Protagenic Therapeutics, Inc.\new - Quarter Report: 2009 March (Form 10-Q)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2009 or

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

For the transition period from __________ to __________

Commission File Number: 001-12555

New Motion, Inc.

Doing business as

(Exact name of registrant as specified in its charter)

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

469 7th Avenue, 10th Floor, New York, NY 10018

(Address of principal executive offices and ZIP Code)

(212) 716-1977

(Registrant’s telephone number, including area code)

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

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No o

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

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

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

Yes o No x

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

As of May 8, 2009, the Company had 20,360,962 shares of Common Stock, $.01 par value, outstanding, which excludes 2,741,318 shares held in treasury.

Table of Contents

		Page

PART I	FINANCIAL INFORMATION	3
Item 1	Financial Statements	3
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3	Quantitative and Qualitative Disclosures about Market Risk	20
Item 4	Controls and Procedures	20
PART II	OTHER INFORMATION	21
Item 1A	Risk Factors	21
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 6	Exhibits	29

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

NEW MOTION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(Dollars in thousands, except per share data)

	March 31,			December 31,
	2009			2008
ASSETS
Current Assets
Cash and cash equivalents	$	22,646		$	20,410
Marketable securities		243			4,245
Accounts receivable, net of allowance for doubtful accounts of $3,926 and $2,938		15,110			16,790
Income tax receivable		2,891			2,666
Prepaid expenses and other current assets		4,847			3,686

Total Currents Assets		45,737			47,797

PROPERTYAND EQUIPMENT, net of accumulated depreciation of $1,597 and $1,435		3,500			3,525
GOODWILL		11,981			11,075
INTANGIBLE ASSETS, net of accumulated amortization of $7,074 and $5,683		11,117			12,508
INVESTMENTS, ADVANCES AND OTHER ASSETS		4,314			3,858

TOTAL ASSETS	$	76,649		$	78,763

LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	10,598		$	7,194
Accrued expenses		9,862			13,941
Note payable		1,881			1,858
Deferred revenue and Other current liabilities		1,613			1,121

Total Current Liabilities		23,954			24,114

STOCKHOLDERS' EQUITY
Common stock - par value $.01, 100,000,000 authorized, 23,032,000 and 22,992,280 shares issued at 2009 and 2008, respectively; and, 20,290,682 and 21,083,354 shares outstanding at 2009 and 2008, respectively.		230			230
Additional paid-in capital		177,563			177,347
Accumulated other comprehensive loss		(312	)		(286	)
Common stock, held in treasury, at cost, 2,741,318 shares		(4,992	)		(4,053	)
Accumulated deficit		(120,036	)		(118,849	)

Total New Motion's Stockholders' Equity		52,453			54,389

NONCONTROLLING INTEREST		242			260

TOTAL EQUITY		52,695			54,649

TOTAL LIABILITIES AND EQUITY	$	76,649		$	78,763

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

NEW MOTION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(Dollars in thousands, except per share data)

	Three Months Ended
	March 31,
	2009			2008

Subscription	$	5,377		$	13,282
Transactional		18,171			15,456
NET REVENUES		23,548			28,738

OPERATING EXPENSES
Cost of media-third party		15,475			20,070
Product and distribution		2,254			2,362
Selling and marketing		2,785			1,951
General and administrative and other operating		3,266			4,415
Depreciation and amortization		1,555			565
		25,335			29,363

LOSS FROM OPERATIONS		(1,787	)		(625	)

OTHER (INCOME) EXPENSE
Interest income and dividends		(46	)		(292	)
Interest expense		50			7
Other (income) expense		(1)			130
		3			(155)

LOSS BEFORE TAXES AND EQUITY IN LOSS OF INVESTEE		(1,790	)		(470	)

INCOME TAXES		(670	)		(174	)

NET LOSS		(1,120	)		(296	)

EQUITY IN LOSS OF INVESTEE, AFTER TAX		85			-

LESS : NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST, AFTER TAX		(18	)		(29	)

NET LOSS ATTRIBUTABLE TO NEW MOTION, INC	$	(1,187	)	$	(267	)

NET LOSS ATTRIBUTABLE TO NEW MOTION, INC PER SHARE
Basic	$	(0.06	)	$	(0.01	)
Diluted	$	(0.06	)	$	(0.01	)

WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic		20,790,942			18,932,871
Diluted		20,790,942			18,932,871

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

NEW MOTION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(Dollars in thousands, except per share data)

	Three Months Ended
	March 31,
	2009			2008

Cash Flows From Operating Activities
Net loss	$	(1,187	)	$	(267	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Allowance for doubtful accounts		988			(5	)
Depreciation and amortization		1,555			565
Stock-based compensation expense		341			694
Net loss on sale of marketable securities		-			53
Deferred income taxes		(863	)		180
Net Loss attributable to noncontrolling interest		(18	)		(29	)
Equity in loss of investee		153			-
Changes in operating assets and liabilities of business, net of acquisitions:
Accounts receivable		1,179			1,767
Prepaid income tax		(225	)		(202	)
Prepaid expenses and other current assets		(593	)		(527	)
Accounts payable		3,404			568
Other, principally accrued expenses		(5,010	)		449

Net cash used in operating activities		(276	)		3,246

Cash Flows From Investing Activities
Purchases of marketable securities		-			(4,972	)
Proceeds from sales of marketable securities		4,000			7,706
Business combinations		-			10,575
Capital expenditures		(214	)		(383	)
Cash paid for investments and other advances		(309	)		-

Net cash provided by investing activities		3,477			12,926

Cash Flows From Financing Activities
Repayments of notes payable		(20	)		(171	)
Purchase of common stock held in treasury		(939	)		-
Proceeds from exercise of options		-			36

Net cash used in financing activities		(959	)		(135	)

Effect of exchange rate changes on cash and cash equivalents		(6	)		(92	)

Net Increase In Cash and Cash Equivalents		2,236			15,945
Cash and Cash Equivalents at Beginning of Year		20,410			987

Cash and Cash Equivalents at End of Year	$	22,646		$	16,932

SUPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash (paid) for interest	$	(4	)	$	(7	)
Cash (paid) refunded for taxes	$	(264	)	$	(900	)

