month periods
        ended March 31, 2008 and 2007 are set forth below:
  36
  **Selling
                    Expense Components****THREE
                    MONTHS ENDED**
                
                **CHANGE**
                
                **CHANGE****MARCH
                    31,**
                
                **INC(DEC)**
                
                **INC(DEC)****2008**
                
                **2007**
                
                **$$$**
                
                **%%%**Marketing
                    expenses
                
                $
                6,069
                
                $
                2,987
                
                $
                3,082
                
                
                103%Selling
                    salaries and related costs
                
                
                464
                
                
                -
                
                
                464
                
                
                100%Travel
                    and entertainment
                
                
                40
                
                
                -
                
                
                40
                
                
                100%-
                
                
                -
                
                
                100%Total
                    Selling Expenses
                
                $
                6,573
                
                $
                2,987
                
                $
                3,586
                
                
                120%
 
 Selling
          expenses on a consolidated basis, increased by approximately $3.6 million,
          or
          120%, to $6.6 million during the three months ended March 31, 2008, as
          compared
          to approximately $3.0 million incurred during the three months ended March
          31,
          2007. The following tables set forth the components of the selling expenses
          as
          they relate to our Entertainment Services and Network Activities, furthermore
          we
          provide a discussion of the comparable quarter over quarter fluctuations
          for
          such accounts. Marketing expenses, attributable to our Entertainment Services
          increased by approximately $3.1 million, or approximately 86% of our
          consolidated increase in selling expenses. Included within the $3.2 million
          increase is approximately $1.9 million in marketing expenses incurred from
          Traffix, Inc., for the period January 1, 2008 to February 3, 2008, the
          period
          prior to the effective date of our Traffix, Inc. merger closing. The balance
          of
          the increase or approximately $1.3 million is attributable to increases
          in
          marketing costs expended with our other marketing partners and client
          acquisition vendors, which partially helped to support our 132% increase
          in
          Entertainment Service revenues. Selling expenses included above are attributable
          to our Network Activities, and increased by approximately $0.5 million,
          or
          approximately 14% of our consolidated increase in selling expenses. All
          such
          selling expenses are attributable to our Network Activities, and are the
          product
          of our Traffix, Inc. merger transaction. Selling expenses include selling
          salaries and commission expenses related to our Network Activities sales
          force
          and their related travel and entertainment expenses. During the month of
          January
          2008, prior to our acquisition, Traffix, Inc. incurred approximately $0.26
          million in selling expenses.
  37
  Our
          consolidated general and administrative expenses (“G&A”) are principally
          comprised of (a) compensation expense and related benefit expense for
          executives, finance, information technology, marketing, and general
          administration personnel, (b) professional fees (which include legal; audit,
          accounting and tax; public relations; database management and outside
          consulting; and public company related printing and filing costs), (c)
          insurance
          costs, (d) occupancy and other equipment rental costs, (e) salaries,
          depreciation, amortization and other related operating costs associated
          with our
          internally maintained site development, maintenance and modification teams
          currently located in Moncton, Canada and Seattle, Washington, and (f) all
          other
          general and administrative corporate expense items. Our workforce and capital
          assets are multi-purposed and serve each of our entertainment and network
          activities somewhat equally, but specific allocation of resources is not
          calculable. Our CODM uses gross margin to determine the allocation of resources
          to our combined overhead, and to assess our performance in terms of consolidated
          income from operations.
 
 Our
          consolidated general and administrative expense for the three months ended
          March
          31, 2008 and March 31, 2007 are set forth below:
 **THREE
                      MONTHS ENDED**
                  
                  **CHANGE**
                  
                  **CHANGE****MARCH
                      31,**
                  
                  **INC(DEC)**
                  
                  **INC(DEC)****2008**
                  
                  **2007**
                  
                  **$$$**
                  
                  **%%%**Compensation
                      and related costs
                  
                  $
                  4,353
                  
                  $
                  976
                  
                  $
                  3,377
                  
                  
                  346%Professional
                      Fees
                  
                  
                  2,065
                  
                  
                  786
                  
                  
                  1,279
                  
                  
                  163%Insurance
                      Costs
                  
                  
                  120
                  
                  
                  5
                  
                  
                  115
                  
                  
                  2300%Occupancy
                      and equipment costs
                  
                  
                  328
                  
                  
                  83
                  
                  
                  245
                  
                  
                  295%Depreciation
                      and amortization
                  
                  
                  417
                  
                  
                  195
                  
                  
                  222
                  
                  
                  114%All
                      other miscellaneous G&A
                  
                  
                  781
                  
                  
                  155
                  
                  
                  626
                  
                  
                  404%Total
                        General and Administrative Expense
                  
                  $
                  8,064
                  
                  $
                  2,200
                  
                  $
                  5,864
                  
                  
                  267%
  General
          and administrative expenses on a consolidated basis, increased by approximately
          $5.9 million, or 267%, to $8.1 million during the three months ended March
          31,
          2008, as compared to approximately $2.2 million incurred during the three
          months
          ended March 31, 2007.
 
 When
          comparing the two quarterly periods ended March 31, 2008 and 2007, respectively,
          the increases in general and administrative expenses are attributable to
          the
          significant growth in our business: from both organic means, as well as
          through
          the acquisition of Traffix, Inc. This increase of $5.9 million, or approximately
          267% includes the impact of increased headcount in growing our business
          organically (approximately $1.6 million including approximately $0.7 million
          in
          non-cash stock compensation expense) and compensation and related costs
          resulting from the acquisition of Traffix, Inc. ($1.9 million). Professional
          fees increased by approximately $1.3 million as a result of increased expenses
          incurred for legal, accounting, tax services and Sarbanes/Oxley compliance
          expenses. Occupancy costs increased approximately $245,000 as a result
          of
          increased office space occupied in our California presence, coupled with
          the
          rents expense attributable to leases assumed in the merger transaction.
          The
          increases in all other G&A expenses were principally attributable to the
          acquisition, coupled with increases in our legacy costs arising from our
          organic
          growth, outside of the effects of the merger transaction.
 
