UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB
(Mark One)

|X|      Quarterly  Report under  Section13 or 15(d) of the Securities  Exchange
         Act of 1934

                                    For the quarterly period ended JUNE 30, 2007
                                                                   -------------

|_|      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: _________________________

                                NEW MOTION, INC.
--------------------------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)

           Delaware                                      34-1775913
-------------------------------             ------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

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

                                 (949) 777-3700
--------------------------------------------------------------------------------
                           (Issuer's telephone number)



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

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90days. Yes |X| No |_|

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

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

As of August 6, 2007,  the Company has 11,965,596  shares of Common Stock,  $.01
par value, outstanding.

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


<PAGE>


                                NEW MOTION, INC.

                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----
TABLE OF CONTENTS.............................................................1

PART I - FINANCIAL INFORMATION................................................2

ITEM 1. FINANCIAL STATEMENTS..................................................2

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS.................................23

ITEM 3. CONTROLS AND PROCEDURES..............................................38

PART II - OTHER INFORMATION..................................................39

ITEM 6. EXHIBITS.............................................................39


                                       1
<PAGE>


                                NEW MOTION, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                (in thousands except share and per share amounts)

PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

                                                       JUNE 30,
                                                         2007       DECEMBER 31,
                                                     (Unaudited)        2006
                                                    ------------    ------------
                     ASSETS
CURRENT ASSETS
Cash and cash equivalents .......................   $     13,989    $        544
Accounts receivable, net of allowance for
   doubtful accounts of $661 (unaudited)
   and $1,263, respectively .....................          4,839           3,527
Prepaid income taxes ............................            618             578
Prepaid expenses and other ......................            739             167
Deferred income taxes ...........................          1,193             149
                                                    ------------    ------------
                                                          21,378           4,965
                                                    ------------    ------------

PROPERTY AND EQUIPMENT ..........................            859             146
                                                    ------------    ------------

OTHER ASSETS
Acquisition costs, net ..........................             91             336
Deposits and other assets .......................             57              47
Intangible asset ................................          1,208            --
                                                    ------------    ------------
                                                           1,356             383
                                                    ------------    ------------

TOTAL ASSETS ....................................   $     23,593    $      5,494
                                                    ============    ============

      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable ................................   $      2,147    $      2,870
Accrued expenses ................................          1,716             837
Short-term note payable .........................             89            --
Deferred income taxes ...........................            564             564
                                                    ------------    ------------
                                                           4,516           4,271
                                                    ------------    ------------

LONG TERM LIABILITIES
Note payable ....................................             67            --
                                                    ------------    ------------

Minority interest in joint venture ..............            135            --
                                                    ------------    ------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
Common stock, par value $0.01, 100,000,000
   authorized, 11,965,596 and 7,263,688
   issued and outstanding, respectively .........            120              73
Additional paid-in capital ......................         18,948              84
Retained earnings (deficit) .....................           (193)          1,066
                                                    ------------    ------------
                                                          18,875           1,223
                                                    ------------    ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ......   $     23,593    $      5,494
                                                    ============    ============


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

                                       2
<PAGE>


<TABLE>
                                NEW MOTION, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
                (in thousands except share and per share amounts)


<CAPTION>
                                                THREE MONTHS ENDED                SIX MONTHS ENDED
                                             JUNE 30,        JUNE 30,        JUNE 30,        JUNE 30,
                                               2007            2006            2007            2006
                                           ------------    ------------    ------------    ------------
<S>                                        <C>             <C>             <C>             <C>
NET SALES ..............................   $      6,894    $      3,884    $     12,536    $      6,962

COST OF SALES ..........................          1,494             156           2,220             219
                                           ------------    ------------    ------------    ------------

GROSS PROFIT ...........................          5,400           3,728          10,316           6,743
                                           ------------    ------------    ------------    ------------

EXPENSES
Selling and marketing ..................          4,460           2,309           7,447           2,823
General and administrative .............          2,898             901           5,098           1,781
                                           ------------    ------------    ------------    ------------
                                                  7,358           3,210          12,545           4,604
                                           ------------    ------------    ------------    ------------

INCOME (LOSS) FROM OPERATIONS ..........         (1,958)            518          (2,229)          2,139
                                           ------------    ------------    ------------    ------------

OTHER EXPENSE (INCOME)
Interest income ........................           (153)             (9)           (239)             (9)
Interest expense .......................             11               7              18              11
Other expense ..........................           --                 5              21              29
                                           ------------    ------------    ------------    ------------
                                                   (142)              3            (200)             31
                                           ------------    ------------    ------------    ------------
INCOME (LOSS) BEFORE PROVISION (BENEFIT)
   FOR INCOME TAXES ....................         (1,816)            515          (2,029)          2,108

PROVISION (BENEFIT) FOR INCOME TAXES ...           (909)            201            (905)            597
                                           ------------    ------------    ------------    ------------

INCOME (LOSS) BEFORE MINORITY INTEREST .           (907)            314          (1,124)          1,511

MINORITY INTEREST, NET OF INCOME TAX ...            (20)           --               135            --
                                           ------------    ------------    ------------    ------------

NET INCOME (LOSS) ......................           (887)            314          (1,259)          1,511
                                           ============    ============    ============    ============

NET INCOME (LOSS) PER SHARE:

Basic ..................................   $      (0.08)   $       0.04    $      (0.12)   $       0.21
                                           ============    ============    ============    ============
Diluted ................................   $      (0.08)   $       0.04    $      (0.12)   $       0.20
                                           ============    ============    ============    ============

WEIGHTED AVERAGE SHARES OUTSTANDING:

Basic ..................................     11,780,923       7,263,688      10,650,096       7,263,688
Diluted ................................     11,780,923       7,750,426      10,650,096       7,750,426
</TABLE>


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


                                       3
<PAGE>


                                NEW MOTION, INC.
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                        FOR THE SIX MONTHS ENDED JUNE 30,
                            (Unaudited)(in thousands)

                                                             2007        2006
                                                           --------    --------

CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ......................................   $ (1,259)   $  1,511
Adjustments to reconcile net income
   to net cash from operating activities:
Allowance for doubtful accounts ........................       (602)       (392)
Depreciation and amortization ..........................        514          11
Stock-based compensation expense .......................        472        --
Deferred income taxes ..................................     (1,044)       --
Minority interest in net income of consolidated
   joint venture, net of income tax ....................        135        --
Changes in operating assets and liabilities:
Accounts receivable ....................................       (710)       (951)
Prepaid income taxes ...................................        (40)       --
Prepaid expenses .......................................       (562)        (38)
Deposits and other assets ..............................        (10)       --
Accounts payable .......................................       (723)        368
Accrued expenses .......................................        892          17
                                                           --------    --------
Net Cash (Used In) Provided By Operating Activities ....     (2,937)        526
                                                           --------    --------

CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for Mobliss transaction ...................        (36)       --
Purchase of property and equipment .....................       (118)       --
Acquisition of Katazo assets ...........................       (970)       --
                                                           --------    --------
Net Cash Used In Investing Activities ..................     (1,124)       --
                                                           --------    --------

CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of notes payable .............................       (552)       (104)
Expenditures for equity financing ......................       (470)       --
Issuance of warrants ...................................         57        --
Issuance of preferred stock ............................     18,471        --
                                                           --------    --------
Net Cash Provided By (Used In) Financing Activities ....     17,506        (104)
                                                           --------    --------

NET CHANGE IN CASH .....................................     13,445         422
CASH AT BEGINNING OF PERIOD ............................        544         350
                                                           --------    --------

CASH AT END OF PERIOD ..................................   $ 13,989    $    772
                                                           ========    ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest and taxes .......................   $    (44)   $   (396)
                                                           ========    ========
Non-cash financing and investing disclosure (certain
non-cash transactions are disclosed in the financial
statement footnotes)
    Acquisition of intangible assets by issuance of note
    payable ............................................   $   (580)   $   --
                                                           ========    ========
    Acquisition of equipment by issuance of note payable   $   (708)   $   --
                                                           ========    ========
    Extinguishment of note payable and accrued interest
    upon conversion of note payable into common stock ..   $    593    $   --
                                                           ========    ========

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


                                       4
<PAGE>


<TABLE>
                                NEW MOTION, INC.
            CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
              FOR THE PERIOD FROM JANUARY 1, 2006 TO JUNE 30, 2007
                                   (Unaudited)
                       (in thousands except share amounts)

<CAPTION>
                                            SERIES A                   SERIES B                   SERIES D
                                    ------------------------   ------------------------   ------------------------
                                      SHARES        AMOUNT       SHARES        AMOUNT       SHARES        AMOUNT
                                    ----------    ----------   ----------    ----------   ----------    ----------
<S>                                       <C>     <C>                <C>     <C>              <C>       <C>
Balance at January 1, 2006 ......         --      $     --           --      $     --           --      $     --

Stock-based compensation expense          --            --           --            --           --            --
Net income ......................         --            --           --            --           --            --
                                    ----------    ----------   ----------    ----------   ----------    ----------
BALANCE AT DECEMBER 31, 2006 ....         --            --           --            --           --            --

Financing Costs related to
 reverse acquisition of MPLC ....         --            --           --            --           --            --
Issuance of Series A Preferred
 (Note 5) .......................            1          --           --            --           --            --
MPLC Common Exchange (Note 5) ...         --            --           --            --           --            --
Issuance of Series B Preferred
 (Note 5) .......................         --            --            650          --           --            --
Issuance of Series D Preferred
 (Note 5) .......................         --            --           --            --          8,333             1
Equity issuance costs related to
 issuance of preferred stock ....         --            --           --            --           --            --
Stock-based compensation expense          --            --           --            --           --            --
Value of warrants issued (Note 7)         --            --           --            --           --            --
Reverse split and conversion
 (Note 5) .......................           (1)         --           (650)         --         (8,333)           (1)
Net loss ........................         --            --           --            --           --            --
                                    ----------    ----------   ----------    ----------   ----------    ----------
BALANCE AT MARCH 31, 2007 .......         --            --           --            --           --            --

Conversion of IVG Note (Note 4) .         --            --           --            --           --            --
Issuance of shares for odd lot
 rounding after Reverse Split ...         --            --           --            --           --            --
Financing costs related to
 reverse acquisition of MPLC ....         --            --           --            --           --            --
Stock-based compensation expense          --            --           --            --           --            --
Net loss ........................         --            --           --            --           --            --
                                    ----------    ----------   ----------    ----------   ----------    ----------
BALANCE AT JUNE 30, 2007 ........         --      $     --           --      $     --           --      $     --


<CAPTION>
                                             COMMON           ADDITIONAL
                                    -----------------------    PAID-IN       RETAINED
                                      SHARES       AMOUNT      CAPITAL       EARNINGS       TOTAL
                                    ----------   ----------   ----------    ----------    ----------
<S>                                 <C>          <C>          <C>           <C>           <C>
Balance at January 1, 2006 ......    7,263,688   $       73   $      (63)   $      389    $      399

Stock-based compensation expense          --           --            147          --             147
Net income ......................         --           --           --             677           677
                                    ----------   ----------   ----------    ----------    ----------
BALANCE AT DECEMBER 31, 2006 ....    7,263,688           73           84         1,066         1,223