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

NEW MOTION, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

(UNAUDITED)

For the Three Months Ended March 31,

(Dollars in thousands, except per share data)

											Retained			Accumulated
								Additional			Earnings			Other											Total
	Comprehensive			Common Stock				Paid-In			(Accumulated			Comprehensive			Treasury Stock					Noncontrolling			shareholders'
	Loss			Shares		Amount		Capital			Deficit)			Loss			Shares		Amount			Interest			Equity
Balance at December 31, 2008					22,992,280	$	230	$	177,347		$	(118,849	)	$	(286	)		1,908,926	$	(4,053	)	$	260		$	54,649
Net loss attributable to New Motion. Inc.		(1,187	)		-		-		-			(1,187	)		-			-		-			(18	)		(1,205	)
Foreign currency translation adjustment		(26	)		-		-		-			-			(26	)		-		-						(26	)
Comprehensive loss		(1,213	)		-																					-

Stock based compensation expense		-			-		-		341			-			-			-		-						341
Restricted Stock vested		-			39,720		-		-			-			-			-		-						-
Tax shortfall on Stock based compensation		-			-		-		(125	)		-			-			-		-						(125	)
Purchase of common stock, at cost		-			-		-		-			-			-			832,392		(939	)					(939	)

Balance at March 31, 2009					23,032,000	$	230	$	177,563		$	(120,036	)	$	(312	)		2,741,318	$	(4,992	)	$	242		$	52,695

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

NEW MOTION, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Basis of Presentation

The accompanying Condensed Consolidated Balance Sheet as of March 31, 2009 and December 31, 2008, and the Consolidated Statements of Operations and the Consolidated Statements of Cash Flows for the three months ended March 31, 2009 and 2008 are unaudited, but in the opinion of management include all adjustments necessary for the fair presentation of financial position, the results of operations and cash flows for the periods presented and have been prepared in a manner consistent with the audited financial statements for the year ended December 31, 2008. Results of operations for interim periods are not necessarily indicative of annual results. These financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2008, included in the Company’s Annual Report on Form 10-K filed on March 27, 2009.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses as well as the disclosure of contingent assets and liabilities. Management continually evaluates its estimates and judgments including those related to allowances for doubtful accounts and the associated allowances for returns and chargebacks, useful lives of property, plant and equipment and intangible assets, fair value of stock options granted, forfeiture rate of equity based compensation grants, probable losses associated with pre-acquisition contingencies, income taxes and other contingencies. Management bases its estimates and judgments on historical experience and other factors that are believed to be reasonable in the circumstances. Actual results may differ from those estimates. Macroeconomic conditions may directly, or indirectly through our business partners and vendors, impact our financial performance and available resources. Such conditions may, in turn, impact the aforementioned estimates and assumptions.

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

Note 2 – Investments and Advances

Marketing Services Agreement with Central Internet Corporation d/b/a Shopit.com

On December 2, 2008 the Company entered into a Marketing Services and Content Agreement with Central Internet Corporation which operates the website www.shopit.com (Hereinafter referred to as “Shopit”). Under the agreement the Company is required to perform certain marketing and administrative services for Shopit and distribute proprietary and third party advertisements through Shopit.com and its social media advertising network. The agreement provides Shopit with a revenue share of all leads monetized by the Company. As part of the agreement, the Company was required to make periodic advance payments totaling $1.025 million through March 2009. The advances, which are secured under separate agreement, are recoverable on a dollar for dollar basis against future revenues and the Company has taken action to obtain further security in the assets of Shopit. As of March 31, 2009 the Company had made $1.025 million in advance payments under the agreement which is recorded on balance sheet in prepaid expense and other current assets.

Joint Venture with Visionaire and Mango Networks

On July 30, 2008, the Company entered into a Joint Venture Agreement to launch online and mobile marketing services and offer the Company’s mobile products in the Indian market. Under the agreement, the Company owns 19% of the Joint Venture and is required to pay up to $325,000 in return for Compulsory Convertible Debentures which can be converted to common stock at any time, at the Company’s sole discretion. Under the agreement, the Company is entitled to one of three seats on the Board of Directors. The company is accounting for the investment under the cost method of accounting. Amounts paid under the agreement as of March 31, 2009 were $125,000.

Investment in The Billing Resource, LLC

On October 30, 2008, the Company acquired a 36% noncontrolling interest in The Billing Resource, LLC (“TBR”). TBR provides alternative billing services to the Company and unrelated third parties. The Company contributed $2.2 million on formation and has committed to provide an additional $1.0 million of working capital to support near term growth. As of March 31, 2009, the Company has contributed $0.5 million of working capital to TBR. In addition, the Company has an operating agreement with TBR whereby TBR provides billing services to the Company and its customers. The agreement was transacted in the normal course of business and negotiated on an arm’s length basis.

The Company recorded its investment in TBR under the equity method of accounting and as such would present its equity in earnings and losses in TBR within its quarterly and year end reported results. The Company recorded $85,000 as equity in earnings for the three months ended March 31, 2009.

Note 3 - Notes Payable

In connection with the acquisition of Ringtone.com, the Company delivered a convertible promissory note (the “Note”) with the aggregate principal amount of $1.75 million, which accrues interest at a rate of 10% per annum. The Note is payable on the earlier to occur of either (i) July 1, 2009, or (ii) 5 days after the Company gives written notice to Ringtone.com of its intent to prepay the Note (the “Maturity Date”). The Note is optionally convertible by Ringtone.com on the Maturity Date into the Company’s common stock at a conversion price of $5.42 per share. As the effective conversion price was significantly greater than the fair value of the Company’s stock at the commitment date, no value was assigned to the conversion feature upon issuance. The payment of principal and interest on the Note is subject to certain recoupment provisions contained in the Note and in the Asset Purchase Agreement “APA”.

FASB issued Staff Position APB14-1 (FSP APB 14-1) which requires that issuers of convertible debt separately account for the liability and equity components in a manner that will reflect the entity’s nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. This FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008. The application of FSP APB 14-1 did not result in a material change to the Company’s financial statements.