 38
  **Liquidity
        and Capital Resources**
 
 As
        of
        March 31, 2008, the Company had cash and cash equivalents of approximately
        $16,932,000, marketable securities of approximately $19,672,000 and a working
        capital balance of approximately $30,053,000. As of December 31, 2007, the
        Company had cash and cash equivalents of approximately $987,000 and a working
        capital balance of approximately $14,041,000. The Company’s positive cash
        balance results primarily from investing activities. In the first quarter
        of
        2008, the Company received net proceeds of $12 million as a result of the
        merger with Traffix, Inc.
 
 New
        Motion believes that its existing cash and cash equivalents and anticipated
        cash
        flows from our operating activities will be sufficient to fund minimum working
        capital and capital expenditure needs for at least the next twelve months.
        The
        extent of the Company’s future capital requirements will depend on many factors,
        including its results of operations. If the Company’s cash from operations is
        less than anticipated or its working capital requirements or capital
        expenditures are greater than it expects, or if the Company expands its business
        by acquiring or investing in additional technologies, it may need to raise
        additional debt or equity financing. The Company is continually evaluating
        various financing strategies to be used to expand its business and fund future
        growth. There can be no assurance that additional debt or equity financing
        will
        be available on acceptable terms or at all. The inability to obtain additional
        debt or equity financing, if required, could have a material adverse effect
        on
        the Company’s operations.
 
 ***Cash
        Flows***
  The
        Company currently satisfies its working capital requirements through cash
        flows
        from operations, supplemented by cash generated from recent acquisitions.
        Cash
        flows provided by (used in) operating, investing and financing activities
        for
        the three months ended March 31, 2008 and 2007 are set forth in the
        following table (Dollars in thousands):
 **Three
                    Months Ended****March
                    31,****2008**
                
                **2007**Operating
                    Activities
                
                
                
                
                $
                3,246
                
                $
                (367
                )Investing
                    Activities
                
                
                
                
                
                14,749
                
                
                (92
                )Financing
                    Activities
                
                
                
                
                
                (1,958
                )
                
                17,635Effect
                    of exchange rate changes
                
                
                
                
                
                (92
                )
                
                -Net
                    change in cash and cash equivalents
                
                
                
                
                $
                15,945
                
                $
                17,176
 39
  *Cash
        Provided By (Used In) Operating Activities*
  New
        Motion’s cash requirements are principally for working capital. For the three
        months ended March 31, 2008, cash provided by operating activities was
        $3,375,000, compared to cash used in operating activities of $367,000 for
        the
        three months ended March 31, 2007. The Company’s operating cash flows result
        primarily from cash received from its aggregator customers and online
        advertising clients, offset by cash payments the Company makes for products
        and
        services, including sales and marketing expenses, media costs, employee
        compensation and consulting fees. Cash received from customers generally
        corresponds to net sales.
 
 *Cash
        Provided By (Used) In Investing Activities*
  For
        the
        three months ended March 31, 2008, cash provided by investing activities
        was
        $14,622,000, compared to $92,000 used in investing activities for the three
        months ended March 31, 2007. The Company’s investing cash flows are comprised of
        purchases of fixed assets, net proceeds from sales of securities and cash
        received in connection with the merger with Traffix, Inc.
 
 *Cash
        Provided By (Used In) Financing Activities*
  For
        the
        three months ended March 31, 2008, cash used in financing activities was
        $1,958,000, compared to cash provided by financing activities of $17,635,000
        for
        the three months ended March 31, 2007. Cash used in financing activities
        resulted primarily from acquisition costs in connection with the Traffix
        merger,
        issuances of stock, issuance and repayment of notes payable and payments
        on
        capital lease obligations.
 
 On
        January 19, 2007, New Motion entered into an Asset Purchase Agreement with
        IVG,
        pursuant to which it purchased from IVG certain specified assets of Mobliss.
        In
        exchange for the assets specified in the Asset Purchase Agreement, New Motion
        issued IVG a convertible promissory note in the initial principal amount
        of
        $500,000, with an aggregate maximum principal amount of up to $2,320,000.
        The
        IVG Note bore interest at the rate of five percent per annum accruing from
        the
        initial issuance of the IVG Note and matured on the earlier of November 30,
        2007
        or 30 days after delivery by IVG of written notice to us demanding payment.
        As a
        result of the assignment of one of the cellular carrier connection contracts
        listed in the Asset Purchase Agreement, on January 26, 2007, the Company
        increased the principal amount of the IVG Note by $580,000 to $1,080,000.
        On
        February 26, 2007, the Company repaid $500,000 of the IVG Note.
 
 In
        accordance with the terms of the IVG Note, on September 15, 2007, IVG converted
        all outstanding principal and accrued interest on the IVG Note into 172,572
        shares of common stock at a conversion price of $3.44 per share, the fair
        market
        value of the Company’s stock on the date of issuance of the IVG Note. As a
        result of the conversion, the IVG Note has been fully extinguished and no
        further amount is owed to IVG.
 
 In
        accordance with the Heads of Agreement, New Motion is required to pay a fee
        for
        management services rendered by the joint venture equal to 10% of the revenue
        generated from the assets New Motion acquired from IVG, up to the purchase
        price
        paid under the Asset Purchase Agreement, or $1,080,000. This management fee
        is
        to be fully paid by June 30, 2008.
 
 New
        Motion made an advance payment on the management fee of $500,000 on March
        12,
        2007, and made another, final, advance payment of $500,000 on September 4,
        2007.
        As of the end of the fourth quarter of 2007, New Motion is evaluating, in
        conjunction with IVG, services and content to be offered by MECC.
 
 In
        February, 2007, New Motion Mobile completed an exchange transaction (the
        “Exchange”) pursuant to which it merged with a publicly traded company, MPLC,
        Inc., so that New Motion Mobile became a publicly traded company, trading
        under
        the ticker “MPNC” on the Over-The-Counter Bulletin Board. In connection with the
        Exchange, the Company raised gross proceeds of approximately $20 million
        in
        equity financing through the sale of its Series A Preferred Stock, Series
        B
        Preferred Stock and Series D Preferred Stock.
 