Financing Costs related to
 reverse acquisition of MPLC ....         --           --           (576)         --            (576)
Issuance of Series A Preferred
 (Note 5) .......................         --           --          3,500          --           3,500
MPLC Common Exchange (Note 5) ...      250,000            3           (3)         --            --
Issuance of Series B Preferred
 (Note 5) .......................         --           --          6,500          --           6,500
Issuance of Series D Preferred
 (Note 5) .......................         --           --          9,999          --          10,000
Equity issuance costs related to
 issuance of preferred stock ....         --           --         (1,529)         --          (1,529)
Stock-based compensation expense          --           --            194          --             194
Value of warrants issued (Note 7)         --           --             57          --              57
Reverse split and conversion
 (Note 5) .......................    4,166,658           42          (41)         --            --
Net loss ........................         --           --           --            (372)         (372)
                                    ----------   ----------   ----------    ----------    ----------
BALANCE AT MARCH 31, 2007 .......   11,680,346          118       18,185           694        18,997

Conversion of IVG Note (Note 4) .      172,572            1          592          --             593
Issuance of shares for odd lot
 rounding after Reverse Split ...      112,678            1           (1)         --            --
Financing costs related to
 reverse acquisition of MPLC ....         --           --           (106)         --            (106)
Stock-based compensation expense          --           --            278          --             278
Net loss ........................         --           --           --            (887)         (887)
                                    ----------   ----------   ----------    ----------    ----------
BALANCE AT JUNE 30, 2007 ........   11,965,596   $      120   $   18,948    $     (194)   $   18,875
</TABLE>


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


                                       5
<PAGE>


                                NEW MOTION, INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -BACKGROUND AND BASIS OF PRESENTATION

BUSINESS

         New Motion,  Inc. ("New Motion" or the "Company") and its  wholly-owned
operating   subsidiary  New  Motion  Mobile,   Inc.  ("New  Motion  Mobile"  and
collectively "New Motion" or the "Company") is a digital  entertainment  company
headquartered  in  Irvine,  California.  The  Company  provides  a wide range of
digital  entertainment  products and services,  using the power of the Internet,
the  latest  in  mobile   technology,   and  traditional   marketing/advertising
methodologies.  The Company's product and service portfolio  includes  contests,
games, ringtones,  screensavers and wallpapers,  trivia applications,  fan clubs
and voting services, blogs and information services.

         The Company's  business is focused on three  strategic  service lines -
digital music,  casual games and interactive  contests.  These distinct  service
lines  consist of a broad  array of  properties,  including  MobileSidewalk(TM),
RingtoneChannel  and  Bid4Prizes.  MobileSidewalk(TM)  is  a  U.S.-based  mobile
entertainment  company,  RingtoneChannel  is a mobile storefront  provider,  and
Bid4Prizes is a low-bid  mobile  auction game.  Other  products  include,  among
others, "MobileSidewalk's Music Trivia," "Ringtone Club" and "Gator Arcade." The
Company  focuses  on  selectively  increasing  its  application  portfolio  with
high-quality, innovative applications. The Company's growing portfolio of mobile
entertainment  and Internet  media  services are based  primarily on  internally
generated  content,  such  as  MobileSidewalk's  Music  Trivia  and  Bid4Prizes.
Internally  generated content  generates the majority of the Company's  revenue.
The  Company  also  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  monthly  end user  subscription  fees for the  Company's  wireless
entertainment  products and services generally range from $3.99 to $9.99. Across
all of its applications,  the median subscription term of the Company's users is
approximately  three  and  a  half  months.  Premium  downloads  offered  on  an
a-la-carte  basis range from $0.99 to $5.99.  The Company  generates  95% of its
revenues on a subscription basis versus 5% on an a-la-carte basis.

HISTORY

         New Motion,  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 this 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 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, the New Motion


                                       6
<PAGE>


                                NEW MOTION, INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Mobile launched its first successful text message campaign  incorporating  music
trivia. In March of 2006, New Motion Mobile partnered with GoldPocket  Wireless,
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, the Company and certain  stockholders entered into
a Common  Stock  Purchase  Agreement  with  Trinad  Capital  Master  Fund,  Ltd.
("Trinad"),  pursuant to which the Company agreed to redeem 23,448,870 shares of
the Company's  Common Stock from existing  stockholders and sell an aggregate of
69,750,000  shares  of  the  Company's  Common  Stock,  representing  93% of the
Company'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,  the Company 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 US and Canada.  The primary strategic  objective of this
purchase is to allow the Company 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 will
also  enable  the  Company  to  better  serve  its  customers  and end  users by
expediting the time in which it reacts to changes in the marketplace.

         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 is to be registered  under the name The Mobile  Entertainment
Channel  Corporation ("MEC") and will assist New Motion in expanding its service
offerings by partnering  with IVG, a leading  global  player in the  interactive
games and mobile space.

         In February,  2007, 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.

         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,  the Company  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.  In connection with these corporate
actions,  the Company also changed its ticker to "NWMO" on the  Over-The-Counter
Bulletin Board.

         On April 1, 2007,  the Company  entered into a Binding Letter of Intent
(the  "LOI")  with  Opera  Telecom  USA  ("Opera")  to  purchase  the  following
identified and specified assets: (1) the domain name www.katazo.com, (2) website
html  code and  graphics,  (3)  access  to a content  management  system,  (4) a
subscriber list, and (5) prepaid short codes.  The Company  purchased the assets
for  $970,000  in cash.  The closing of the asset  purchase  occurred on May 25,
2007.

         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.


                                       7
<PAGE>


                                NEW MOTION, INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

INTERIM FINANCIAL INFORMATION

         The Company's  condensed balance sheet as of December 31, 2006 has been
derived from audited financial statements and the interim condensed consolidated
financial  statements have been prepared from the records of the Company without
audit. The Company's unaudited condensed  consolidated financial statements have
been  prepared  pursuant  to the rules and  regulations  of the  Securities  and
Exchange  Commission  (the  "SEC").  Certain  information  and note  disclosures
normally  included in annual  financial  statements  prepared in accordance with
generally accepted accounting principles have been condensed or omitted pursuant
to  those  rules  and  regulations,  although  the  Company  believes  that  the
disclosures  made are adequate to make the information  not  misleading.  In the
opinion of management,  all adjustments,  which consist of only normal recurring
adjustments  to present  fairly the financial  position at June 30 2007, and the
results of operations  and cash flows for the three- and  six-months  ended June
30, 2007 and 2006,  respectively,  have been made.  These  interim  consolidated
financial  statements  should be read in conjunction with the Company's  audited
financial  statements  and notes thereto for each of the two years in the period
ended December 31, 2006 contained in the Company's  Annual Report on Form 10-KSB
filed with the SEC on April 2, 2007.  The results of  operations  for the three-
and six-months ended June 30, 2007 are not necessarily indicative of the results
to be expected for any other interim period or for the full fiscal year.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

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

         Beginning  in the first  quarter of 2007,  the  Company's  consolidated
financial   statements  also  include  the  accounts  of  the  Company's  Mobile
Entertainment  Channel  Corporation  ("MEC") joint venture. On January 19, 2007,
the Company  entered  into a Heads of  Agreement  with Index Visual & Games Ltd.
("IVG")  setting forth the terms of the joint venture to distribute  IVG content
within  North  America and to manage and service the Mobliss,  Inc.  ("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 MEC have been  consolidated  with
the  Company's  accounts  because the Company (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.  The Company
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 the Company's  balance
sheet represents IVG's interest in operating results of the joint venture.

USE OF ESTIMATES

         The  preparation of financial  statements in conformity with accounting
principles   generally  accepted  in  the  United  States  of  America  requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities,  and disclosure of contingent  assets and liabilities at
the date of the financial  statements,  and the reported amounts of revenues and
expenses during the reporting period.  Significant  estimates made by management
are, among others, the recognition of revenue and related  chargebacks and other
credits,  realizability  of accounts  receivable,  recoverability  of long-lived
assets,  valuation of stock  options and deferred  taxes.  Actual  results could
materially differ from those estimates.


                                       8
<PAGE>


                                NEW MOTION, INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

RISKS AND UNCERTAINTIES

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

FAIR VALUE OF FINANCIAL INSTRUMENTS

         The carrying  amounts of current assets and  liabilities are carried at
historical  value.  Due  to  the  relatively  short  maturity  of  these  items,
historical values are a reasonable estimate of their fair values.

FOREIGN CURRENCY RISK

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

         The Company's foreign operations' functional currency is the applicable
local  currency.  Assets  and  liabilities  for  these  foreign  operations  are
translated at the exchange rate in effect at the balance sheet date,  and income
and expenses are  translated at average  exchange  rates  prevailing  during the
year. Translation gains or losses are reflected in the statement of operations.

CONCENTRATION OF CREDIT RISK

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


                                       9
<PAGE>


                                NEW MOTION, INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

                                     FOR THE SIX MONTHS     FOR THE THREE MONTHS
                                       ENDED JUNE 30,          ENDED JUNE 30,
                                      2007        2006        2007        2006
                                    --------    --------    --------    --------
SIGNIFICANT CUSTOMERS:
REVENUE
Customer A ......................        10%         64%          8%         48%
Customer B ......................        - %         13%         - %          9%
Customer C ......................        85%         23%         85%         43%
Other Customers .................         5%         - %          7%         - %

                                    JUNE 30,    DEC. 31,
                                      2007        2006
                                    --------    --------
SIGNIFICANT CUSTOMERS:
ACCOUNTS RECEIVABLE
Customer A ......................        11%         18%
Customer B ......................        - %         11%
Customer C ......................        81%         70%
Other Customers .................         8%          1%

ACCOUNTS RECEIVABLE

         Accounts  receivable  are  stated at the amount  management  expects to
collect  from  outstanding  balances.  The Company  makes  estimates  for future
refunds,  charge backs or credits, and provides for these probable uncollectible
amounts  through a credit to a valuation  allowance  and a reduction of recorded
revenues in the period for which the sale  occurs  based on analyses of previous
rates and trends,  which have  historically  varied between 10% and 17% of gross
revenue.  This reserve is reconciled  once a carrier remits total payment to the
Company's aggregator,  who subsequently remits payments to the Company,  usually
between 90 to 180 days after billing.  Balances that are still  outstanding  and
deemed  uncollectible  after  management has performed this  reconciliation  are
written off through a charge to the  valuation  allowance  and a credit to trade
accounts  receivable.  The Company has an arrangement  with its aggregators that
allows  for  the  collection  of 70%  of the  outstanding  receivable  from  the
aggregator  within 30 days,  instead of waiting the 90 to 180 days for the final
carrier  confirmation of the receivable.  The Company  believes that the reserve
established  against the  accounts  receivable  balance is adequate to cover any
credits  and charge  backs from the  carrier  and that the  Company  will not be
required to repay any amounts to the aggregator.

PROPERTY AND EQUIPMENT

         The Company provides for depreciation  using the  straight-line  method
over the  estimated  useful lives of its property  and  equipment,  ranging from
three  to  five  years.  Repairs  and  maintenance   expenditures  that  do  not
significantly  add value to property  and  equipment,  or prolong its life,  are
charged to expense,  as incurred.  Gains and losses on  dispositions of property
and equipment are included in the operating results of the related period.

INTANGIBLE ASSETS MEASUREMENT AND RECOGNITION

         For  intangible  assets  acquired,  in  accordance  with SFAS No.  142,
"Goodwill and Other Intangible  Assets," the Company recognizes and measures the
intangible  asset acquired based on its fair value, or in the case of a group of
intangible  assets  acquired,  based on each asset's  relative  fair value.  The
Company uses a range of


                                       10
<PAGE>


                                NEW MOTION, INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

valuation methodologies,  including performing discounted cash flow analysis, to
value  acquired  intangible  assets.  Discounted  cash  flow  analysis  requires
assumptions  about the timing and amount of future cash  inflows  and  outflows,
risk,  the cost of  capital,  and  terminal  values.  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.  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 flows;  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.