New Motion had a fully amortizable note payable due to Oracle for hardware and software purchases made on February 28, 2007 (“Oracle Note”). The term of the note was two years and interest charged thereunder was approximately 8% per annum. As of December 31, 2008, the principal balance of the Oracle note payable was approximately $20,000. The note plus interest was paid in February 2009.

Note 4 - Concentration of Business and Credit Risk

New Motion is currently utilizing several billing partners in order to provide content and subsequent billings to the end user. These billing partners, or aggregators, act as a billing interface between New Motion and the mobile phone carriers that ultimately bill New Motion’s end user subscribers. 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 marketplace, due to a constant evolving business environment that stems from the infancy of the U.S. mobile content industry.

In addition, the Company also has customers other than aggregators that represent significant amounts of revenues and accounts receivable.

	For the three months
	Ended March 31,
	2009			2008

Revenues
Customer A		29	%		16	%
Billing Aggregator B		9	%		0	%
Billing Aggregator C		8	%		37	%
Other Customers & Aggregators		54	%		47	%

	For the three months
	Ended March 31,
	2009			2008

Accounts Receivable
Billing Aggregator B		21	%		0	%
Customer A		18	%		8	%
Billing Aggregator C		11	%		33	%
Other Customers & Aggregators		50	%		59	%

Note 5 – Goodwill

The gross carrying value of goodwill and intangibles as well as the accumulated amortization of the intangibles are as follows:

			March 31, 2009											December 31, 2008
	Useful		Gross					Impairment/				Net		Gross		Impairment/				Net
	Life		Carrying		Acquisition			Accumulated				Carrying		Carrying		Accumulated				Carrying
	(in years)		Value		Adjustments			Amortization				Value		Value		Amortization				Value

Unamortized intangible assets:
Goodwill			$	11,075		$	906		$	-			11,981	$	125,858		$	(114,783	)	$	11,075

Other unamortized identifiable intangible
assets:
Trademarks				11						-			11		11			-			11
Trademarks				5,323						-			5,323		5,323			-			5,323
Domain Name				1,174						-			1,174		1,174			-			1,174

Other amortized identifiable intangible assets:

Acquired Software Technology		3		2,431						(945	)		1,486		2,431			(743	)		1,688
Domain Name		3		550						(214	)		336		550			(168	)		382
Licensing		2		580						(580	)		-		580			(580	)		-
Trade names		9		1,320						(171	)		1,149		1,320			(134	)		1,186
Customer list		1.5		949						(949	)		-		949			(949	)		-
Customer list		3		669						(260	)		409		669			(205	)		464
Subscriber Database		1		3,956						(3,668	)		288		3,956			(2,679	)		1,277
Restrictive Covenants		5		1,228						(287	)		941		1,228			(225	)		1,003
Total identifiable intangible assets			$	18,191		$	-		$	(7,074	)	$	11,117	$	18,191		$	(5,683	)	$	12,508

During the first quarter of 2009, the Company revised its estimate of the fair market value of certain pre acquisition contingencies and other merger related liabilities which resulted in the increase of its liabilities by approximately $0.9 million.

Note 6 - Stock-based compensation

The fair value of share-based awards granted is estimated on the date of grant using the Black-Scholes option pricing model. The key assumptions for this model are expected term, expected volatility, risk-free interest rate, dividend yield and strike price. Many of these assumptions are judgmental and highly sensitive. There were no options granted for the period ending March 31, 2009. A total of 39,720 shares of restricted stock vested during the period ended March 31, 2009. The Company recorded $341,000 and $694,000 of share based compensation expenses for the three months ended March 31, 2009 and 2008, respectively, as follows:

	For the three months ended March 31,
	2009		2008
Product and distribution	$	45	$	71
Selling and marketing		-		-
General and administrative and other operating		296		623

	$	341	$	694

Note 7 - Loss Per Share Attributable to New Motion, Inc

Basic loss per share attributable to New Motion, Inc. is computed by dividing reported loss by the weighted average number of shares of common stock outstanding for the period. Diluted loss per share 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.

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

	Three Months ended
	March 31,
	2009			2008
EPS Denominator:
Basic weighted average shares		20,790,942			18,932,871
Effect of dilutive securities		-			-
Diluted weighted average shares		20,790,942			18,932,871

EPS Numerator (effect on net income):
Net loss attributable to New Motion, Inc.	$	(1,187	)	$	(267	)
Effect of dilutive securities		-			-
Diluted loss attributable to New Motion, Inc.	$	(1,187	)	$	(267	)

Earnings per share:
Basic weighted average loss attributable to New Motion, Inc.	$	(0.06	)	$	(0.01	)
Effect of dilutive securities		-			-
Diluted weighted average loss attributable to New Motion, Inc.	$	(0.06	)	$	(0.01	)

The Company has issued options, a convertible note payable and warrants, which may have a dilutive effect on reported earnings if they are exercised or converted to common stock. Common stock underlying outstanding options, convertible securities and warrants were not included in the computation of diluted earnings per share for the three months ended March 31, 2009 and 2008, because their inclusion would be anti dilutive when applied to the Company’s net loss per share.

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

Anti Diluted EPS Disclosure


	Three Months ended
	March 31,
	2009		2008

Convertible note payable		322,878		-
Options		2,773,372		3,531,789
Restricted Stock		70,280		110,000
Warrants		314,443		314,443

The per share exercise prices of the options were $0.48 - $14.00 for the three months ended March 31, 2009 and 2008. The per share exercise prices of the warrants were $3.44 - $5.50 for the three months ended March 31, 2009 and 2008. The convertible note payable with a face value of $1,750,000, and a conversion price of $5.42, has a post conversion effect of 322,878 shares, if converted.

Note 8 —Stockholders’ Equity

On April 8, 2008, the Company’s Board of Directors authorized management to repurchase up to $10 million of common stock through May 31, 2009. The amount and timing of specific repurchases are subject to market conditions, applicable legal requirements, and other factors, including management’s discretion. Repurchases may be made through privately negotiated transactions or in the open market. The Board of Directors of the Company may modify, extend, or terminate the share repurchase program at any time, and there is no guarantee of the exact number of shares that will be repurchased under the program. Repurchases will be funded from available working capital, and subject to other limitations.