 On
        February 4, 2008, New Motion completed the transactions contemplated by the
        Agreement and Plan of Merger executed on September 26, 2007 by and among
        New
        Motion, NM Merger Sub and Traffix pursuant to which Merger Sub merged with
        and
        into Traffix. As a result of the Merger, Traffix became a wholly-owned
        subsidiary of New Motion. The Merger was approved by the stockholders of
        each of
        New Motion and Traffix on January 31, 2008. In consideration for the Merger,
        shareholders of Traffix received approximately 0.676 shares of common stock
        of
        New Motion for each share of Traffix common stock. In the aggregate, New
        Motion
        issued approximately 10,409,000 shares of New Motion stock to Traffix
        shareholders. In addition, under the terms of the Merger Agreement, a stock
        option to purchase shares of Traffix converted into and became an option
        to
        purchase New Motion common stock, and New Motion assumed such option in
        accordance with the terms of the stock option plan or agreement under which
        that
        option was issued, subject to an option exchange ratio calculated in accordance
        with the Merger Agreement.
  40
  ***Contractual
        Obligations and Off Balance Sheet Arrangements***
  At
        March
        31, 2008 and March 31, 2007, the Company did not have any relationships with
        unconsolidated entities or financial partnerships, such as entities often
        referred to as structured finance or special purpose entities, which would
        have
        been established for the purpose of facilitating off-balance sheet arrangements
        or other contractually narrow or limited purposes. As such, the Company is
        not
        exposed to any financing, liquidity, market or credit risk that could arise
        if
        it had engaged in such relationships.
 
 The
        following table shows the Company’s future commitments for future minimum lease
        payments required under operating leases that have remaining noncancellable
        lease terms in excess of one year and future commitments under employment
        agreements, as of March 31, 2008 (Dollars in thousands):
 TotalOperating
                
                Employment
                
                ContractualLeases
                
                Agreements
                
                Obligations2008
                
                $
                1,190
                
                $
                1,280
                
                $
                2,4702009
                
                
                1,575
                
                
                1,290
                
                
                2,8652010
                
                
                1,306
                
                
                1,132
                
                
                2,4382011
                
                
                1,201
                
                
                35
                
                
                1,236Thereafter
                
                
                3,921
                
                
                -
                
                
                3,921$
                9,193
                
                $
                3,737
                
                $
                12,930
  Due
          to the payment terms of the carriers requiring in
          excess of 60 days from the date of billing or sale, New Motion utilizes
          an
          advance program offered by its aggregators. This advance program feature
          allows
          for payment of 70% of the prior month’s billings within 15 to 20 days after the
          end of the month. For this feature, New Motion pays an additional fee,
          ranging
          from 2.5% to 5% of the amount advanced. For the three months ended March
          31,
          2008, the gross amount of invoices subject to the advance program totaled
          approximately $10.8 million. The total advance amount of these invoices
          equals
          approximately $8.7 million. As of March 31, 2008, New Motion had contra
          assets
          in the form of reserves and allowances of approximately $0.42 million against
          such advanced amounts. This compares to $5.7 million of gross invoices
          subject
          to the advance program for the three months ended March 31, 2007, of which
          the
          total advance amount of these invoices equaled approximately $3.9 million.
          This
          advance program is offered on a forward-recourse basis, with potential
          recourse
          accessed against future advances. Gross sales for each month are reported
          net of
          any of these advance fees. New Motion believes that the reserve established
          against the accounts receivable balance at March 31, 2008, is adequate
          to absorb
          all future processed credits, chargebacks and allowances issued to our
          customers
          by the carriers.
  **Item
          3. Quantitative and Qualitative
          Disclosures About Market Risk**
  Not
          required.
  **Item
          4T. Controls and Procedures**
 
 *Evaluation
        of Disclosure Controls and Procedures*
 
 The
        SEC
        defines the term “disclosure controls and procedures” to mean a company’s
        controls and other procedures that are designed to ensure that information
        required to be disclosed in the reports that it files or submits under the
        Securities Exchange Act of 1934 is recorded, processed, summarized and reported,
        within the time periods specified in the Commission’s rules and
        forms.
 
 As
        discussed in our Annual Report on Form 10-KSB for the year ended December
        31,
        2007, we identified two material weaknesses pertaining to controls related
        to
        (i) the treatment of events subsequent to the year ended December 31, 2007,
        and
        (ii) our consolidation process.
  41
  In
        order
        to address these material weaknesses, during the quarter ended March 31,
        2008 we
        implemented procedures to provide an additional layer of supervisory review
        of
        subsequent event transactions and implemented a comprehensive set of
        consolidation protocols to improve our controls and procedures over financial
        reporting.
  Members
        of the Company's management, including our Chief Executive Officer, Burton
        Katz,
        and Chief Financial Officer, Dan Harvey, have evaluated the effectiveness
        of our
        disclosure controls and procedures, as defined by paragraph (e) of Exchange
        Act
        Rules 13a-15 or 15d-15, as of March 31, 2008, the end of the period covered
        by
        this report. Based upon that evaluation other than as described above, Messrs.
        Katz and Harvey concluded that our disclosure controls and procedures were
        effective as of March 31, 2008, the end of the quarterly period covered by
        this
        report.
 INTERNAL
          CONTROL OVER FINANCIAL REPORTING
  Other
          than as described above, there were no changes in our internal control
          over
          financial reporting or in other factors identified in connection with the
          evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15
          that
          occurred during the first quarter ended March 31, 2008 that have materially
          affected, or are reasonably likely to materially affect, our internal control
          over financial reporting.
  **Item
        4. Submission of Matters to a Vote of Security Holders**
 
 During
        the quarter covered by this report, our security holders voted on matters
        submitted to a vote of security holders through the solicitation of proxies.
        The
        date of the special meeting was January 31, 2008. The following table provides
        a
        brief description of each matter voted upon at the special meeting and the
        number of votes cast for or against or withheld, as well as the number of
        abstentions and broker non-votes as to each such matter.
 