IMPAIRMENT OF LONG-LIVED ASSETS

         Long-lived   assets,   such  as  property  and  equipment   subject  to
amortization,  are  reviewed  for  impairment  whenever  events  or  changes  in
circumstances  indicate  that  the  carrying  amount  of an  asset  may  not  be
recoverable.  Assets to be disposed of, if any, would be separately presented in
the balance sheet and reported at the lower of the carrying amount or fair value
less  costs to sell,  and are no  longer  depreciated.  For each of the  periods
reported herein, the Company's management believes there is no impairment of its
long-lived assets.  There can be no assurance,  however,  that market conditions
will not change or demand for the  Company's  products or services will continue
which could result in impairment of long-lived assets in the future.

STOCK-BASED COMPENSATION

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

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

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


                                       11
<PAGE>


                                NEW MOTION, INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

REVENUE RECOGNITION

         The Company  recognizes  revenue from the sale or  subscription  of its
applications to wireless subscribers under distribution agreements with wireless
carriers  and other  distributors  in the period in which the  applications  are
purchased or over the period in which the applications are subscribed,  assuming
that:  fees are  fixed  and  determinable;  we have no  significant  obligations
remaining;  and collection of the related receivable is reasonably assured.  The
Company makes estimates and creates reserves for future refunds, charge backs or
credits in the period for which the sale  occurs  based on  analyses of previous
rates and trends,  which have  historically  varied between 10% and 17% of gross
revenue.  This reserve is reconciled  once a carrier remits total payment to the
Company's  aggregator,  who  subsequently  remits payment usually 90 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 revenues and actual
revenue in the next reporting period once the actual amounts are determined.  To
date,  differences  between estimates and ultimate  reconciled revenues have not
been significant.

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

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

SOFTWARE DEVELOPMENT COSTS

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

ADVERTISING AND MARKETING EXPENSE

         The Company expenses  advertising and marketing costs as incurred.  For
the six months ended June 30, 2006 and 2007,  advertising and marketing expenses
were  $2,823,000 and $7,447,000,  respectively.  For the quarters ended June 30,
2006  and  2007,   advertising  and  marketing   expenses  were  $2,309,000  and
$4,460,000, respectively.


                                       12
<PAGE>


                                NEW MOTION, INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

INCOME TAXES

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

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

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

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

         The  Company and its  subsidiaries  file income tax returns in the U.S.
and Australian federal  jurisdictions and the state of California  jurisdiction.
The Company is subject to U.S. and Australia federal examinations and California
state  examinations by tax authorities.  The statute of limitations for 2005 and
2006 in all  jurisdictions  remains open and are subject to  examination  by tax
authorities.

         The  Company  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, the Company recognized no change in the
liability  for  unrecognized  tax  benefits.  The  Company  does  not  have  any
unrecognized tax benefits as of January 1, 2007, and June 30, 2007.

         Included in the balance at January 1, 2007, are $0 of tax positions 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


                                       13
<PAGE>


                                NEW MOTION, INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

period.  Also included in the balance at January 1, 2007, are $0 of unrecognized
tax benefits  that,  if  recognized,  would impact the  effective tax rate. As a
result of (insert issue,  if  applicable),  the Company expects no adjustment to
its amount of unrecognized tax benefits during 2007.

         The  Company  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 June 30, 2007.

         For the  six-months  ended June 30, 2007, the Company has a benefit for
income taxes of  approximately  $905,000.  This represents a current tax benefit
for the Company of  $1,044,000,  offset by a tax  provision  of $139,000 for its
consolidated  joint  venture  entity,  MEC.  For the three months ended June 30,
2007, the Company has a benefit for income taxes of approximately $909,000. This
represents  a current tax benefit for the Company of $889,000  and a tax benefit
of $20,000 for the Company's consolidated joint venture entity, MEC.

EARNINGS PER SHARE

         Basic  earnings  per share  ("EPS") is computed  by  dividing  reported
earnings by the weighted  average  number of shares of common stock  outstanding
for the  period.  Diluted EPS  includes  the  effect,  if any, of the  potential
issuance of  additional  shares of common  stock as a result of the  exercise or
conversion of dilutive  securities,  using the treasury stock method.  Potential
dilutive securities for the Company include outstanding stock options,  warrants
and convertible debt.

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.  FAS  159 is  effective  for  financial
statements issued for fiscal year beginning after November 15, 2007. The Company
does  not  expect  adoption  of FAS  159  will  have a  material  impact  on our
consolidated results of operations or financial position.

         In December  2006,  the FASB issued FASB Staff  Position  EITF 00-19-2,
"Accounting for Registration  Payment  Arrangements" (" FSP EITF 00-19-2").  FSP
EITF 00-19-2 specifies that the contingent obligation to make future payments or
otherwise  transfer  consideration  under a  registration  payment  arrangement,
whether issued as a separate agreement or included as a provision of a financial
instrument or other agreement,  should be separately  recognized and measured in
accordance  with SFAS No. 5,  "Accounting for  Contingencies."  FSP EITF 00-19-2
further clarifies that a financial  instrument subject to a registration payment
arrangement  should be accounted for in accordance  with other  applicable  GAAP
without regard to the contingent obligation to transfer  consideration  pursuant
to the  registration  payment  arrangement.  FSP EITF 00-19-2 is  effective  for
registration payment arrangements and the financial instruments subject to those
arrangements that are entered into or modified  subsequent to December 21, 2006.
For registration payment arrangements and financial instruments subject to those
arrangements  that were entered into prior to the issuance of FSP EITF  00-19-2,
the  standard is  effective  for  financial  statements  issued for fiscal years
beginning  after  December 15,  2006,  and interim  periods  within those fiscal
years.  Early  adoption  for  interim  or annual  periods  for  which  financial
statements  or interim  reports have not been issued is  permitted.  The Company
does not expect  adoption of FSP EITF 00-19-2 will have a material impact on its
consolidated results of operations or financial position.


                                       14
<PAGE>


                                NEW MOTION, INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - TRANSACTIONS WITH IVG

PURCHASE OF MOBLISS ASSETS AND IVG NOTE

         On  January  19,  2007,  the  Company  entered  into an Asset  Purchase
Agreement  with IVG,  pursuant to which the Company  purchased  from IVG certain
mobile  associated  assets of Mobliss,  Inc.  ("Mobliss").  These  assets do not
constitute  substantially  all of the assets or the ongoing  business of Mobliss
and thus will be accounted for at cost  consistent with the purchase of specific
assets and not the acquisition of a business.  The Company  purchased the assets
specified in the Asset Purchase Agreement through the issuance to IVG of the IVG
Note with an aggregate  principal  amount of up to  $2,320,000.  Pursuant to the
terms of the  Asset  Purchase  Agreement,  on  January  19,  2007,  the  Company
consummated the initial  closing of the  acquisition  wherein the Company issued
the IVG Note in the principal  amount of $500,000 to IVG and received all of the
assets to be purchased  under the Asset Purchase  Agreement,  other than certain
cellular  carrier  connection  contracts  described  under  the  Asset  Purchase
Agreement.  On January 26, 2007, the Company  increased the principal  amount of
the IVG Note by $580,000 to $1,080,000  as payment for the  assignment of one of
the  cellular  carrier  connection   contracts  listed  in  the  Asset  Purchase
Agreement. On February 26, 2007, the Company repaid $500,000 of the IVG Note.

         The IVG Note bore  interest at the rate of 5% per annum  accruing  from
the time amounts were advanced thereunder and matured on the earlier of November
30,  2007 or 30 days  after  delivery  by IVG of written  notice to the  Company
demanding  payment.  Prior to  repayment,  IVG could  convert  the IVG Note into
shares of common stock at a conversion price of $3.44 per share, the fair market
value of the Company's common stock on the date of issuance of the IVG Note. The
IVG Note was also  automatically  convertible  into shares of common  stock at a
conversion  price of $3.44 upon the date that the common stock was listed on the
New York Stock Exchange, American Stock Exchange, Nasdaq Global Market or Nasdaq
Capital Market.  The Company granted IVG piggyback  registration  rights for the
shares  issuable upon  conversion of the IVG Note. In accordance with EITF 98-5,
"Accounting for Convertible  Securities with Beneficial  Conversion  Features or
Contingently Adjustable Conversion Ratios, and EITF 00-27, "Application of Issue
No. 98-5 to Certain Convertible  Instruments," the Company accounted for the IVG
Note as short-term debt and did not separately value the convertibility  feature
of  the  IVG  Note  because  (i)  this  option  was  contingent  upon  a  future
undeterminable   event,  (ii)  the  number  of  shares  to  be  issued  was  not
determinable until the future event occurred and (iii) the derivative  component
of the IVG Note is embedded and not detachable from the IVG Note.

         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. In accordance with SFAS 84, "Induced  Conversions of Convertible  Debt (An
Amendment of APB Opinion No. 26)," the Company has not recognized a gain or loss
upon the  conversion  of the IVG Note  because the  conversion  was  pursuant to
original  conversion  terms, such that the debt was extinguished in exchange for
equity  pursuant to a preexisting  contract  that was already  recognized in the
Company's financial statements.

MOBILE ENTERTAINMENT CHANNEL CORPORATION

         Concurrent  with the signing of the Asset Purchase  Agreement with IVG,
the Company also entered into a Heads of Agreement  with IVG,  setting forth the
terms of a joint venture with IVG to distribute IVG content within North America
and to  manage  and  service  the  assets  acquired  under  the  Asset  Purchase
Agreement.  The joint  venture,  The Mobile  Entertainment  Channel  Corporation
("MEC"),  is a Nevada  corporation in which the Company will own a 49% stake and
IVG will own a 51% stake.  The joint venture is to be managed by a  three-member
board,  with  each  party  designating  one  member  and both  parties  mutually
designating  the third  member of the  board.  The  Company  will  enter  into a
management  services  agreement with the joint venture pursuant to which it will


                                       15
<PAGE>


                                NEW MOTION, INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

pay the joint  venture a management  fee equal to the purchase  price paid under
the Asset Purchase Agreement, or $1,080,000, for management services rendered by
the joint venture.  The Company made an advance payment on the management fee of
$500,000 on March 12, 2007,  with the remainder of the management fee payable in
quarterly installments, through June 30, 2008. Beyond any advance payments, each
quarterly  management  fee payment made by the Company to the joint venture will
equal 10% of the revenue  generated  from the assets the Company  acquired  from
IVG. The joint venture has been established and the Company is in the process of
evaluating,  with IVG, various  Asian-themed  content for placement in the joint
venture.

         The Company's condensed  consolidated  financial statements include the
accounts of the MEC 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 MEC have been  consolidated  with
the  Company's  accounts  because the Company (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 for the  foreseeable  future.  The  consolidation  of MEC  reflects  the
elimination  of  all  intercompany  transactions.  MEC  is  reflected  with  the
following balances in the Company's consolidated balance sheet at June 30, 2007:
current assets of $409,000 and current liabilities of $139,000. MEC's results of
operations are reflected in the Company's  consolidated  statement of operations
for the six months ended June 30, 2007 as minority interest of $135,000,  net of
provision  for income tax of $139,000 and for the three months ended June,  2007
as minority  interest of $(20,000),  net of a benefit for income tax of $20,000.
The minority  interest reflects our joint venture partner's portion of MEC's net
income or loss for the period.