During the three months ended March 31, 2009, the Company repurchased 832,392 shares at an average purchase price of $1.13. For the year ended December 31, 2008, the Company repurchased 1,908,926 shares of its common stock at an average purchase price of $2.12 per share. Total cash consideration for the repurchased stock to date is $5.0 million at an average price of $1.82.

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

Note 9 - Income Taxes

The effective tax rate for income before noncontrolling interest and loss on investee was 37.4% and 37.0% for the three months ended March 31, 2009 and 2008, respectively.

FIN 48 Disclosures

The Company recognizes interest accrued related to unrecognized tax benefits and penalties as income tax expense. There were accrued penalties and interest recorded on the Balance Sheet in Merger Related Accruals for the three months ended March 31, 2009, related to uncertain tax benefits for Traffix Inc.

The Company is subject to taxation in the US Federal, State and many foreign jurisdictions. The Company’s tax years for 2006 and 2007 are subject to examination by the tax authorities. In addition, the tax returns for certain acquired entities are also subject to examination. As of March 31, 2009, the total liability for uncertain tax liabilities recorded in our balance sheet in Merger Related accruals is $450,000. Management believes that an adequate provision has been made for any adjustments that may result from tax examinations. The outcome of tax examinations however, cannot be predicted with certainty. If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income tax, or goodwill, to the extent such adjustments relate to acquired entities. Although the timing or the resolution and/or closure of the audits is highly uncertain, the Company does not believe that its unrecognized tax benefit will materially change in the next twelve months.

Note 10 – Noncontrolling Interest in Consolidated Financial Statements

Mobile Entertainment Channel Corporation (MECC) is a Nevada corporation in which New Motion owns 49%. New Motion shall receive 50% of the amount of any dividends or other distributions made by the joint venture. The results of MECC are consolidated within the financial statements under FIN 46(R). There has been no change in the Company’s ownership of MECC for the three months ended March 31, 2009 and 2008.

Note 11 - Recent Accounting Pronouncements

In December 2008, the EITF issued EITF Issue No. 08-7, Accounting for Defensive Intangible Assets (EITF 08-7). This issue clarifies the accounting for defensive assets, which are separately identifiable intangible assets acquired in an acquisition which an entity does not intend to actively use but does intend to prevent others from using. EITF 08-7 requires an acquirer to account for these assets as a separate unit of accounting, which should be amortized to expense over the period the asset diminishes in value. This issue is effective for intangible assets acquired on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The adoption of EITF 08-7 did not have an impact on the Company’s financial statements.

In June 2008, the FASB issued FASB Staff Position No. EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities.” EITF 03-6-1 gives guidance as to the circumstances when unvested share-based payment awards should be included in the computation of EPS. EITF 03-6-1 is effective for fiscal years beginning after December 15, 2008. The adoption of EITF 03-6-1 did not have an impact on the Company’s financial statements.

In April 2008, the FASB issued FASB Staff Position No. FSP 142-3, “Determining the Useful Life of Intangible Assets” FSP 142-3 amends the factors to be considered in determining the useful life of intangible assets. Its intent is to improve the consistency between the useful life of an intangible asset and the period of expected cash flows used to measure its fair value. FSP 142-3 is effective for fiscal years beginning after December 15, 2008. The adoption of FSP 142-3 did not have an impact on the Company’s financial statements.

On February 12, 2008, the FASB issued FASB Staff Position (“FSP”) SFAS No. 157-2, “Effective Date of SFAS No. 157,” which defers the effective date of SFAS 157 for nonfinancial assets and liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis. This FSP delayed the implementation of SFAS 157 for the Company’s accounting of goodwill, acquired intangibles, and other nonfinancial assets and liabilities that are measured at the lower of cost or market until January 1, 2009. There is no impact on the financial statements for the three months ended March 31, 2009.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements,” which we refer to as SFAS No. 160. SFAS No. 160 establishes requirements for ownership interests in subsidiaries held by parties other than us (minority interests) be clearly identified and disclosed in the consolidated statement of financial position within equity, but separate from the parent's equity. Any changes in the parent's ownership interests are required to be accounted for in a consistent manner as equity transactions and any noncontrolling equity investments in deconsolidated subsidiaries must be measured initially at fair value. SFAS No. 160 is effective, on a prospective basis, for fiscal years beginning after December 15, 2008; however, presentation and disclosure requirements must be retrospectively applied to comparative financial statements. Except for presentation and disclosure requirements, the adoption of SFAS 160 had no material impact on the Company’s financial statements.

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

Note 12 - Commitments and contingencies

In 2007, the Office of the Attorney General of the State of Florida commenced an investigation of the advertising and business practices of the third party wireless content industry including the Company and its acquired entities, namely Traffix, Inc. On February 12, 2009, the Company approached the Florida Attorney General to volunteer its compliance and cooperate with the ongoing investigation, and contribute to the remediation and educational initiatives of the Florida Attorney General. In connection with this matter, the Company estimates that total costs will approximate $1.125 million which is included in the Consolidated Balance Sheet through purchase accounting. The Company paid $500,000 of the estimated $1.125 million to the State of Florida in the three months ended March 31, 2009.

The Company is also named in two Class Action Lawsuits (in Florida and California) involving allegations concerning the Company's marketing practices associated with some of its services billed and delivered via wireless carriers. The Company is disputing the allegations and is vigorously defending itself in these matters. In one of these matters the Company has received a Summary Judgment on its Motion to Dismiss related to a number of the allegations made in the original complaint. The Company has accrued for the related costs through purchase accounting in the amount of $0.275 million in connection with these matters which are included in Accrued Expenses in the Consolidated Balance Sheet.

On February 2, 2009 the Company filed a complaint against Mobile Messenger PTY LTD and its subsidiary Mobile Messenger Americas, Inc. (“Mobile Messenger”) to recover monies owed the Company in connection with transaction activity incurred in the ordinary and normal course and also included declaratory relief concerning demands made by Mobile Messenger's for indemnification in Mobile Messenger's settlement in its Florida Class Action Matter which it settled in late 2008 (“Grey vs. Mobile Messenger”). Mobile Messenger, a party also involved in the Florida Attorney General investigation described herein, brought upon the Company a cross complaint seeking injunctive relief, indemnification, damages exceeding $17 million, and recoupment of attorney’s fees. The Company disputes the allegations and intends to vigorously defend itself in these matters considering, among other things, the specific facts surrounding the underlying claims against the Company, which we believe, are without merit.