 **Matters
                  Voted**
              
              **For**
              
              **Against
                  or**
                **Withheld**
              
              **Abstentions**
                **And
                  Broker**
                **Non-votes**Proposal
                  to approve the issuance of New Motion common stock in connection
                  with the
                  merger contemplated by the Agreement and Plan of Merger, dated
                  September
                  26, 2007, by and among Traffix, Inc., NM Merger Sub, Inc. and New
                  Motion,
                  Inc.
              
              
              7,937,121
              
              
              -
              
              
              -Proposal
                  to grant discretionary authority to management to adjourn the special
                  meeting, if necessary, to solicit additional proxies if there appear
                  to be
                  insufficient votes at the time of the special meeting to approve
                  any of
                  the foregoing proposals
              
              
              7,936,821
              
              
              200
              
              
              100To
                  transact such other business as may properly come before the meeting
                  or
                  any adjournment or adjournments thereof
              
              
              7,711,721
              
              
              400
              
              
              225,000
 
 42
  **PART
        II**   **–
        OTHER INFORMATION**
  **Item
        1A. Risk Factors**
  **Risk
        Factors**
 
 *Investing
        in our common stock involves a high degree of risk. You should carefully
        consider the following risk factors and all other information contained in
        this
        report before purchasing our common stock. The risks and uncertainties described
        below are not the only ones we face. Additional risks and uncertainties that
        management is unaware of, or that it currently deems immaterial, also may
        become
        important factors that affect us. If any of the following risks occur, our
        business, financial condition, cash flows and/or results of operations could
        be
        materially and adversely affected. In that case, the trading price of OUR
        common
        stock could decline, and stockholders are at risk of losing some or all of
        the
        money invested in purchasing our common stock.*
 
 **We
        face substantial risks and uncertainties in our operating and competitive
        marketing environment and some of our businesses have a limited operating
        history.**
 
 Evaluations
        of our current business model and of our future prospects must address the
        risks
        and uncertainties encountered by companies in various stages of development,
        that may possess limited operating history, and may have had wide fluctuations
        in net sale and profitability levels, and that are conducting business in
        new
        and emerging markets that have yet to produce tangible business success
        accomplishments of significant magnitude.
  The
        following is a list of some of the risks and uncertainties that exist in
        our
        operating, and competitive marketing environment. To be successful, we believe
        that we must:
 
 •
              maintain
                  and develop new wireless carrier and billing aggregator relationships
                  upon
                  which our mobile entertainment business currently
                  depends;•
              maintain
                  a compliance based control system to render our products and services
                  compliant with carrier and aggregator demands, as well as marketing
                  practices imposed by private marketing rule makers, such as the
                  Mobile
                  Marketing Association (MMA), and to conform with the stringent
                  marketing
                  demands as imposed by various States’ Attorney
                  Generals;•
              respond
                  effectively to competitive pressures in order to maintain our market
                  position;•
              increase
                  brand awareness and consumer recognition to secure continued
                  growth;•
              attract
                  and retain qualified management and employees for the expansion
                  of the
                  operating platform;•
              continue
                  to upgrade our technology to process increased usage and remain
                  competitive with message delivery;•
              continue
                  to upgrade our information processing systems to assess marketing
                  results
                  and customer satisfaction ;•
              continue
                  to develop and source high-quality mobile content that achieves
                  significant market acceptance;•
              maintain
                  and grow our off-deck distribution (“off-deck” refers primarily to
                  services delivered through the Internet, which are independent
                  of the
                  carriers own product and service offers), including such distribution
                  through our web sites and third-party direct-to-consumer
                  distributors;•
              obtain
                  the financial resources necessary to execute our business plan
                  when such
                  financing may be difficult and/or more expensive to obtain, especially
                  in
                  a period of slowed-economic-growth in the United States;
                  and•
              our
                  ability to successfully execute on our business and marketing
                  strategies.
 
 If
        we are
        unable to address these risks, and respond accordingly, our operating results
        may not meet our publicly forecasted expectations, and/or the expectations
        as
        derived by our investors, which could cause the price of our common stock
        to
        decline. The potential for a decline in our stock price could also have a
        negative impact on our recorded goodwill and intangible asset values, and
        potentially subject us to a non-cash impairment write-down on such assets.
        At
        March 31, 2008, our approximate book value was $165 million, and our market
        capitalization was approximately $113 million on May 12, 2008.
 
 Our
        mobile entertainment business commenced offering entertainment products and
        services directly to consumers in 2005. Accordingly, this business has a
        limited
        history of generating revenues, and its future revenue and income generating
        potential is uncertain and unproven based on its limited operating history.
        As a
        result of the mobile entertainment business’s short operating history, and its
        existence during that time in the nascent and dynamically evolving mobile
        entertainment industry, we have limited financial data that can be used to
        develop trends and other historical based evaluation methods to project and
        forecast this business. Any evaluation of our business and the potential
        prospects derived from such evaluation must be considered in light of the
        mobile
        entertainment business’s limited operating history and should be discounted
        accordingly.
  43
  **A
        large proportion of our business relies on wireless carriers and aggregators
        to
        facilitate billing and collections in connection with our entertainment products
        sold and services rendered. The loss of, or a material change in, any of
        these
        relationships could materially and adversely affect our business, operating
        results and financial condition.**
 
 We
        expect
        that we will continue to bill a significant portion of our revenues through
        a
        limited number of aggregators for the foreseeable future, although these
        aggregators may vary from period to period. In a risk diversification and
        cost
        saving effort, we have established a direct billing relationship with a carrier
        that mitigates a portion of its revenue generation risk as it relates to
        aggregator dependence; conversely this risk is replaced with internal
        performance risk regarding our ability to successfully process billable messages
        directly with the carrier.
 