NOTE 4 - PURCHASE OF KATAZO ASSETS

         On April 1, 2007,  the Company  entered into a Binding Letter of Intent
(the  "LOI")  with  Opera  Telecom  USA  ("Opera")  to  purchase  the  following
identified and specified assets: (1) the domain name www.katazo.com, (2) website
html  code and  graphics,  (3)  access  to a content  management  system,  (4) a
subscriber list, and (5) prepaid short codes.  The Company  purchased the assets
for  $970,000  in cash.  The closing of the asset  purchase  occurred on May 25,
2007.  Both  parties  expect to execute a more  complete  written  agreement  to
supersede the LOI.  According to the terms of the LOI, The Company may terminate
the LOI or final  agreement  in the  event  that the total  number  of  billable
subscribers  is reduced by more than 15% during any 30-day period  between April
1, 2007 and June 30, 2007.  According to the LOI,  there is no limit to the time
the Company can take to assess whether to terminate the LOI or final  agreement.
In the event of termination, the purchase price will be refunded to the Company,
less any amounts the Company has collected from the assets.  In accordance  with
APB Opinion No. 16, "Business  Combinations" and EITF 98-3, "Determining Whether
a  Nonmonetary  Transaction  Involves  Receipt  of  Productive  Assets  or  of a
Business,"  the Company  has  determined  that the  purchase of assets was not a
purchase of a business. The Company has also evaluated the specified assets and,
in  accordance  with  SFAS 142,  "Goodwill  and Other  intangible  Assets,"  has
allocated the cost of the  acquisition to the  individual  assets based on their
relative  fair  values,  without  any  goodwill.  In  addition,  the  Company is
amortizing  the  amortizable   identified   intangible  assets  based  on  their
respective useful lives, ranging from five months to eighteen months.

NOTE 5 - INTANGIBLE ASSETS

         The  Company's   intangible   assets  consist  of  a  cellular  carrier
connection  contract acquired pursuant to the Asset Purchase  Agreement with IVG
and a subscriber  list and certain  other assets (the "Katazo  assets)  acquired
from Opera. The gross carrying amount of the Company's  intangible assets totals
$1,540,000 and as of June 30, 2007 the  accumulated  amortization  applicable to
the  intangible  assets was  $332,000,  resulting  in a net  carrying  amount of
$1,208,000.  The amortizable intangible assets acquired are being amortized over
periods of five to 18 months.


                                       16
<PAGE>


                                NEW MOTION, INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 - DEBT

         In addition to the IVG Note, which was subsequently  converted into the
Company's common stock (see "Note 3 - Transactions  with IVG"), the Company also
has a note payable due to Oracle for hardware  and  software  purchases  made on
February 28, 2007. The term of the note is two years and interest  charged there
under is approximately 8% per annum.

NOTE 7 - EARNINGS PER SHARE

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

<TABLE>
<CAPTION>
                                          FOR THE SIX MONTHS ENDED       FOR THE THREE MONTHS ENDED
                                               ENDED JUNE 30,                  ENDED JUNE 30,
                                        ----------------------------    ----------------------------
                                            2007            2006            2007            2006
                                        ------------    ------------    ------------    ------------
<S>                                     <C>             <C>             <C>             <C>
EPS DENOMINATOR:
Basic weighted average shares .......     10,650,096       7,263,688      11,780,923       7,263,688
Effect of dilutive securities .......           --           486,738            --           448,933
                                        ------------    ------------    ------------    ------------
Diluted weighted average shares .....     10,650,096       7,750,428      11,780,923       7,712,621
                                        ------------    ------------    ------------    ------------

EPS NUMERATOR (EFFECT ON NET INCOME):
Basic weighted average earnings .....   $ (1,259,000)   $  1,511,000    $   (887,000)   $    314,000
Effect of dilutive securities .......           --             3,000            --             3,000
                                        ------------    ------------    ------------    ------------
Diluted weighted average earnings ...   $ (1,259,000)   $  1,514,000    $   (887,000)   $    317,000
                                        ------------    ------------    ------------    ------------

EARNINGS PER SHARE:
Basic weighted average earnings .....   $      (0.12)   $       0.21    $      (0.08)   $       0.04
Effect of dilutive securities .......           --             (0.01)           --              --
                                        ------------    ------------    ------------    ------------
Diluted weighted average earnings ...   $      (0.12)   $       0.20    $      (0.08)   $       0.04
                                        ------------    ------------    ------------    ------------
</TABLE>

         For comparative  purposes,  the 7,263,688 shares of outstanding  common
stock of the Company,  after the  recapitalization  has been  retroactively  and
consistently  applied  throughout  all  periods  presented  for the  purposes of
earnings per share calculations.

         Common stock underlying outstanding options, convertible securities and
warrants were not included in the computation of diluted  earnings per share for
the three- and six-months  ended June 30, 2007 and  three-months  ended June 30,
3006,  because  their  inclusion  would  be  antidilutive  when  applied  to the
Company's net loss per share. For the three- and six months ended June 30, 2007,
the Company's  weighted average shares  outstanding  includes the effects of (i)
1,200,000  common  shares as of January 19, 2007,  after the  conversion  of the
Series A Preferred Stock,  (ii) 1,300,000 common shares as of February 12, 2007,
after the  conversion  of the Series B Preferred  Stock,  (iii)  250,000  common
shares which were issued and outstanding shares of MPLC immediately prior to the
Exchange as of February 12, 2007,  (iv)  1,666,658  common shares as of March 6,
2007,  after the conversion of the Series D Preferred  Stock, (v) 172,572 common
shares as of June 15,  2007,  after  the  conversion  of the IVG Note,  and (vi)
112,678 common shares issued for odd lot rounding in connection with the Reverse
Split.

         Under the treasury stock method,  options to purchase 448,934 shares of
common  stock and notes  convertible  into  37,804  shares of common  stock were
included in the  computation  of diluted  earnings  per share for the six months
ended June 30, 2006 because their  exercise or conversion  prices were less than
the fair value of the common shares and therefore are dilutive.


                                       17
<PAGE>


                                NEW MOTION, INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - STOCKHOLDERS' EQUITY

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

         On  January  31,  2007,  New Motion  Mobile  entered  into an  exchange
agreement  with MPLC (now called New  Motion,  Inc.) and Trinad  Capital  Master
Fund,  Ltd.  The closing of the Exchange  occurred on February 12, 2007.  At the
closing, MPLC acquired all of the outstanding shares of the capital stock of New
Motion  Mobile.  In exchange for the stock,  MPLC issued to New Motion  Mobile's
stockholders 500,000 shares of MPLC's Series C Convertible  Preferred Stock, par
value $0.10 per share (the "Series C Preferred  Stock"),  which was subsequently
converted into 7,263,688 shares of MPLC's common stock on May 2, 2007. After the
Exchange,  the  stockholders  of MPLC  immediately  prior to the Exchange  owned
250,000 post-Reverse Split common shares of the Company.

         On May 2, 2007 MPLC filed an amendment to its restated  certificate  of
incorporation  with the  Secretary of State of the State of Delaware,  to change
its  corporate  name to New  Motion,  Inc.  from MPLC,  Inc.,  to  increase  the
authorized shares of common stock from 75 million to 100 million and to effect a
1-for-300 reverse stock split (the "Reverse Split"). These matters were approved
by the requisite vote of the  stockholders  of the Company on March 15, 2007. As
such, for comparative purposes, the 7,263,688 shares of outstanding common stock
of the combined entity, after  recapitalization and the 1-for-300 Reverse Split,
has been  retroactively  applied  to January  1, 2006 and  consistently  applied
throughout all periods presented.

         In conjunction  with the exchange  transaction,  the Company issued one
share of its Series A  Preferred  Stock on January 19,  2007,  650 shares of its
Series B Preferred  Stock on February  12, 2007 and 8,333 shares of its Series D
Preferred  Stock on March 6, 2007 for aggregate gross proceeds to the Company of
approximately  $20 million.  Upon  effectiveness of the Reverse Split, on May 2,
2007,  the one share of Series A Preferred  Stock  automatically  converted into
1,200,000  shares of common  stock,  the 650 shares of Series B Preferred  Stock
automatically  converted  into  1,300,000  shares of common  stock and the 8,333
shares of Series D Preferred Stock automatically converted into 1,666,658 shares
of common stock.  The effect of the Reverse  Split and of the  conversion of all
classes  of  preferred  stock  into  common  shares  of the  Company  have  been
retroactively applied to the financing transactions.

         Pursuant to a registration  rights  agreement  entered into on February
28, 2007, the Company is required to file a registration  statement with the SEC
to register the common stock issued in  connection  with the  conversion  of the
Series D  Preferred  Stock.  The  Company is  subject  to payment of  liquidated
damages  of  one  percent  of the  Series  D  aggregate  purchase  price  if the
registration  statement  is not filed  within 75 days of the Series D financing,
which closed on March 6, 2007,  the date the Company  received the cash proceeds
of the Series D  financing.  The  Company is  subject to a further  one  percent
liquidated  damages  payment  for each 30-day  period in which the  registration
statement  has not been filed,  up to a maximum of 12% of the Series D aggregate
purchase price.  The Company filed a registration  statement on Form SB-2 on May
16, 2007, to register the common stock issued in connection  with the conversion
of the Series D Preferred Stock along with certain other shares of common stock.
Subsequently,  on July 20, 2007, the Company filed  Amendment No. 1 to Form SB-2
in response to comments received from the SEC on its original filing.


                                       18
<PAGE>


                                NEW MOTION, INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

         On June 15,  2007,  pursuant  to the  terms of the IVG  Note,  IVG sent
notice to the Company asking for the IVG Note to be converted into shares of the
Company's common stock at a conversion price of $3.44, which was the fair market
value of the Company's common stock at the time of the issuance of the IVG Note.
Based  on the  $580,000  principal  value  of the IVG  Note as of that  date and
approximately  $14,000  of  accrued  interest  payable  under the IVG Note,  the
Company  issued  172,572 shares of its common stock to IVG and cancelled the IVG
Note. In accordance with SFAS 84, "Induced  Conversions of Convertible  Debt (An
Amendment of APB Opinion No. 26)," the Company has not recognized a gain or loss
upon the  conversion  of the IVG Note  because the  conversion  was  pursuant to
original  conversion  terms, such that the debt was extinguished in exchange for
equity  pursuant to a preexisting  contract  that was already  recognized in the
Company's financial statements.

NOTE 9 - STOCK BASED COMPENSATION

2005 PLAN

         In 2005, the Company  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 the Company's  common stock at no less than 100% of the market price at
the date the  option is  granted.  Since the  Company's  stock was not  publicly
traded,  the market price at the date of grant was  historically  determined  by
third party valuation. Incentive stock options granted to date typically vest at
the rate of 33% on the anniversary of the vesting  commencement date, and 1/24th
of the  remaining  shares on the last day of each month  thereafter  until fully
vested.  The  options  expire  ten  years  from  the date of  grant  subject  to
cancellation  upon  termination  of  employment  or  in  the  event  of  certain
transactions,  such as a merger of the Company.  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.

2007 PLAN

         On February 16, 2007,  the  Company's  board of directors  approved our
2007 Stock  Incentive  Plan (the "2007  Plan").  On March 15, 2007,  the Company
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 the
Company'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 the Company'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 the Company.

OPTION VALUATION

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


                                       19
<PAGE>


                                NEW MOTION, INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

         The Company  did not make any option  awards  during the quarter  ended
June 30,  2007.  The fair value of each option award during the six months ended
June 30, 2007 was estimated on the date of grant using a Black-Scholes valuation
model that used the assumptions noted in the following table:

                                           FEBRUARY 2007
                                           -------------
                                              (Grant)
         Stock price                           $6.00
         Strike Price                          $6.00
         Maturity                            7 years
         Risk free interest rate                  5%
         Volatility                              86%
         Fair market value per share           $4.72
         Forfeiture rate                          5%

         As part  of  Scott  Walker's  2007  employment  agreement,  Mr.  Walker
received an option to purchase 37,500 shares of the Company's common stock at an
exercise  price per share of $6.60 (on a post  Reverse-Split  basis)  and a five
year term,  however,  all options to purchase  equity  securities of New Motion,
Inc. which were previously  granted to Mr. Walker were cancelled pursuant to the
terms of the Employment Agreement. The fair value of the option granted to Scott
Walker was estimated on the date of grant using a Black-Scholes  valuation model
that used the assumptions noted above, except that the strike price was $6.60.