In the ordinary course of business, the Company is involved in various disputes, which are routine and incidental to the business and the industry in which it operates. 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 except as otherwise disclosed.

Item 2. Management’s Discussion and Analysis

CAUTIONARY STATEMENT

This discussion summarizes the significant factors affecting our consolidated operating results, financial condition and liquidity and cash flows for the three months ended March 31, 2009 and 2008. Except for historical information, the matters discussed in this “Management’s Discussion and Analysis” are forward-looking statements that involve risks and uncertainties and are based upon judgments concerning various factors that are beyond our control. Actual results could differ materially from those projected in the “ forward-looking statements” as a result of, among other things, the factors described under the “Cautionary Statements and Risk Factors” included elsewhere in this report. The information contained in this Form 10-Q, as at and for the three months ended March 31, 2009 and 2008, is intended to update the information contained in our Annual Report on Form 10-K for the year ended December 31, 2008 of New Motion, Inc. (“we,” “our,” “us”, the “Company,” or “New Motion”) and presumes that readers have access to, and will have read, the “Management’s Discussion and Analysis” and other information contained in our Annual Report on Form 10-K.

A NOTE CONCERNING PRESENTATION

This Quarterly Report on Form 10-Q contains information concerning New Motion, Inc. as it pertains to the periods covered by this report - for the three months ended March 31, 2009 and 2008.

Executive Overview

New Motion, Inc., doing business as Atrinsic, is one of the leading digital advertising and marketing services companies in the United States. Atrinsic has two main service offerings, Transactional services and Subscription services. Transactional services offers full service online marketing and distribution services which are targeted and measurable online campaigns and programs for marketing partners, corporate advertisers, or their agencies, generating qualified customer leads, online responses and activities, or increased brand recognition. Subscription services offer our portfolio of subscription based content applications direct to users working with wireless carriers and other distributors.

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

Our goal is to optimize revenues from each of our qualified leads, regardless of the nature of the services we provide to such parties. Over an extended period of time our ability to generate incremental revenues relies on our ability to increase the size and scope of our media, our ability to target campaigns, and our ability to convert qualified leads into appropriate revenue generating opportunities

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

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

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

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

New Motion, Inc. is operating under the trade name of Atrinsic and is in the process of formally changing its name.

STRATEGIC INITIATIVES

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

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

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

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

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

Results of Operations for the three months ended March 31, 2009 compared to the three months ended March 31, 2008.

In terms of comparability, the March 31, 2008 total revenue and operating expenses include two months of Traffix, Inc. activity and none for Ringtone.com LLC whereas March 31, 2009 total revenue and operating expenses includes three full months of Traffix, Inc. and Ringtone.com LLC activity.

Revenues presented by type of activity are as follows for the three month periods ending March 31:

	For the three months ended March 31,				Change Inc.(Dec.)			Change Inc.(Dec.)
	2009		2008		$			%

Subscription	$	5,377	$	13,282	$	(7,905	)		-60	%
Transactional	$	18,171	$	15,456	$	2,715			18	%

Total Revenues (1)	$	23,548	$	28,738	$	(5,190	)		-18	%

(1)

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

Revenues decreased approximately $5.2 million, or 18%, to $23.5 million for the three months ended March 31, 2009, compared to $28.7 million for the three months ended March 31, 2008.

Subscription revenue decreased by approximately $7.9 million, or 60%, to $5.4 million for the three months ended March 31, 2009, compared to $13.3 million for the three months ended March 31, 2008. The decrease in subscription service revenue was principally attributable to a decrease in the average number of billable subscribers during the period. We ended the first quarter of 2009 with approximately 419,000 subscribers, compared to approximately 1.0 million at the end of the first quarter of 2008. The number of subscribers is largely, but not precisely, correlated to the periodic reported revenues as a result of inter-period volatility and the circumstance that subscribers are billed on a monthly basis.

Transactional revenue increased by approximately $2.7 million or 18% to $18.2 million for the three months ended March 31, 2009 compared to $15.5 million for the three months ended March 31, 2008. The increase is principally attributed to the acquisition of Traffix, Inc. which took place February 4, 2008.

Operating Expenses

	For the three months ended				Change			Change
	March 31,				Inc.(Dec.)			Inc.(Dec.)
	2009		2008		$			%

Operating Expenses
Cost of Media - 3rd party	$	15,475	$	20,070		(4,595	)		-23	%
Product and distribution		2,254		2,362		(108	)		-5	%
Selling and marketing		2,785		1,951		834			43	%
General and administrative and other operating		3,266		4,415		(1,149	)		-26	%
Depreciation and Amortization		1,555		565		990			175	%

Total Operating Expenses	$	25,335	$	29,363	$	(4,028	)		-14	%

Cost of Media

Cost of Media decreased by $4.6 million to $15.5 million for the three months ended March 31, 2009 from $20.1 million for the three months ended March 31, 2008. For 2009, Cost of Media – 3 rd party includes media purchased for monetization of both transactional and subscription revenues. The decrease was proportionately correlated to the decline in the related revenue. Where possible, the Company has curtailed its discretionary spending as a result of uncertainties in the marketplace and plans to increase such expenditures with the launch of new products and initiatives.

Product and Distribution

Product and distribution expense decreased by $108,000 to $2.3 million for the three months ended March 31, 2009 compared to $2.4 million for the three months ended March 31, 2008. Product and distribution expenses are costs necessary to develop and maintain proprietary content, support and maintain our websites, user data and technology platforms which drive both our transactional and subscription based revenues. Included in product and distribution cost is stock compensation expense of $45,000 and $71,000 for the three months ended March 31, 2009 and 2008 respectively.

Selling and Marketing

Selling and marketing expense increased by $0.8 million to $2.8 million in the three months ended March 31, 2009 as compared to $2.0 million for the three months ended March, 2008. The Company’s bad debt expense increased by approximately $1.0 million for the three months ended March 31, 2009 compared to for the three months ended March 31, 2008 partially offset by a reduction in salaries and other marketing costs.