 Our
        aggregator agreements are not exclusive and generally have a limited term
        of
        less than three years with automatic renewal provisions upon expiration in
        the
        majority of the agreements. These agreements set out the terms of our
        relationships with the carriers, and provide that either party to the contract
        can terminate such agreement prior to its expiration, and in some instances,
        terminate without cause.
  Many
        other factors exist that are outside of our control and could impair our
        carrier
        relationships, including:
  •
              a
                  carrier’s decision to suspend delivery of our products and services to
                  our
                  customer base;•
              a
                  carrier’s decision to offer its own competing entertainment applications,
                  products and services;•
              a
                  carrier’s decision to offer similar entertainment applications, products
                  and services to its subscribers for price points less than our
                  offered
                  price points, or for free;•
              a
                  network encountering technical problems that disrupt the delivery
                  of, or
                  billing for, our applications;•
              the
                  potential for concentrations of credit risk embedded in the amounts
                  receivable from the aggregator should any one, or group of aggregators,
                  encounter financial difficulties, directly or indirectly, as a
                  result of
                  the current period of slowed-economic-growth currently affecting
                  the
                  United States; or•
              A
                  decision to increase the fees it charges to market and distribute
                  our
                  applications, thereby increasing its own revenue and decreasing
                  our share
                  of revenue.
 
 If
        one or
        more of these wireless carriers decides to suspend the offering of off-deck
        applications, we may be unable to replace such revenue source with an acceptable
        alternative, within an acceptable time frame. This could cause us to lose
        the
        capability to derive revenue from those subscribers, which could materially
        harm
        our business, operating results and financial condition.
 
 **We
        depend on third-party internet and telecommunications providers, over whom
        we
        have no control, for the conduct of our network business. Interruptions in
        these
        services caused by one of the providers could have an adverse effect on revenue
        and securing alternate sources of these services could significantly increase
        expenses and cause significant interruption to both our network and
        entertainment business.**
 
 We
        depend
        heavily on several third-party providers of Internet and related
        telecommunication services, including hosting and co-location facilities,
        in
        operating our network services. These companies may not continue to provide
        services without disruptions in service, at the current cost, or at all.
        The
        costs associated with any transition to a new service provider would be
        substantial, requiring the reengineering of computer systems and
        telecommunications infrastructure to accommodate a new service provider to
        allow
        for a rapid replacement and return to normal network operations. This process
        would be both expensive and time-consuming. In addition, failure of the Internet
        and related telecommunications providers to provide the data communications
        capacity in the time frame required by us could cause interruptions in the
        services we provide across all of our business activities. In addition to
        service interruptions arising from third-party service providers, unanticipated
        problems affecting our proprietary internal computer and telecommunications
        systems have the potential to occur in future fiscal periods, and could cause
        interruptions in the delivery of services, causing a loss of revenue and
        related
        gross margins, and the potential loss of customers, all of which could
        materially and adversely affect our business, results of operations and
        financial condition.
 
 **We
        may be unable to successfully keep pace with the rapid technological changes
        that may occur in the wireless communication, internet and e-commerce arenas
        which would adversely affect our business operations.**
  44
  To
        remain
        competitive, we must continually monitor, enhance and improve the
        responsiveness, functionality and features of our services, offered both
        in our
        entertainment and network activities. Wireless network and mobile phone
        technologies, the Internet and the online commerce industry in general are
        characterized by rapid innovation and technological change, changes in user
        and
        customer requirements and preferences, frequent new product and service
        introductions requiring new technologies to facilitate commercial delivery,
        as
        well as the emergence of new industry standards and practices that could
        render
        existing technologies, systems and/or business methods obsolete in future
        fiscal
        periods. Success in our mobile entertainment business will depend, in part,
        on
        our ability to license or internally develop leading technologies that address
        the increasingly sophisticated and varied needs of prospective consumers,
        and
        respond to technological advances and emerging industry standards and practices
        on a timely-cost-effective basis. Website and other proprietary technology
        development entails significant technical and business risks, including the
        significant cost and time to complete development, the successful implementation
        of the application once developed, and time period for which the application
        will be useful prior to obsolescence. There can be no assurance that we will
        use
        internally developed or acquired new technologies effectively or adapt existing
        websites and operational systems to customer requirements or emerging industry
        standards. If we are unable, for technical, legal, financial or other reasons,
        to adopt and implement new technologies on a timely basis in response to
        changing market conditions or customer requirements, our business, prospects,
        financial condition and results of operations could be materially adversely
        affected.
 
 **We
        may not be able to comply with the adoption of newly created laws and
        governmental regulation of the internet industry and new restrictions for
        internet use may increase our cost of doing business.**
  As
        a
        direct-to-consumer marketing company, we are subject to a variety of federal,
        state and local laws and regulations designed to protect consumers that govern
        certain of its marketing practices, all as more fully set forth in our periodic
        reports filed pursuant to the Securities Exchange Act of 1934 under the heading
        “Business - Government Regulation.”
 
 **We
        rely exclusively on the Internet for much of our revenue generating activities.
        In the event that the marketing preferences of advertisers change such that
        advertisers reduce the amount they spend on internet advertising and digital
        marketing solutions, our financial results could be adversely
        impacted.**
 
 Companies
        doing business on the Internet must compete with traditional advertising
        media,
        including television, radio, cable and print, for a share of advertisers'
        total
        marketing budgets. Potential customers may be reluctant to devote a significant
        portion of their marketing budget to Internet advertising or digital marketing
        if they perceive the Internet to be trending towards a limited or ineffective
        marketing medium. Any shift in marketing budgets away from Internet advertising
        spending or digital marketing solutions could directly, materially and adversely
        affect our network business, as well as our entertainment business, with
        both
        having a materially negative impact on our results of operations and financial
        condition.
 