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

STOCK OPTIONS

         Stock option  activity under the 2005 Plan and 2007 Plan was as follows
(amounts presented on a post-Reverse Split basis):

<TABLE>
<CAPTION>
                                                              WEIGHTED-     ESTIMATED
                                                               AVERAGE      AGGREGATE
                                               NUMBER OF       EXERCISE     INTRINSIC
                                                 SHARES         PRICE         VALUE
                                              -----------    -----------   -----------
<S>                                             <C>          <C>           <C>
Outstanding at January 1, 2007 ............     1,349,594    $      0.51   $   892,000
Granted ...................................       443,700    $      6.05
Forfeited or cancelled ....................      (585,453)   $      0.53
                                              -----------
Outstanding at June 30, 2007 ..............     1,207,841    $      2.54   $16,016,000
                                              ===========
Vested or expected to vest at June 30, 2007       605,450    $      0.78   $ 9,093,859
                                              ===========
Exercisable at June 30, 2007 ..............       605,450    $      0.78   $ 9,093,859
                                              ===========
</TABLE>

         For the six  months  ended  June 30 2007,  there  was no  stock  option
activity outside of the 2005 Plan and 2007
Plan.

         For the  three-  and six  months  ended  June 30,  2007,  $194,000  and
$278,000,  respectively  ($194,000  and  $278,000,  respectively  after  tax) of
compensation relating to options was recorded. No stock-based compensation costs
were  capitalized  as  part  of the  cost of an  asset  for  any of the  periods
presented.  Additionally, SFAS No. 123(R) requires that the tax benefit from the
tax  deduction  related  to  share-based  compensation  that  is  in  excess  of
recognized  compensation  costs be reported as a financing cash flow rather than
an  operating  cash  flow.  Prior to January 1,  2006,  the  Company  would have
reported the entire tax benefit  related to the exercise of stock  options as an
operating cash flow if options had been exercised. There was no tax benefit from
option exercises for the three- and six-month periods ended June 30, 2007.


                                       20
<PAGE>


                                NEW MOTION, INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

         The  following  table  summarizes   information   concerning  currently
outstanding and exercisable stock options as of June 30, 2007:

<TABLE>
<CAPTION>
                                     WEIGHTED       WEIGHTED                      WEIGHTED
    RANGE OF                         AVERAGE         AVERAGE                       AVERAGE
    EXERCISE           OPTIONS      REMAINING       EXERCISE        OPTIONS       EXERCISE
     PRICES          OUTSTANDING   LIFE (YEARS)       PRICE       EXERCISABLE       PRICE
-----------------   ------------   ------------   ------------   ------------   ------------
<S>                      <C>                <C>   <C>                 <C>       <C>
2005 PLAN:
      $0.48 .....        756,877            8.5   $       0.48        572,117   $       0.48
      $2.34 .....          7,624            9.1   $       2.34           --     $       2.34

2007 PLAN:
      $6.00 .....        406,200            9.6   $       6.00         33,333   $       6.00
      $6.60 .....         37,500            4.6   $       6.60           --     $       6.60

OUTSIDE OF PLANS:
      $2.34 .....        363,184            9.2   $       2.34           --     $       2.34
</TABLE>


WARRANTS

         To value warrants granted,  the Company uses the  Black-Scholes  option
pricing model.  The Company  determines the assumptions in this pricing model at
the grant date.  For warrants  granted or modified  after  January 1, 2006,  the
Company bases expected  volatility on the historical  volatility of a peer group
of publicly  traded  entities.  The  Company  bases the  risk-free  rate for the
expected term of the option on the U.S.  Treasury  Constant  Maturity rate as of
the grant date.

         The fair value of each warrant  issued during the period ended June 30,
2007 were estimated on the date of grant using a  Black-Scholes  valuation model
that used the following assumptions:

                                                 JANUARY 2007     FEBRUARY 2007
                                                WALKER AND SGE        SMH
                                                   WARRANTS         WARRANTS
                                                --------------   --------------
                                                   (Grant)            (Grant)
Stock price ............................             $3.44            $6.00
Strike Price ...........................             $3.44            $5.50
Maturity ...............................           5 years          5 years
Risk free interest rate ................                5%               5%
Volatility .............................               86%              86%
Fair market value per share ............             $2.42            $4.31

         The warrants  issued during the six months ended June 30 2007 are fully
vested and exercisable on the date of grant.

         In 2006, the Company issued Secured  Convertible  Notes to Scott Walker
and SGE, a corporation  owned by Allan Legator,  the Company's  Chief  Financial
Officer.  These Secured  Convertible  Notes were repaid in full with interest in
September  2006.  Pursuant to the terms of the  Secured  Convertible  Notes,  on


                                       21
<PAGE>


                                NEW MOTION, INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

January  26,  2007,  Scott  Walker  was  granted a right to receive a warrant to
purchase,  on a  post-Reverse  Split basis,  14,384 shares of common stock at an
exercise  price of $3.44  per share  and SGE was  granted  a right to  receive a
warrant to purchase, on a post-Reverse Split basis, 9,153 shares of common stock
at an exercise price of $3.44 per share.  The per share fair market value of the
Company's  common stock on January 26, 2007 was $3.44.  The  warrants  issued to
Scott Walker and SGE are  freestanding  instruments and exercise of the warrants
requires a physical or net share  settlement.  Thus, in accordance with Emerging
Issues Task Force EITF 00-19,  "Accounting for Derivative Financial  Instruments
Indexed to, and  Potentially  Settled in, a Company's  Own Stock," the  warrants
have been classified in stockholders' equity and the Company recorded $57,000 of
expense  related to the  issuance  of the  warrants  to Scott  Walker and SGE on
January 26, 2007.

         In connection  with the Series A, B and D Preferred  Stock  financings,
Sanders Morris  Harris,  Inc. acted as placement  agent.  For its services,  the
Company  paid  Sanders  Morris  Harris  a cash fee  equal  to 7.5% of the  gross
proceeds from the financing and five year warrants to purchase 290,909 shares of
common  stock at an  average  exercise  price of $5.50 per  share  (post-Reverse
Split),  which was equivalent to the average per share  valuation of the Company
for the Series A, B and D Preferred  Stock  financings.  The warrants  issued to
Sanders Morris Harris are freestanding  instruments and exercise of the warrants
requires a physical or net share  settlement.  In addition,  the  warrants  were
issued as a fee for  Sanders  Morris  Harris'  services  as  placement  agent in
connection with the Series A, B and D financings.  Thus, in accordance with SFAS
No. 133,  "Accounting  for Derivative  Instruments  and Hedging  Activities" and
Emerging  Issues Task Force EITF 00-19,  "Accounting  for  Derivative  Financial
Instruments  Indexed to, and Potentially Settled in, a Company's Own Stock," the
Company recorded the issuance of the Sanders Morris Harris warrants based on the
value of the warrants  established by the Black-Scholes option pricing model and
credited  additional  paid  in  capital  in  the  amount  of  $1,253,000  with a
corresponding offset to the net proceeds from issuance of Preferred Stock.

         The  following  table  summarizes   information   concerning  currently
outstanding and exercisable common stock warrants as of June 30, 2007:

<TABLE>
<CAPTION>
                                     WEIGHTED       WEIGHTED                      WEIGHTED
    RANGE OF                         AVERAGE         AVERAGE                       AVERAGE
    EXERCISE          WARRANTS      REMAINING       EXERCISE       WARRANTS       EXERCISE
     PRICES          OUTSTANDING   LIFE (YEARS)       PRICE       EXERCISABLE       PRICE
-----------------   ------------   ------------   ------------   ------------   ------------
<S>                      <C>                <C>   <C>                 <C>       <C>
$       3.44              16,200            4.6   $       3.44         16,200   $       3.44
$       5.50             290,909            4.7   $       5.50        290,909   $       5.50
</TABLE>


NOTE 10 - COMMITMENTS AND CONTINGENCIES

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


                                       22
<PAGE>


                                NEW MOTION, INC.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS

         The information contained in this Form 10-QSB is intended to update the
information  contained  in the Annual  Report on Form  10-KSB for the year ended
December 31, 2006 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 included elsewhere in this Form 10-QSB.

         THIS  DISCUSSION  SUMMARIZES  THE  SIGNIFICANT  FACTORS  AFFECTING  OUR
CONSOLIDATED OPERATING RESULTS, FINANCIAL CONDITION AND LIQUIDITY AND CASH FLOWS
FOR THE THREE AND SIX MONTHS  ENDED  JUNE 30,  2007 AND THE THREE AND SIX MONTHS
ENDED JUNE 30, 2006. 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"
IN OUR FORM 10-KSB FILED WITH THE SEC ON APRIL 2, 2007.

OVERVIEW

         We  are  a  digital  entertainment  company  headquartered  in  Irvine,
California.  We  provide a wide  range of  digital  entertainment  products  and
services, using the power of the Internet, the latest in mobile technology,  and
traditional   marketing/advertising   methodologies.  Our  product  and  service
portfolio  includes  contests,  games,  ringtones,  screensavers and wallpapers,
trivia  applications,  fan  clubs and  voting  services,  blogs and  information
services.

         Our  business  is focused on three  strategic  service  lines - digital
music,  casual games and  interactive  contests.  These  distinct  service lines
consist  of  a  broad  array  of   properties,   including   MobileSidewalk(TM),
RingtoneChannel  and  Bid4Prizes.  MobileSidewalk(TM)  is  a  U.S.-based  mobile
entertainment  company,  RingtoneChannel  is a mobile storefront  provider,  and
Bid4Prizes is a low-bid  mobile  auction game.  Other  products  include,  among
others,  "MobileSidewalk's Music Trivia," "Ringtone Club" and "Gator Arcade." We
focus on selectively  increasing our  application  portfolio with  high-quality,
innovative applications.  Our growing portfolio of applications and services are
based primarily on internally generated content, such as MobileSidewalk's  Music
Trivia and Bid4Prizes.  Internally  generated  content generates the majority of
our  revenues.  We also license some  identifiable  content,  such as ringtones,
wallpapers  and images from third  parties to whom we generally  pay a licensing
fee on a per-download basis.

         The monthly end user subscription  fees for our wireless  entertainment
products and  services  generally  range from $3.99 to $9.99.  Across all of our
applications,  the median  subscription term of our users is approximately three
and a half months.  Premium  downloads offered on an a-la-carte basis range from
$0.99 to $5.99.  We generate 95% of its revenues on a subscription  basis versus
5% on an a-la-carte basis.

HISTORY

         New Motion  Mobile 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, we launched our first successful text message campaign incorporating music
trivia.  In March of 2006,  we partnered  with  GoldPocket  Wireless,  a leading
provider of mobile technology  solutions for media and entertainment  companies,
to enhance the proficiency and performance of our mobile service offering.