General, Administrative and Other Operating

General and administrative expenses decreased by approximately $1.1 million to $3.3 million for the three months ended March 31, 2009 compared to $4.4 million for the three months ended March 31, 2008. The decrease is primarily due to a reduction in labor and related costs, professional and consulting fees, facilities and related costs. The Company continues to make appropriate and modest investments in labor, facilities, technology infrastructure, and utilization of third party professional service providers to support its continued growth, business development and corporate governance initiatives. Included in general and administrative expense is stock compensation expense of $296,000 and $623,000 for the three months ended March 31, 2009 and 2008 respectively.

Depreciation and Amortization

Depreciation and amortization expense increased $1.0 million to $1.6 million for the three months ended March 31, 2009 compared to $0.6 million for the year three months ended March 31, 2008 principally as a result of the increase in intangible assets as a result of the acquisitions of Traffix, Inc. on February 4, 2008 and Ringtone.com LLC on June 30, 2008, and an increase in leasehold improvements for the Company’s New York City headquarters.

Loss from Operations

Operating loss increased to approximately $1.8 million for the three months ended March 31, 2009, compared to an operating loss of $0.6 million for the three months ended March 31, 2008. The Company’s revenue decreased by 18% with a corresponding decrease in operating expenses of 14%.

Interest income and dividends

Interest and dividend income decreased $246,000 to $46,000 for the three months ended March 31, 2009, compared to $292,000 for the three months ended March 31, 2008. The reduction is mainly due to a decrease in the balances of cash and marketable securities at March 31, 2009 compared to March 31, 2008, as well as a reduction in the rate of return on invested capital.

Interest expense

Interest expense increased $43,000 to $50,000 for the three months ended March 31, 2009, compared to $7,000 for the three months ended March 31, 2008. The increase is due principally to interest accrued on the note payable.

Income Taxes

Income tax benefit, before noncontrolling interest and loss on investee, for the three months ended March 31, 2009 and 2008 was $670,000 and $174,000 respectively and reflects an effective tax rate of 37.6% and 37.0% respectively. The Company had a loss before taxes of $1.8 million for the three months ended March 31, 2009 compared to $0.5 million for the three months ended March 31, 2008.

Equity in Loss of Investee

Equity in loss of investee was ($85,000), net of taxes and represents the Company’s 36% interest in The Billing Resource, LLC.

Net loss attributable to noncontrolling interest

Noncontrolling interest for the three months ended March 31, 2009 was ($18,000) compared to ($29,000) for the three months ended March 31, 2008.

Net Loss attributable to New Motion, Inc.

Net loss increased by $0.9 million to $1.2 million for the three months ended March 31, 2009 as compared to a net loss of $0.3 million for the three months ended March 31, 2008. This increase resulted from the factors described above.

Liquidity and Capital Resources

The Company continually projects anticipated cash requirements, which may include share repurchases, business combinations, capital expenditures, principal and interest payments on its outstanding and future indebtedness, and working capital requirements. As of March 31, 2009, the Company had cash and cash equivalents of approximately $22.6 million, marketable securities of approximately $0.2 million and a working capital balance of approximately $21.8 million. The Company used approximately $276,000 in operations for the three months ended March 31, 2009 and, contingent on prospective operating performance, may require reductions in discretionary variable costs and other realignments to permanently reduce fixed operating costs.

In conjunction with the Company’s objective of enhancing shareholder value, the Company’s Board of Directors authorized a share repurchase program. Under this share repurchase program, the Company purchased 832,392 shares of the Company’s common stock for an aggregate price of approximately $1.0 million during the three months ended March 31, 2009.

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

In connection with its investments the Company is obligated to fund investments totaling approximately $0.7 million in 2009. Furthermore, management anticipates the risk adjusted return is sufficiently in excess of the contributed capital obligations, as of this date. There is however, no guarantee of the anticipated returns. In addition, management has taken considerable actions to secure its interest in achieving such a return.

New Accounting Standards and Interpretations

In June 2008, the FASB issued FASB Staff Position No. EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities.” EITF 03-6-1 gives guidance as to the circumstances when unvested share-based payment awards should be included in the computation of EPS. EITF 03-6-1 is effective for fiscal years beginning after December 15, 2008. The adoption of EITF 03-6-1 will not have an impact on the Company’s financial statements.

In April 2008, the FASB issued FASB Staff Position No. FSP 142-3, “Determining the Useful Life of Intangible Assets” FSP 142-3 amends the factors to be considered in determining the useful life of intangible assets. Its intent is to improve the consistency between the useful life of an intangible asset and the period of expected cash flows used to measure its fair value. FSP 142-3 is effective for fiscal years beginning after December 15, 2008. The adoption of FSP 142-3 will not have an impact on the Company’s financial statements.

In February 2007, FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS-159”), which gives companies the option to measure eligible financial assets, financial liabilities and firm commitments at fair value (i.e., the fair value option), on an instrument-by-instrument basis, that are otherwise not permitted to be accounted for at fair value under other accounting standards. The election to use the fair value option is available when an entity first recognizes a financial asset or liability or upon entering into a firm commitment. Subsequent changes in fair value must be recorded in earnings. SFAS 159 is effective for financial statements issued for fiscal year beginning after November 15, 2007. The Company elected not to adopt the provisions of SFAS 159 for its financial instruments that are not required to be measured at fair value.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not required.

Item 4. Disclosure Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Members of the our management, including our Chief Executive Officer, Burton Katz, and Chief Financial Officer Andrew Zaref, have evaluated the effectiveness of our disclosure controls and procedures, as defined by paragraph (e) of Exchange Act Rules 13a-15 or 15d-15, as of March 31, 2009, the end of the period covered by this report. Based upon that evaluation, Messrs. Katz and Zaref concluded that our disclosure controls and procedures were effective for the period ended March 31, 2009.

INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in our internal control over financial reporting or in other factors identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the first quarter ended March 31, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1A. Risk Factors

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

We have a limited operating history in an emerging market, which may make it difficult to evaluate our business.