 **Our
        success depends on our ability to continue forming relationships with other
        Internet and interactive media content, service and product
        providers.**
 
 The
        Internet includes an ever-increasing number of businesses that offer and
        market
        consumer products and services. These entities offer advertising space on
        their
        websites, as well as profit sharing arrangements for joint effort marketing
        programs. We expect that with the increasing number of entrants into the
        Internet commerce arena, advertising costs and joint effort marketing programs
        will become extremely competitive. This competitive environment might limit,
        or
        possibly prevent us from obtaining profit generating advertising or reduce
        our
        margins on such advertising, and reduce our ability to enter into joint
        marketing programs in the future. If we fail to continue establishing new,
        and
        maintain and expand existing, profitable advertising and joint marketing
        arrangements, we may suffer substantial adverse consequences to our financial
        condition and results of operations. Additionally, as a result of our
        acquisition of Traffix, we now have a significant economic dependence on
        the
        major search engine companies that conduct business on the Internet; such
        search
        engine companies maintain ever changing rules regarding scoring and indexing
        their customers marketing search terms. If we cannot effectively monitor
        the
        ever changing scoring and indexing criteria, and effectively adjust our search
        term applications to conform within these scoring and indexing practices,
        we
        could suffer a material decline in our search term generated acquisitions,
        correspondingly reducing our ability to fulfill our clients marketing needs.
        This would have an adverse impact on our revenues and
        profitability.
 
 **The
        demand for a portion of our network services may decline due to the
        proliferation of “spam” and the expanded commercial adoption of software
        designed to prevent its delivery.**
  45
  Our
        business may be adversely affected by the proliferation of "spam" or unwanted
        internet solicitations. In response to the proliferation of spam, Internet
        Service Providers ("ISPs") have been adopting technologies, and individual
        computer users are installing software on their computers that are designed
        to
        prevent the delivery of certain Internet advertising, including legitimate
        solicitations such as the ones we deliver. We cannot assure you that the
        number
        of ISPs and individual computer users who employ these or other similar
        technologies and software will not increase, thereby diminishing the efficacy
        of
        our network, as well as our entertainment service activities. In the case
        that
        one or more of these technologies, or software applications, realize continued
        and/or widely increased adoption, demand for our services could decline in
        response. During 2007 Traffix, (our recently acquired subsidiary) recognized
        a
        decline in a component of its network activity revenue attributable to email
        marketing compared to the prior year, and further noted declines in such
        revenue
        during the quarter ended March 31, 2008, as compared with the year ago period.
        We believe that such decline is the result of the factors mentioned above,
        and
        such decline may continue at higher rates in future fiscal periods.
 
 **We
        have no intention to pay dividends on our equity
        securities.**
 
 Our
        recently acquired subsidiary, Traffix, had paid a dividend of $0.08 per share
        on
        its common stock for its last 18 fiscal quarters prior to the acquisition.
        It is
        our current and long-term intention that we will use all cash flows to fund
        operations and maintain excess cash requirements for the possibility of
        potential future acquisitions. Future dividend declarations, if any, will
        result
        from the reversal of our current intention, and would depend on our performance,
        the level of our then current and retained earnings and other pertinent factors
        relating to our financial position. Prior dividend declarations should not
        be
        considered as an indication for the potential for any future dividend
        declarations.
 
 **We
        face intense competition in the marketing of its entertainment services and
        its
        network based clients’ products.**
 
 The
        development, distribution and sale of wireless entertainment applications
        is a
        highly competitive business. In our entertainment services and network services,
        we compete primarily on the basis of marketing acquisition cost, brand
        awareness, consumer penetration and carrier and distribution depth and breadth,
        as specific to our entertainment services.
 
 We
        consider our primary entertainment business competitors to be Buongiorno,
        Playphone, Dada Mobile, Acotel, Glu Mobile, Cellfish (Lagadere), Jamster
        (Fox),
        Hands on Mobile and Thumbplay. In the network business, we consider Azoogle,
        Value Click, Miva, Kowabunga! (Think Partnership), Right Media, Aptimus and
        Blue
        Lithium to be our primary competitors. In the future, likely competitors
        may
        include other major media companies, traditional video game publishers, content
        aggregators, wireless software providers and other pure-play wireless
        entertainment publishers. Wireless carriers may also decide to develop and
        distribute their own similar on-deck wireless entertainment applications,
        products and services and as such they might refuse to, or limit the
        distribution of some or all of our applications or may deny access to all
        or
        part of their networks.
 
 New
        Motion also competes for experienced and talented employees from the same
        domestic labor pool as its competitors.
 
 Some
        of
        our competitors’ advantages include the following:
  •
              substantially
                  greater revenues and financial resources;•
              stronger
                  brand names, broader distribution networks and enhanced consumer
                  recognition;•
              the
                  capacity to leverage their marketing expenditures across a broader
                  portfolio of wireless and non-wireless products;•
              pre-existing
                  and long standing relationships with marquee brand
                  holders;•
              deeper
                  resources, both financial and otherwise, to effectively execute
                  on
                  acquisition identification, closing and integration;
                  and•
              broader
                  geographic presence potentially allowing for entrance into new
                  markets,
                  both domestically and
                  internationally.
 
 If
        we are
        not as successful as our competitors in executing on our strategy in targeting
        new markets, increasing customer penetration in existing markets, executing
        on
        marquee brand alignment, and/or effectively executing on business level
        accretive acquisition identification and successful closing and post acquisition
        integration, our sales could decline, our margins could be negatively impacted
        and we could lose market share, any and all of which could materially harm
        our
        business prospects, and potentially have a negative impact on our stock
        price.
  46
  **We
        are dependent on our key personnel for managing our business affairs. The
        loss
        of their services could materially and adversely affect the conduct and the
        continuation of our business.**
 