                                       23
<PAGE>


                                NEW MOTION, INC.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

         On January 19, 2007, we entered into an agreement  with IVG to purchase
certain  specified  assets of Mobliss,  a provider of proprietary  applications,
delivery  systems,  and  platforms  for  wireless  devices.  Mobliss  has direct
networking and billing connectivity with carriers for executing  large-scale SMS
campaigns  and  distributing  mobile  content to a wide array of mobile  devices
across multiple  carrier  networks in the US and Canada.  The primary  strategic
objective  of this  purchase  is to  allow  us to more  efficiently  manage  our
business and  operations by enabling us to directly bill and collect from mobile
carriers,  thus  eliminating  the fees associated with using third party billing
processors  and  expediting  the  collection of open carrier  receivables.  This
purchase  will also  enable us to better  serve our  customers  and end users by
expediting the time in which we react to changes in the marketplace.

         Also on January 19,  2007,  we entered  into an  agreement  with IVG to
create an Asian-themed mobile entertainment  portal, the first major endeavor of
its kind in the  North  American  off-deck  arena.  This new  direct-to-consumer
service  provides  an  opportunity  for  us  to  tap  into  a  new  market  with
Asian-themed  content,  delivering  sophisticated  mobile  products.  The  joint
venture  is to be  registered  under the name The Mobile  Entertainment  Channel
Corporation and will assist us in expanding our service  offerings by partnering
with IVG, a leading global player in the interactive games and mobile space.

         In February,  2007,  we completed an exchange  transaction  pursuant to
which we merged with a publicly  traded  company,  MPLC,  Inc.,  so that we (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,  we
raised gross proceeds of approximately  $20 million in equity financing  through
the sale of our Series A Preferred Stock,  Series B Preferred Stock and Series D
Preferred Stock.

         After receiving the requisite  approval of our stockholders,  on May 2,
2007,  we filed a  certificate  of  amendment  to our  restated  certificate  of
incorporation  with  the  Delaware  Secretary  of  State  to  (i)  increase  the
authorized  number of shares of our common stock from 75,000,000 to 100,000,000,
(ii) change our corporate  name to New Motion,  Inc. from MPLC,  Inc., and (iii)
effect a 1-for-300 reverse split. In connection with these corporate actions, we
also changed our ticker symbol to "NWMO" on the Over-The-Counter Bulletin Board.

         On April 1,  2007,  we  entered  into a Binding  Letter of Intent  (the
"LOI") with Opera Telecom USA ("Opera") to purchase the following identified and
specified assets: (1) the domain name www.katazo.com,  (2) website html code and
graphics,  (3) access to a content management system, (4) a subscriber list, and
(5) prepaid  short  codes.  We purchased  the assets for  $970,000 in cash.  The
closing of the asset purchase occurred on May 25, 2007.

         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 our stock on the date of issuance of the IVG Note.

KEY BUSINESS FACTORS

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

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


                                       24
<PAGE>


                                NEW MOTION, INC.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

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

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

APPLICATION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

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

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

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

         We estimate  revenues  from  carriers  and  aggregators  in the current
period when reasonable  estimates of these amounts can be made. Several carriers
and  aggregators  provide  reliable  sales data within a  reasonable  time frame
following  the end of each  month,  both of which  allow  us to make  reasonable
estimates of revenues and therefore to recognize  revenues  during the reporting
period  when  the end  user  subscribes  to our  service.  Determination  of the


                                       25
<PAGE>


                                NEW MOTION, INC.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

appropriate amount of revenue  recognized  involves judgments and estimates that
we believe are  reasonable,  but it is possible  that actual  results may differ
from our estimates.  When we receive the final aggregator  reports broken out by
carrier,  to the extent these reports were not received within a reasonable time
frame  following  the end of each  month,  we  record  any  differences  between
estimated  revenues  and actual  revenues in the next  reporting  period once we
determine the actual amounts.

         Revenues earned from certain carriers may not be reasonably  estimated.
If we are unable to  reasonably  estimate the amount of revenue to be recognized
in the  current  period,  we  recognize  revenues  upon the receipt of a carrier
revenue report.  In order to mitigate the risk of a material  misstatement,  our
management reviews the revenues by carrier on a monthly basis and gross billings
on a daily basis to identify  unusual  trends that could  indicate  operational,
carrier or market  issues  which  could lead to a material  misstatement  in any
reporting  period.  Additionally,  on a weekly basis,  management  monitors cash
settlements made by carriers to our aggregators.

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

         Reserves recorded based on this estimation  process for the years ended
December  31,  2005  and  2006,  amounted  to  15%  and  13% of  gross  revenue,
respectively.  Reserves  recorded  as of June 30,  2007  amounted to 5% of gross
revenue.  The  improvement  in our  reserve is due to more  accurate  and timely
billing  information  received  from  our  aggregator  customers.  Historically,
differences  between our estimates and actual  revenues have not been materially
different  and,  as a  private  company,  we had  adequate  time to  adjust  our
estimated  revenues to actual  results  once we receive  final sales data.  On a
going forward  basis,  our quarterly  revenues will include a reserve  allowance
based on historical trends regarding chargebacks.

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

         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.

         INTANGIBLE  ASSETS  MEASUREMENT AND RECOGNITION.  For intangible assets
that we acquire, in accordance with SFAS No. 142, "Goodwill and Other Intangible
Assets," we recognize and measure the  intangible  asset  acquired  based on its
fair value, or in the case of a group of intangible  assets  acquired,  based on
each asset's  relative  fair value.  We use a range of valuation  methodologies,
including performing discounted cash flow analysis, to value acquired intangible
assets.  Discounted cash flow analysis requires assumptions about the timing and
amount of future  cash  inflows and  outflows,  risk,  the cost of capital,  and


                                       26
<PAGE>


                                NEW MOTION, INC.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

terminal values. 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.  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 flows;
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.

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

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

         Our  estimate  of the value of its tax  reserves  contains  assumptions
based on past  experiences and judgments about the  interpretation  of statutes,
rules and regulations by taxing jurisdictions.  It is possible that the ultimate
resolution of these matters may be greater or less than the amount estimated. If
payment  of  these  amounts  proves  to be  unnecessary,  the  reversal  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.

         We  file  income  tax  returns   with  U.S.  and   Australian   federal
jurisdictions  and in the  state  of  California.  We are  subject  to U.S.  and
Australia  federal   examinations  and  California  state  examinations  by  tax
authorities.  The statute of limitations for 2005 and 2006 in all  jurisdictions
remains open and are subject to examination by tax authorities.

         We 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, we recognized no change in the liability
for  unrecognized  tax  benefits,  which was accounted for as a reduction to the
January 1, 2007, balance of retained  earnings.  We do not have any unrecognized
tax benefits as of January 1, 2007, and June 30, 2007.

         Included in the balance at January 1, 2007, are $0 of tax positions 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.  Also included in the balance at January 1, 2007, are $0 of unrecognized
tax benefits that, if recognized, would impact the effective tax rate. We do not
expect any adjustment to our amount of unrecognized tax benefits during 2007.

         We recognize interest and penalties accrued related to unrecognized tax
benefits  in income  tax  expense.  We did not have any amount  accrued  for the
payment of interest and penalties at June 30, 2007.


                                       27
<PAGE>


                                NEW MOTION, INC.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

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

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

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

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

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


                                       28
<PAGE>


                                NEW MOTION, INC.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

         CONSOLIDATION.   We  have  consolidated  the  accounts  of  our  Mobile
Entertainment Channel Corporation ("MEC") 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 MEC 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 MEC reflects the elimination of all intercompany
transactions.  MEC is reflected with the following  balances in our consolidated
balance  sheet  at June  30,  2007:  current  assets  of  $409,000  and  current
liabilities  of  $139,000.  MEC's  results of  operations  are  reflected in our
consolidated  statement of operations  for the six months ended June 30, 2007 as
minority  interest of $135,000,  net of provision for income tax of $139,000 and
for the three months ended June, 2007 as minority interest of $(20,000),  net of
a benefit for income tax of $21,000.  The minority  interest  reflects our joint
venture partner's portion of MEC'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.


RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2007 COMPARED TO THREE
MONTHS ENDED JUNE 30, 2006.

         The  following  analysis  and  discussion  pertains  to our  results of
operations for the three months ended June 30, 2007,  compared to our results of
operations for the three months ended June 30, 2006.

NET SALES

                                          THREE MONTHS ENDED
                                               JUNE 30,
                                      --------------------------      PERCENT
                                          2007           2006          CHANGE
                                      -----------    -----------    -----------

Net sales..........................   $ 6,894,000    $ 3,884,000            77%

         Net sales  increased 77% to $6,894,000  for the three months ended June
30, 2007,  compared to $3,884,000 for the three months ended June 30, 2006. This
increase  in net sales over the prior  period was due to a 113%  increase in our
average monthly billable customer base. This significant increase in our average
monthly  billable  customer  base was due to two main factors.  First,  although
approximately 63% of the year-over-year increase in our average monthly billable
customer  base was due to  subscribers  acquired as part of our  purchase of the
Katazo  assets  acquired from Opera Telecom USA, only 17% of the increase in net
sales was due to these newly  acquired  Katazo  subscribers.  This is due to the
relatively  lower  average  monthly  revenue  per Katazo  user  compared  to our
existing  subscriber base.  Second, the increase in our average monthly billable
customer base was also due to higher selling and marketing expense in the second
quarter,  which allowed us to effectively acquire new subscribers throughout the
current quarter at a faster rate than in the comparative  quarter. To the extent
that we can continue to acquire  subscribers  at what we believe is a relatively
low cost of  acquisition,  then we will  continue  to  expand  our  selling  and
marketing efforts,  which we expect will lead to a proportionate increase in net
sales in future quarters.

         This  increase  in net sales over the prior  period was offset by a 17%
decrease in our average  monthly  revenue  per user,  which was  impacted by the
relatively  lower  average  monthly  revenue  per Katazo  user  compared  to our
existing  subscriber base. As a result of the Katazo  acquisition,  we do expect


                                       29
<PAGE>


                                NEW MOTION, INC.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

that we will  experience  some future  decreases  in  quarterly  year-over  year
average  monthly  revenue  per user,  but we also  expect  that on a  sequential
quarterly  basis,  our average monthly revenue per user will improve steadily as
the Katazo subscriber base becomes a smaller proportion of our total subscribers
in future  periods.  Our second  quarter  product mix  consisted  of a number of
different products, including Music Trivia, RingtoneChannel,  Bid4Prizes, Katazo
and our White Label service.  This product mix compares  favorably to the second
quarter of 2006,  which  consisted of only our Music Trivia and  RingtoneChannel
products.

COST OF SALES

                                          THREE MONTHS ENDED
                                               JUNE 30,
                                      --------------------------      PERCENT
                                          2007           2006          CHANGE
                                      -----------    -----------    -----------

Cost of sales......................   $ 1,494,000    $   156,000           858%

         Cost of sales  increased  858% to $1,494,000 for the three months ended
June 30, 2007,  from  $156,000  for the three  months  ended June 30, 2006.  The
increase in cost of sales is due in part to the larger  proportion  of net sales
relating to our White Label products,  which unlike our other  products,  have a
significant cost of sales  component.  The increase in cost of sales is also due
to  expenses  related  to our  Bid4Prizes  service,  which  did not exist in the
comparative  period and higher  hosting and  licensing  fees,  due to the larger
average monthly  billable  subscriber base and higher sales when compared to the
year ago period.

GROSS PROFIT

                                          THREE MONTHS ENDED
                                               JUNE 30,
                                      --------------------------      PERCENT
                                          2007           2006          CHANGE
                                      -----------    -----------    -----------

Gross profit.......................   $ 5,400,000    $ 3,728,000            45%

         Gross profit  increased  45% to  $5,400,000  for the three months ended
June 30, 2007,  from  $3,728,000  for the three months ended June 30, 2006.  Our
gross margin decreased to 78% for the three months ended June 30, 2007, from 96%
for the three months  ended June 30,  2006.  The decrease in our gross margin is
due to sales of our lower margin White Label  services in the second  quarter of
2007, compared to no White Label sales in the comparative period. Although these
White  Label  services  have a  relatively  lower  gross  margin  than our other
products, we incur substantially lower selling and marketing expenses associated
with White Label sales, as these costs are borne by our White Label partners.