Our wholly-owned subsidiary, New Motion Mobile, commenced offering subscription products and services directly to consumers in 2005. In addition, our merger with Traffix, which is responsible for generating the majority of our Transactional revenues, was completed at the beginning of 2008. Accordingly, we have a limited history of generating revenues, and our future revenue and income generating potential is uncertain and unproven based on our limited operating history. As a result of our short operating history, we have limited financial data that can be used to develop trends and other historical based evaluation methods to project and forecast our business. Any evaluation of our business and the potential prospects derived from such evaluation must be considered in light of our limited operating history and discounted accordingly. Evaluations of our current business model and our future prospects must address the risks and uncertainties encountered by companies in early stages of development, that possess limited operating history, and that are conducting business in new and emerging markets.

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

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

If we are unable to address these risks, and respond accordingly, our operating results may not meet our publicly forecasted expectations, and/or the expectations as derived by our investors, which could cause the price of our common stock to decline.

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

During the first quarter ended March 31, 2009, we generated a significant portion of our revenues from the sale of our products and services directly to consumers which are billed through wireless aggregators and carriers. We expect that we will continue to bill a significant portion of our revenues through a limited number of aggregators for the foreseeable future, although these aggregators may vary from period to period. In a risk diversification and cost saving effort, we have established a direct billing relationship with a carrier that mitigates a portion of our revenue generation risk as it relates to aggregator dependence; conversely this risk is replaced with internal performance risk regarding our ability to successfully process billable messages directly with the carrier.

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

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

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

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

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

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

If advertising on the internet loses its appeal, our revenue could decline.

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

During the three months ended March 31, 2009, all of our revenue was generated, directly or indirectly, through the Internet in part by delivering advertisements that generate leads, impressions, click-throughs, and other actions to our advertiser customers' websites as well as confirmation and management of mobile services. This business model may not continue to be effective in the future for the following reasons:

	·	click and conversion rates may decline as the number of advertisements and ad formats on the Web increases, making it less likely that a user will click on our advertisement;
	·	the installation of "filter" software programs by web users which prevent advertisements from appearing on their computer screens or in their email boxes may reduce click throughs;

	·	companies may be reluctant or slow to adopt online advertising that replaces, limits or competes with their existing direct marketing efforts;
	·	companies may prefer other forms of Internet advertising we do not offer, including certain forms of search engine placements;
	·	companies may reject or discontinue the use of certain forms of online promotions that may conflict with their brand objectives;
	·	companies may not utilize online advertising due to concerns of "click-fraud", particularly related to search engine placements;
	·	regulatory actions may negatively impact certain business practices that we currently rely on to generate a portion of our revenue and profitability; and
	·	perceived lead quality.

If the number of companies who purchase online advertising from us does not continue to grow, we may experience difficulty in attracting publishers, and our revenue could decline.

Our revenue could decline if we fail to effectively monetize our content and our growth could be impeded if we fail to acquire or develop new content

Our success depends in part on our ability to effectively manage our existing content. The Web publishers and email list owners that list their unsold leads, data or offers with us are not bound by long-term contracts that ensure us a consistent supply of same. In addition, Web publishers or email list owners can change the amount of content they make available to us at any time. If a Web publisher or email list owner decides not to make content from its websites, newsletters or email lists available to us, we may not be able to replace this content with content from other Web publishers or email list owners that have comparable traffic patterns and user demographics quickly enough to fulfill our advertisers' requests. This would result in lost revenue.

If we are unable to successfully keep pace with the rapid technological changes that may occur in the wireless communication, internet and e-commerce arenas, we could lose customers or advertising inventory and our revenue and results of operations could decline.

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

We could be subject to legal claims, government enforcement actions, and be held accountable for our or our customers' failure to comply with federal, state and foreign laws, regulations or policies, all of which could materially harm our business.

As a direct-to-consumer marketing company, we are subject to a variety of federal, state and local laws and regulations designed to protect consumers that govern certain of aspects of our business. For instance, recent growing public concern regarding privacy and the collection, distribution and use of information about Internet users has led to increased federal, state and foreign scrutiny and legislative and regulatory activity concerning data collection and use practices.. Any failure by us to comply with applicable federal, state and foreign laws and the requirements of regulatory authorities may result in, among other things, indemnification liability to our customers and the advertising agencies we work with, administrative enforcement actions and fines, class action lawsuits, cease and desist orders, and civil and criminal liability.

Our customers are also subject to various federal and state laws concerning the collection and use of information regarding individuals. These laws include the Children's Online Privacy Protection Act, the Federal CAN-SPAM Act of 2003, as well as other laws that govern the collection and use of consumer credit information. We cannot assure you that our customers are currently in compliance, or will remain in compliance, with these laws and their own privacy policies. We may be held liable if our customers use our technologies in a manner that is not in compliance with these laws or their own stated privacy policies, which would have an adverse impact on our operations.

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

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

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

Our business may be adversely affected by the proliferation of "spam" or unwanted internet solicitations. In response to the proliferation of spam, Internet Service Providers ("ISP's") have been adopting technologies, and individual computer users are installing software on their computers that are designed to prevent the delivery of certain Internet advertising, including legitimate solicitations such as those delivered by us. We cannot assure you that the number of ISP's and individual computer users who employ these or other similar technologies and software will not increase, thereby diminishing the efficacy of our transactional, as well as our subscription service activities. In the case that one or more of these technologies, or software applications, realize continued and/or widely increased adoption, demand for our services could decline in response.

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

It is our current and long-term intention that we will use all cash flows to fund operations and maintain excess cash requirements for the possibility of potential future acquisitions. We may also use our cash to repurchase shares pursuant to our share repurchase program discussed elsewhere in this report. Future dividend declarations, if any, will result from our reversal of our current intentions, and would depend on our performance, the level of our then current and retained earnings and other pertinent factors relating to our financial position. Prior dividend declarations should not be considered as an indication for the potential for any future dividend declarations.

We face intense competition in the marketing of our subscription services and the products of our transaction based clients.