 We
        are
        currently highly dependent upon the efforts of the members of our management
        team, particularly those of Burton Katz, our Chief Executive Officer, Andrew
        Stollman, our President, Raymond Musci, our Executive-vice President, and
        Daniel
        Harvey, our Chief Financial Officer. The loss of the services of Messrs.
        Katz,
        Stollman, Musci or Harvey may impede the execution of our business strategy
        and
        the achievement of its business objectives. We can give you no assurance
        that we
        will be able to attract and retain the qualified personnel necessary for
        the
        development of our business. Our failure to recruit key personnel or failure
        to
        adequately train, motivate and supervise our existing or future personnel
        will
        adversely affect our operations.
  **We
        have been named as a defendant in litigation, either directly, or indirectly
        through its merger/acquisition of Traffix, Inc., with the outcome of such
        litigation being unpredictable; a materially adverse decision in any such
        matter
        could have a material adverse affect on our financial position and results
        of
        operations.**
 
 From
        time
        to time we are named as a defendant in litigation matters, as described under
        "Legal Proceedings" in our periodic reports filed pursuant to the Securities
        Exchange Act of 1934. The defense of these claims may divert financial and
        management resources that would otherwise be used to benefit our operations.
        Although we believe that we have meritorious defenses to the claims made
        in each
        and all of the litigation matters to which we have been a named party, whether
        directly or indirectly, and despite our intent to contest each lawsuit
        vigorously, no assurances can be given that the results of these matters
        will be
        favorable. A materially adverse resolution of any of these lawsuits could
        have a
        material adverse affect on our financial position and results of
        operations.
 
 **We
        are subject to market fluctuation and debt repayment risk of marketable
        securities investment portfolio**
 
 We
        maintain an investment portfolio that is managed by prominent financial
        institutions. The portfolio includes high-grade corporate commercial paper
        and
        auction rate securities, and common stock equities, all of which are held
        for
        varying periods of time depending on market conditions and other factors.
        These
        investments are subject to market price volatility, in addition to the potential
        for business failure at the company level. Moreover, due to the potential
        for an
        economic downturn in the United States as a result of the current “sub-prime
        mortgage” problems and the potential of related fiscal difficulties that may be
        faced by some of the municipalities, educational institutions and companies
        in
        which we have investments, our investment portfolio could become impaired
        by the
        failure of such entities to repay principal upon maturity. Additionally,
        our
        cash flows and interest income could be negatively impacted by Federal Reserve
        Bank interest rate reductions.
 
 **We
        expect to record a significant amount of goodwill and other intangible assets
        in
        connection with the acquisition of Traffix, which may result in significant
        future charges against earnings if the goodwill and other intangible assets
        become impaired.**
 
 In
        the
        accounting of the merger with Traffix, we expect to allocate and record a
        large
        portion of the purchase price paid in the merger to goodwill and other
        intangible assets. Under SFAS No. 142, we must assess, at least annually
        and
        potentially more frequently, whether the value of goodwill and other intangible
        assets has been impaired. Any reduction or impairment of the value of goodwill
        or other intangible assets will result in a charge against earnings, which
        could
        materially adversely affect our results of operations in future
        periods.
 
 **The
        integration of Traffix following the merger may divert managements’ attention
        away from our day-to-day business and negatively impact the combined
        business.**
 
 The
        acquisition of Traffix involves the integration of two companies that have
        previously operated independently with principal offices in two distinct
        locations. The combined company will be required to devote significant
        management attention and resources to integrate the two companies. Delays
        in
        this process could adversely affect the combined company’s business, financial
        results, financial condition and accordingly, our stock price. Even if we
        were
        able to integrate the businesses successfully, there can be no assurance
        that
        this integration will result in the realization of all of the synergies,
        cost
        savings, innovation and operational efficiencies that may be possible from
        this
        integration or that these benefits will be achieved within a reasonable period
        of time.
  47
  **We
        may be impacted by the affects of a slow-down of the United States economic
        environment and potential for recession.**
 
 The
        majority of our client audience is comprised of individuals dispersed throughout
        the United States that will be directly and negatively impacted by increased
        mortgage payments, foreclosures and other factors arising out of a recessionary
        economy, and the results of the sub-prime mortgage problems, that restrict
        disposable income that is expended on our products and services. Should current
        expectations of a looming recession become fiscal fact, we could be materially
        and adversely affected by reductions in revenue, and the corresponding negative
        impact on results of operations and financial condition.
  **We
        depend on a limited number of applications, products and services for a
        significant portion of revenue.**
 
 We
        derive
        a significant portion of our revenue from a limited number of applications.
        We
        expect to continue to derive a substantial portion of our mobile entertainment
        revenue from Bid4Prizes and Gator Arcade and a limited number of other
        applications in the foreseeable future. Due to this dependence on a limited
        number of applications, the failure to achieve anticipated results with any
        one
        of these key applications may harm our business. Additionally, if we cannot
        develop new applications that are as successful as Bid4Prizes, our future
        revenue could be limited and our business will suffer.
 
 **We
        will become subject to more stringent reporting and disclosure requirements
        as a
        result of the merger with Traffix, which could harm the combined company’s
        business.**
 
 As
        a
        result of the completion of the merger with Traffix, the combined company
        may,
        at sometime in the near future qualify as an “accelerated filer” for reporting
        purposes under the Securities Exchange Act of 1934, which would require the
        Company to file periodic reports and other documents on an accelerated
        timetable. We currently anticipate the full attestation requirements to be
        effective for the year ending December 31, 2009. Also, as a result of the
        merger, we will no longer qualify as a small business issuer in subsequent
        reporting periods, and will be subject to more expanded and burdensome
        disclosure requirements with respect to any future reports or other documents
        filed with the Securities and Exchange Commission. Additionally, the merger
        significantly increases the complexity of the internal controls over financial
        reporting that the combined company will need, and significantly more resources
        will be required to ensure that these controls remain effective. Accordingly,
        as
        a result of the merger, the combined company will be subject to substantially
        more stringent and burdensome reporting and disclosure requirements, and
        complying with these requirements could be expensive and time consuming and
        could require significant management attention, which could substantially
        increase our expenses and harm our business.
 