         The decrease in gross margin due to White Label  services was offset by
improved  gross  margins  on our other  product  lines as a result of our larger
average monthly subscriber base and our ability to spread our cost of sales over
a larger base of subscribers when compared to the year ago period.

SELLING AND MARKETING EXPENSE

                                          THREE MONTHS ENDED
                                               JUNE 30,
                                      --------------------------      PERCENT
                                          2007           2006          CHANGE
                                      -----------    -----------    -----------

Selling and marketing .............   $ 4,460,000    $ 2,309,000             93%

         Selling and marketing expense increased 93% to $4,460,000 for the three
months ended June 30, 2007,  from $2,309,000 for the three months ended June 30,
2006. As a percentage of net sales,  selling and marketing  expense increased by


                                       30
<PAGE>


                                NEW MOTION, INC.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

10% to 65% for the three  months  ended June 30,  2007,  compared to 59% for the
three months ended June 30, 2006. The increase in selling and marketing  expense
was  principally  due to a larger  relative  allocation of selling and marketing
expense to our online direct  marketing  partners in the second quarter of 2007,
compared to the second  quarter of 2006.  Our online direct  marketing  partners
continue to deliver  subscribers  at what we believe is a relatively low cost of
acquisition,  and thus we intend to continue to expand our selling and marketing
efforts with our direct marketing partners.

GENERAL AND ADMINISTRATIVE EXPENSE

                                          THREE MONTHS ENDED
                                               JUNE 30,
                                      --------------------------      PERCENT
                                          2007           2006          CHANGE
                                      -----------    -----------    -----------

General and administrative ........   $ 2,898,000    $   901,000           222%

         General and administrative expense increased 222% to $2,898,000 for the
three months ended June 30, 2007,  from $901,000 for the three months ended June
30,  2006.  As a percentage  of net sales,  general and  administrative  expense
increased by 83% to 42% for the three months ended June 30, 2007 compared to 23%
for the three  months ended June 30, 2006.  On a sequential  basis,  general and
administrative  expense increased 8% in the second quarter compared to the first
quarter of 2007.  The  year-over-year  increase  in general  and  administrative
expense,  is the result of several  factors,  including  higher payroll expense,
which accounted for 46% of the increase,  higher  professional  service expense,
which  accounted for 24% of the increase and greater travel,  entertainment  and
office  expense,  which  accounted  for  9%  of  the  increase  in  general  and
administrative  expense. Our salaried headcount at the end of the second quarter
of 2007 was 45, an increase of nine  personnel  from the first  quarter of 2007,
and an increase  of  approximately  23 people from the year ago period.  We also
recorded $278,000 of stock  compensation  expense in the second quarter of 2007,
representing 16% of the increase in general and administrative  expense compared
to no stock compensation expense in the year ago period.

INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR INCOME TAXES

                                          THREE MONTHS ENDED
                                               JUNE 30,
                                      --------------------------      PERCENT
                                          2007           2006          CHANGE
                                      -----------    -----------    -----------

Income (loss) before provision
   (benefit) for income taxes .....   $(1,816,000)   $   515,000          (453%)

         Income (loss)  before  provision  (benefit) for income taxes  decreased
452% to a loss of  $1,816,000  for the three months  ended June 30,  2007,  from
income of $515,000 for the three months ended June 30, 2006.  Our income  (loss)
before provision (benefit) for income taxes margin decreased to negative 26% for
the three months ended June 30, 2007  compared to 13% for the three months ended
June 30, 2006.  The decline in our pretax income is a result of higher levels of
selling and marketing expense and general and administrative  expense, offset by
an increase in net sales, as described above.

NET INCOME (LOSS)

                                          THREE MONTHS ENDED
                                               JUNE 30,
                                      --------------------------      PERCENT
                                          2007           2006          CHANGE
                                      -----------    -----------    -----------

Net income (loss)..................   $  (887,000)   $   314,000          (382%)


                                       31
<PAGE>


                                NEW MOTION, INC.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

         Net income  (loss)  decreased  382% to a loss of $887,000 for the three
months  ended June 30,  2007,  from net income of $314,000  for the three months
ended June 30, 2006. Our net income (loss) margin  decreased to negative 13% for
the three months  ended June 30, 2007  compared to 8% for the three months ended
June 30,  2006.  Our income tax benefit was  $909,000 for the three months ended
June 30,  2007,  compared to a provision  for income  taxes of $201,000  for the
three months ended June 30, 2006.  Minority  interest benefit of $20,000 for the
three  months  ended June 30, 2007  represents  the change in our joint  venture
partner's  claim on MEC's net tangible assets during the second quarter of 2007.
On a per share basis, basic and diluted net income (loss) per share decreased to
a loss of $0.08 per share for the three months ended June 30, 2007,  compared to
basic and diluted net income of $0.04 per share for the three  months ended June
30, 2006.


RESULTS OF  OPERATIONS  FOR THE SIX MONTHS  ENDED JUNE 30, 2007  COMPARED TO SIX
MONTHS ENDED JUNE 30, 2006.

         The  following  analysis  and  discussion  pertains  to our  results of
operations  for the six months ended June 30,  2007,  compared to our results of
operations for the six months ended June 30, 2006.

NET SALES

                                           SIX MONTHS ENDED
                                                JUNE 30,
                                      --------------------------      PERCENT
                                          2007           2006          CHANGE
                                      -----------    -----------    -----------

Net sales..........................   $12,536,000    $ 6,962,000            80%

         Net sales  increased 80% to  $12,536,000  for the six months ended June
30, 2007,  compared to $6,962,000  for the six months ended June 30, 2006.  This
increase  in net sales over the prior  period was due to a 90%  increase  in our
average  monthly  billable  customer base.  This increase in our average monthly
billable  customer base was due to subscribers  acquired as part of our purchase
of the Katazo assets and subscribers  acquired as a result of higher selling and
marketing  expense  in the  period  ended  June 30,  2007,  which  allowed us to
effectively  acquire new subscribers  throughout the current quarter at a faster
rate than in the  comparative  period.  To the extent  that we can  continue  to
acquire  subscribers at what we believe is a relatively low cost of acquisition,
we will  continue to expand our selling and marketing  efforts,  which we expect
will lead to a proportionate increase in net sales in future periods.

The  increase in net sales over the prior  period was offset by a 5% decrease in
our average monthly revenue per user, which was impacted by the relatively lower
average  monthly  revenue per Katazo user  compared to our  existing  subscriber
base.  Our  product  mix for the  period  consisted  of a  number  of  different
products, including Music Trivia,  RingtoneChannel,  Bid4Prizes,  Katazo and our
White Label service.  This product mix compares  favorably to the product mix in
the comparative period,  which consisted of our Music Trivia and RingtoneChannel
products.

COST OF SALES

                                           SIX MONTHS ENDED
                                                JUNE 30,
                                      --------------------------      PERCENT
                                          2007           2006          CHANGE
                                      -----------    -----------    -----------

Cost of sales......................   $ 2,220,000    $   219,000           914%

         Cost of sales  increased  914% to  $2,220,000  for the six months ended
June 30,  2007,  from  $219,000  for the six  months  ended June 30,  2006.  The
increase in cost of sales is due in part to the larger  proportion  of net sales
relating  to our  White  Label  products,  which  have a  higher  cost of  sales


                                       32
<PAGE>


                                NEW MOTION, INC.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

component than our other product  offerings.  However,  the higher cost of sales
associated  with our  White  Label  products  are  offset by lower  selling  and
marketing  costs,  which are borne by our White Label partners.  The increase in
cost of sales was also due to expenses related to our Bid4Prizes service,  which
did not exist in the  comparative  period and higher hosting and licensing fees,
due to the larger average monthly billable subscriber base and higher sales when
compared to the year ago period.

GROSS PROFIT

                                           SIX MONTHS ENDED
                                                JUNE 30,
                                      --------------------------      PERCENT
                                          2007           2006          CHANGE
                                      -----------    -----------    -----------

Gross profit.......................   $10,316,000    $ 6,743,000            53%

         Gross profit increased 53% to $10,316,000 for the six months ended June
30, 2007,  from  $6,743,000  for the six months  ended June 30, 2006.  Our gross
margin decreased to 82% for the six months ended June 30, 2007, from 97% for the
six months ended June 30, 2006. The decrease in our gross margin is due to sales
of lower margin White Label  services in 2007,  compared to no White Label sales
in the year ago period.  Although  our White Label  services  have a  relatively
lower gross margin than our other products,  we incur substantially less selling
and marketing expense associated with White Label sales.

         The decrease in gross margin due to our White Label services was offset
by improved  gross  margins on our other product lines as a result of our larger
average monthly  subscriber base, which allows us to spread cost of sales across
a larger base of subscribers when compared to the year ago period.

SELLING AND MARKETING EXPENSE

                                           SIX MONTHS ENDED
                                                JUNE 30,
                                      --------------------------      PERCENT
                                          2007           2006          CHANGE
                                      -----------    -----------    -----------

Selling and marketing..............   $ 7,447,000    $ 2,823,000           164%

         Selling and marketing  expense increased 164% to $7,447,000 for the six
months ended June 30, 2007,  from  $2,823,000  for the six months ended June 30,
2006. As a percentage of net sales,  selling and marketing expense increased 44%
to 59% for the six months ended June 30, 2007 compared to 41% for the six months
ended June 30, 2006. The increase in selling and marketing  expense was due to a
larger relative allocation of selling and marketing expense to our online direct
marketing partners in 2007 and the anticipation of a new aggregator relationship
during  the  comparative  period  in  2006,  which  resulted  in  a  significant
curtailment of our selling and marketing spending during that period. Our online
direct marketing partners continue to deliver  subscribers at what we believe is
a relatively low cost of  acquisition,  and thus we intend to continue to expand
our selling and marketing efforts with our direct marketing partners.

GENERAL AND ADMINISTRATIVE EXPENSE

                                           SIX MONTHS ENDED
                                                JUNE 30,
                                      --------------------------      PERCENT
                                          2007           2006          CHANGE
                                      -----------    -----------    -----------

General and administrative.........   $ 5,098,000    $ 1,781,000           186%


                                       33
<PAGE>


                                NEW MOTION, INC.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

         General and administrative expense increased 186% to $5,098,000 for the
six months ended June 30, 2007,  from  $1,781,000  for the six months ended June
30,  2006.  As a percentage  of net sales,  general and  administrative  expense
increased  58% to 41% for the six months ended June 30, 2007 compared to 26% for
the six months ended June 30, 2006. The  year-over-year  increase in general and
administrative  expense,  is the result of  several  factors,  including  higher
payroll expense, accounting for 37% of the increase, higher professional service
expense,  accounting for 33% of the increase and greater  travel,  entertainment
and  office  expense,   accounting  for  7%  of  the  increase  in  general  and
administrative  expense. We also recorded $472,000 of stock compensation expense
in the period ended June 30, 2007,  representing  16% of the increase in general
and administrative expense compared to no stock compensation expense in the year
ago period.

INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR INCOME TAXES

                                           SIX MONTHS ENDED
                                                JUNE 30,
                                      --------------------------      PERCENT
                                          2007           2006          CHANGE
                                      -----------    -----------    -----------

Income (loss) before provision
   (benefit) for income taxes .....   $(2,029,000)   $ 2,108,000          (196%)

         Income (loss)  before  provision  (benefit) for income taxes  decreased
196% to a loss of $2,029,000 for the six months ended June 30, 2007, from income
of $2,108,000  for the six months ended June 30, 2006.  Our income (loss) before
provision  (benefit)  for income taxes margin  decreased to negative 16% for the
six months ended June 30, 2007 compared to 30% for the six months ended June 30,
2006.  This decline in our pretax income is a result of higher levels of selling
and  marketing  expense  and general and  administrative  expense,  offset by an
increase in net sales, as discussed above.

NET INCOME (LOSS)

                                           SIX MONTHS ENDED
                                                JUNE 30,
                                      --------------------------      PERCENT
                                          2007           2006          CHANGE
                                      -----------    -----------    -----------

Net income (loss)..................   $(1,259,000)   $ 1,511,000          (183%)

         Net income (loss)  decreased  183% to a loss of $1,259,000  for the six
months ended June 30,  2007,  from net income of  $1,511,000  for the six months
ended June 30, 2006. Our net income (loss) margin  decreased to negative 10% for
the six months ended June 30, 2007 compared to 22% for the six months ended June
30, 2006.  Our income tax benefit was $905,000 for the six months ended June 30,
2007,  compared to a provision  for income  taxes of $597,000 for the six months
ended June 30, 2006. Minority interest of $135,000 for the six months ended June
30, 2007 represents our joint venture  partner's claim on MEC's 2007 net income.
This joint venture was formed in January  2007. On a per share basis,  basic and
diluted net income  (loss) per share  decreased to a loss of $0.12 per share for
the six months ended June 30, 2007,  compared to basic and diluted net income of
$0.21 and $0.20 per share, respectively, for the six months ended June 30, 2006.

LIQUIDITY AND CAPITAL RESOURCES

         As of June 30, 2007, we had cash and cash  equivalents of approximately
$13,989,000 and a working capital balance of  approximately  $16,862,000.  As of
December 31, 2006, we had cash and cash  equivalents of  approximately  $544,000
and a working  capital  balance of  approximately  $694,000.  Our positive  cash
balance  results  primarily from financing  activities.  In the first quarter of
2007, we received  gross  proceeds of $20 million from the sale of capital stock
to institutional investors and other accredited investors.


                                       34
<PAGE>


                                NEW MOTION, INC.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

         We believe that our existing cash and cash  equivalents and anticipated
cash flows from our operating  activities will be sufficient to fund our minimum
working  capital  and  capital  expenditure  needs for at least the next  twelve
months.   In  order  to  expand  and  improve  our  operating   and   management
infrastructure,  we expect to incur approximately  $250,000 of expenses over the
next twelve months  relating to improving our internal  controls and procedures,
which  includes  expenses  related  to  training  and hiring  additional  staff,
implementing   a  new  accounting   system  and  consulting   fees  relating  to
Sarbanes-Oxley  Act  compliance.  The extent of our future capital  requirements
will depend on many factors,  including our results of  operations.  If our cash
from operations is less than anticipated or our working capital  requirements or
capital expenditures are greater than we expect, or if we expand our business by
acquiring  or  investing  in  additional  technologies,  we may  need  to  raise
additional  debt or equity  financing.  We are  continually  evaluating  various
financing  strategies to be used to expand our 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.

     CASH FLOWS

         We currently satisfy our working capital requirements primarily through
the  issuance  of  debt  and  equity  securities,   supplemented  by  cash  from
operations. Cash flows provided by (used in) operating,  investing and financing
activities for the six months ended June 30, 2006 and 2007 are summarized in the
following table:

                                                SIX MONTHS ENDED
                                                    JUNE 30,
                                          ----------------------------
                                              2007            2006
                                          ------------    ------------
         Operating Activities .........   $ (2,937,000)   $    526,000
         Investing Activities .........     (1,124,000)           --
         Financing Activities .........     17,506,000        (104,000)
                                          ------------    ------------
              Net increase in cash ....   $ 13,445,000    $    422,000
                                          ============    ============

         CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

         New Motion's cash requirements are principally for working capital. For
the six months  ended  June 30,  2007,  cash used in  operating  activities  was
$2,937,000,  compared to cash  provided by operating  activities of $526,000 for
the six months ended June 30, 2006.  Our operating  cash flows result  primarily
from cash received  from our  aggregator  customers,  offset by cash payments we
make for products and services, including sales and marketing expenses, employee
compensation  and consulting  fees. Cash received from our aggregator  customers
generally corresponds to our net sales.

         CASH USED IN INVESTING ACTIVITIES

         For  the six  months  ended  June  30,  2007,  cash  used in  investing
activities  was  $1,124,000,  compared to zero for the six months ended June 30,
2006.  Our investing  cash flows  correspond  with purchases of fixed assets for
cash and cash flows related to  acquisitions.  In the second  quarter 2007,  our
purchase of the Katazo assets from Opera totaled  $970,000 in cash. The purchase
of the Mobliss  assets  during the six months ended June 30, 2007,  was financed
through the issuance of the IVG Note.  During the period ended June 30, 2007, we
also  made  capital  expenditures  relating  to  investment  in  our  technology
infrastructure, computer equipment and furniture for new employees.

         CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

         For the six months  ended June 30,  2007,  cash  provided by  financing
activities  was  $17,506,000,  compared to cash used in financing  activities of
$104,000 for the six months ended June 30, 2006. Cash from financing  activities
result from  issuances  of stock,  issuance and  repayment of notes  payable and
payments on capital lease obligations.


                                       35
<PAGE>


                                NEW MOTION, INC.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

         On January 19, 2007, we entered into an Asset  Purchase  Agreement with
IVG,  pursuant  to which we  purchased  from IVG  certain  specified  assets  of
Mobliss.  In exchange for the assets specified in the Asset Purchase  Agreement,
we 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, we increased the
principal  amount of the IVG Note by $580,000  to  $1,080,000.  On February  26,
2007, we repaid $500,000 of the IVG Note.

         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. As a result of the  conversion,  the IVG Note has been fully  extinguished
and no further amount is owed to IVG.

         In connection with The Mobile  Entertainment  Channel Corporation joint
venture  with IVG, we are  obligated to pay the joint  venture a management  fee
equal to the purchase  price paid for  hardware and software  assets we acquired
from IVG, or  $1,080,000,  for management  services  rendered to us by the joint
venture.  We made an advance  payment on the management fee of $500,000 on March
12,  2007,  with the  remainder  of the  management  fee  payable  in  quarterly
installments, through June 30, 2008. Beyond any advance payments, each quarterly
management  fee payment  made by us to the joint  venture  will equal 10% of the
revenue generated from the assets we acquired from IVG.

         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.

CONTRACTUAL OBLIGATIONS AND OFF BALANCE SHEET ARRANGEMENTS

         At June 30, 2007 and June 30, 2006,  we 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, we are not exposed
to any  financing,  liquidity,  market or credit risk that could arise if we had
engaged in such relationships.

         The following  table shows our 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:

                                                      TOTAL
                   OPERATING       EMPLOYMENT     CONTRACTUAL
                     LEASES        AGREEMENTS     OBLIGATIONS
                   ----------      ----------      ----------
         2007      $  380,000      $1,578,000      $1,958,000
         2008         277,000       1,034,000       1,311,000
         2009          15,000         233,000         248,000
                   ----------      ----------      ----------
                   $  672,000      $2,845,000      $3,517,000
                   ==========      ==========      ==========


                                       36
<PAGE>


                                NEW MOTION, INC.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

         Due to the payment terms of the carriers requiring in excess of 90 days
from the date of billing or sale, we utilize factoring facilities offered by our
aggregators.  This  factoring  feature  allows  for  payment of 70% of the prior
month's billings 15 to 20 days after the end of the month. For this feature,  we
pay an additional fee of 2.5% to 5% of the amount factored. For the three months
ended June 30, 2007,  the gross amount of invoices  subject to factoring  totals
approximately  $6,579,000.  The total factored  amount of these invoices  equals
approximately $4,383,000. As of June 30, 2007, we had reserves and allowances of
approximately   $83,705  against  these  factored  amounts.   This  compares  to
$3,710,000 of gross invoices  subject to factoring and the total factored amount
of these invoices of $2,511,000  for the three months ended June 30, 2006.  This
factoring  facility  is offered to us on a recourse  basis.  Our gross sales for
each month are  reported  net of any of these  factoring  fees.  We  continually
evaluate the best use of our cash assets  relating to our factoring  facility or
to alternative  uses of cash,  such as enhancing our  infrastructure  and making
selective acquisitions.

RISK FACTORS

         For risk factors  relating to our  business,  refer to the risk factors
disclosed in our Annual Report on Form 10-KSB for the fiscal year ended December
31, 2006.


                                       37
<PAGE>


ITEM 3. 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,
2006, we identified three material weaknesses  pertaining to controls related to
(i) the  process of  accounting  for  complex,  non-routine  transactions,  (ii)
internal   documentation   related  to  calculation  of   Black-Scholes   option
calculations,  and (iii)  preparation of draft versions of SEC filings presented
to Windes and McClaughry, our independent registered public accounting firm.

         In order to address these  material  weaknesses,  during the six months
ended June 30, 2007 we hired additional  accounting and finance personnel and we
subsequently  engaged  a  consultative  public  accounting  firm  to give us the
resources and expertise to improve our disclosure controls and procedures.

         Based on the evaluation by our management, in which our chief executive
officer and our chief financial  officer  participated,  of the effectiveness of
our  disclosure  controls and  procedures,  including  the  remediation  efforts
described  above,  our chief executive  officer and our chief financial  officer
have concluded that our disclosure  controls and procedures were effective as of
the end of the period covered by this report.

CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING.

         Other  than the  remediation  efforts  described  above,  there were no
changes in our internal  control  over  financial  reporting  for the six months
ended  June 30,  2007 that  materially  affected,  or are  reasonably  likely to
materially affect, our internal control over financial reporting.

         It should be noted that any system of controls,  however well  designed
and operated, can provide only reasonable, and not absolute,  assurance that the
objectives of the system are met. In addition,  the design of any control system
is based in part upon certain assumptions about the likelihood of future events.
Because of these and other inherent limitations of control systems, there can be
no assurance  that any design will  succeed in achieving  its stated goals under
all potential future conditions, regardless of how remote.


                                       38
<PAGE>


PART II - OTHER INFORMATION

ITEM 6. EXHIBITS

EXHIBIT
NUMBER         DESCRIPTION OF EXHIBIT
-------        -----------------------------------------------------------------

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

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

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

3.4            Certificate   of  Amendment  to  the  Restated   Certificate   of
               Incorporation,  dated May 2, 2007.  Incorporated  by reference to
               Exhibit  3.1 to the  Registrant's  Form 8-K (File  No.  34-51353)
               filed with the Commission on May 7, 2007.

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

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

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

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

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.


                                       39
<PAGE>


                                   SIGNATURES

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

         Dated: August 14, 2007


                                    BY:   /s/ Allan Legator
                                         ---------------------------------------
                                    Allan Legator
                                    Chief Financial Officer and Secretary
                                    (Principal Financial and Accounting Officer)



                                       40
<PAGE>


                                  EXHIBIT INDEX


EXHIBIT
NUMBER         DESCRIPTION OF EXHIBIT
-------        -----------------------------------------------------------------

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

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

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

3.4            Certificate   of  Amendment  to  the  Restated   Certificate   of
               Incorporation,  dated May 2, 2007.  Incorporated  by reference to
               Exhibit  3.1 to the  Registrant's  Form 8-K (File  No.  34-51353)
               filed with the Commission on May 7, 2007.

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

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

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

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

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.


                                       41