 **The
        requirements of the Sarbanes-Oxley act, including section 404, are burdensome,
        and our failure to comply with them could have a material adverse affect
        on our
        business and stock price.**
 
 Effective
        internal control over financial reporting is necessary so we can provide
        reliable financial reports and effectively prevent fraud. Section 404 of
        the
        Sarbanes-Oxley Act of 2002 requires us to evaluate and report on our internal
        control over financial reporting beginning with our Annual Report on Form
        10-KSB
        for the fiscal year ending December 31, 2007. Our independent registered
        public
        accounting firm will need to annually attest to our evaluation, and issue
        their
        own opinion on our internal control over financial reporting beginning with
        our
        Annual Report on Form 10-K for the fiscal year ending December 31, 2008.
        The
        process of complying with Section 404 is expensive and time consuming, and
        requires significant management attention. We cannot be certain that the
        measures we will undertake will ensure that we will maintain adequate controls
        over our financial processes and reporting in the future. Furthermore, if
        we
        continue to rapidly grow our business, the internal controls over financial
        reporting that we will need will become more complex, and significantly more
        resources will be required to ensure that our internal controls over financial
        reporting remain effective. Failure to implement required controls, or
        difficulties encountered in their implementation, could harm our operating
        results or cause us to fail to meet our reporting obligations. If we or our
        auditors discover a material weakness in our internal control over financial
        reporting, the disclosure of that fact, even if the weakness is quickly
        remedied, could diminish investors’ confidence in our financial statements and
        harm our stock price. In addition, non-compliance with Section 404 could
        subject
        us to a variety of administrative sanctions, including the suspension of
        trading, ineligibility for listing on one of the NASDAQ Stock Markets or
        national securities exchanges, and the inability of registered broker-dealers
        to
        make a market in our common stock, which would further reduce our stock
        price.
 
 48
 
 **Item
        6. Exhibits**
  **Exhibit**
                  **Number**
                
                **Description
                    of Exhibit**10.1
                
                Employment
                    Agreement dated as of February 1, 2008, by and between New Motion,
                    Inc.
                    and Andrew Stollman.10.2
                
                Employment
                    Agreement as of February 1, 2008 by and between New Motion, Inc.
                    and
                    Burton Katz.10.3
                
                Consulting
                    Agreement dated as of January 31, 2008 by and between New Motion,
                    Inc. and
                    Jeffrey Schwartz.10.4
                
                Master
                    Services Agreement effective as of January 1, 2008 by and between
                    New
                    Motion, Inc. and Motricity, Inc. (1)31.1
                
                Certification
                    of Principal Executive Officer pursuant to Securities Exchange
                    Act Rules
                    13a-14(a) and
                  15d-14(a)
                    as adopted pursuant to section 302 of the Sarbanes-Oxley Act
                    of
                    2002.
                *31.2
                
                Certification
                    of Principal Financial Officer pursuant to Securities Exchange
                    Act Rules
                    13a-14(a) and
                  15d-14(a)
                    as adopted pursuant to section 302 of the Sarbanes-Oxley Act
                    of
                    2002.
                *32.1
                
                Certification
                    of Principal Executive Officer and Principal Financial Officer
                    pursuant to
                    18 U.S.C. Section
                  1350,
                    as adopted pursuant to section 906 of the Sarbanes-Oxley Act
                    of
                    2002.
                *
  *
        Filed
        herewith.
  (1)
        certain portions of this agreement have been omitted
        and filed separately with the Securities and Exchange Commission pursuant
        to a
        request for an order granting confidential treatment pursuant to Rule 24b-2
        of
        the Rules and Regulations of the Commission under the Securities Exchange
        Act of
        1934, as amended.
  49
 
 **Signatures**
 
 Pursuant
        to the requirements of Section 13 or 15(d) of the Securities Exchange Act
        of
        1934, as amended, the registrant has caused this report to be signed on its
        behalf by the undersigned, there unto duly authorized.
  Dated:
                May
                19, 2008
              
              Dated:
                May
                19, 2008BY:
              /s/
                  Burton Katz
              
              BY:
              /s/
                  Dan HarveyBurton
                  Katz
              
              Daniel
                  HarveyChief
                  Executive Officer
              
              Chief
                  Financial Officer and Secretary(Principal
                  Financial and Accounting Officer)
 
 50
  **Exhibit
        Index**
 **Exhibit**
                    **Number**
                  
                  **Description
                      of Exhibit**10.1
                  
                  Employment
                      Agreement dated as of February 1, 2008, by and between New
                      Motion, Inc.
                      and Andrew Stollman.10.2
                  
                  Employment
                      Agreement as of February 1, 2008 by and between New Motion,
                      Inc. and
                      Burton Katz.10.3
                  
                  Consulting
                      Agreement dated as of January 31, 2008 by and between New Motion,
                      Inc. and
                      Jeffrey Schwartz.10.4
                  
                  Master
                      Services Agreement effective as of January 1, 2008 by and between
                      New
                      Motion, Inc. and Motricity, Inc. (1)31.1
                  
                  Certification
                      of Principal Executive Officer pursuant to Securities Exchange
                      Act Rules
                      13a-14(a) and
                    15d-14(a)
                      as adopted pursuant to section 302 of the Sarbanes-Oxley Act
                      of
                      2002.
                  *31.2
                  
                  Certification
                      of Principal Financial Officer pursuant to Securities Exchange
                      Act Rules
                      13a-14(a) and
                    15d-14(a)
                      as adopted pursuant to section 302 of the Sarbanes-Oxley Act
                      of
                      2002.
                  *32.1
                  
                  Certification
                      of Principal Executive Officer and Principal Financial Officer
                      pursuant to
                      18 U.S.C. Section
                    1350,
                      as adopted pursuant to section 906 of the Sarbanes-Oxley Act
                      of
                      2002.
                  *
 *
        Filed
        herewith.
  (1)
        certain portions of this agreement have been omitted
        and filed separately with the Securities and Exchange Commission pursuant
        to a
        request for an order granting confidential treatment pursuant to Rule 24b-2
        of
        the Rules and Regulations of the Commission under the Securities Exchange
        Act of
        1934, as amended.
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