In both our subscription services and transaction services, we compete primarily on the basis of marketing acquisition cost, brand awareness, consumer penetration and carrier and distribution depth and breadth. We consider our primary subscription business competitors to be Buongiorno, Playphone, Dada Mobile, Acotel, Glu Mobile, Cellfish (Lagadere), Jamster (Fox), Hands on Mobile and Thumbplay. In our transactional business, we consider Azoogle, Value Click, Miva, Kowabunga! (Think Partnership), Right Media, iCrossing, 360i, iProspect, Publicis (Formerly Digitas), Omnicom and Blue Lithium to be our primary competitors. In the future, likely competitors may include other major media companies, traditional video game publishers, wireless carriers, content aggregators, wireless software providers and other pure-play wireless subscription publishers, and Internet affiliate and network companies.

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

If we do not successfully execute our international strategy, our revenue, results of operations and the growth of our business could be harmed.

Our planned international expansion and the integration of international operations present unique challenges and risks to our company, and require management attention. Our foreign operations subject us to foreign currency exchange rate risks and we currently do not utilize hedging instruments to mitigate foreign currency exchange rate risks.

Our continued international expansion will subject us to additional foreign currency exchange rate risks and will require additional management attention and resources. We cannot assure you that we will be successful in our international expansion and operations efforts. Our international operations and expansion subject us to other inherent risks, including, but not limited to: the impact of recessions in economies outside of the United States; changes in and differences between regulatory requirements between countries; U.S. and foreign export restrictions, including export controls relating to encryption technologies; reduced protection for and enforcement of intellectual property rights in some countries; potentially adverse tax consequences; difficulties and costs of staffing and managing foreign operations; political and economic instability; tariffs and other trade barriers; and seasonal reductions in business activity.

Our failure to address these risks adequately could materially and adversely affect our business, revenue, results of operations and financial condition.

System failures could significantly disrupt our operations, which could cause us to lose customers or content.

Our success depends on the continuing and uninterrupted performance of our systems. Sustained or repeated system failures that interrupt our ability to provide services to customers, including failures affecting our ability to deliver advertisements quickly and accurately and to process visitors' responses to advertisements, and, validate mobile subscriptions, would reduce significantly the attractiveness of our solutions to advertisers and Web publishers. Our business, results of operations and financial condition could also be materially and adversely affected by any systems damage or failure that impacts data integrity or interrupts or delays our operations. Our computer systems are vulnerable to damage from a variety of sources, including telecommunications failures, power outages, malicious or accidental human acts, and natural disasters. We operate a data center in Canada and have a co-location agreement with a service provider to support our operations. Therefore, any of the above factors affecting any of these areas could substantially harm our business. Moreover, despite network security measures, our servers are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptive problems in part because we cannot control the maintenance and operation of our third-party data centers. Despite the precautions taken, unanticipated problems affecting our systems could cause interruptions in the delivery of our solutions in the future and our ability to provide a record of past transactions. Our data centers and systems incorporate varying degrees of redundancy. All data centers and systems may not automatically switch over to their redundant counterpart. Our insurance policies may not adequately compensate us for any losses that may occur due to any failures in our systems.

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

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

Decreased effectiveness of equity compensation could adversely affect our ability to attract and retain employees and harm our business.

We have historically used stock options as a key component of our employee compensation program in order to align employees' interests with the interests of our stockholders, encourage employee retention, and provide competitive compensation packages. Volatility or lack of positive performance in our stock price may adversely affect our ability to retain key employees, many of whom have been granted stock options, or to attract additional highly-qualified personnel. As of March 31, 2009, a majority of our outstanding employee stock options have exercise prices in excess of the stock price on that date. To the extent this continues to occur, our ability to retain employees may be adversely affected. Moreover, applicable NASDAQ listing standards relating to obtaining stockholder approval of equity compensation plans could make it more difficult or expensive for us to grant stock options or other stock-based awards to employees in the future. As a result, we may incur increased compensation costs, change our equity compensation strategy or find it difficult to attract, retain and motivate employees, any of which could materially, adversely affect our business.

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

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

In 2007, the Office of the Attorney General of the State of Florida commenced an investigation of the advertising and business practices of the third party wireless content industry including the Company and its acquired entities, namely Traffix, Inc. On February 12, 2009, the Company approached the Florida Attorney General to volunteer its compliance and cooperate with the ongoing investigation, and contribute to the remediation and educational initiatives of the Florida Attorney General. In connection with this matter, at December 31, 2008 the Company estimates that total costs approximate $1.125 million which is included Accrued Expenses in the Consolidated Balance Sheet. During the three months ended March 31, 2009, $500,000 was paid to the State of Florida.

The Company is also named in two Class Action Lawsuits (in Florida and California) involving allegations concerning the Company's marketing practices associated with some of its services billed and delivered via wireless carriers. The Company is disputing the allegations and is vigorously defending itself in these matters. In one of these matters the Company has received a Summary Judgment on its Motion to Dismiss related to a number of the allegations made in the original complaint. The Company has accrued for the related costs in the amount of $275,000 in connection with these matters which are included in Accrued Expenses in the Consolidated Balance Sheet.

On February 2, 2009 the Company filed a complaint against Mobile Messenger PTY LTD and its subsidiary Mobile Messenger Americas, Inc. (“Mobile Messenger”) to recover monies owed the Company in connection with transaction activity incurred in the ordinary and normal course and also included declaritory relief concerning demands made by Mobile Messenger's for indemnification in Mobile Messenger's settlement in its Florida Class Action Matter which it settled in late 2008 (“Grey vs. Mobile Messenger”). Mobile Messenger, a party also involved in the Florida Attorney General investigation described herein, brought upon the Company a cross complaint seeking injunctive relief, indemnification, damages exceeding $17 million, and recoupment of attorneys fees. The Company disputes the allegations and intends to vigorously defend itself in these matters considering, among other things, the specific facts surrounding the underlying claims against the Company are without merit.

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

In accounting for the merger with Traffix and the acquisition of the assets of Ringtone.com, we allocated and recorded a large portion of the purchase price paid in the merger to goodwill and other intangible assets. Under SFAS No.142, we must assess, at least annually and potentially more frequently, whether the value of goodwill and other intangible assets has been impaired. Any reduction or impairment of the value of goodwill or other intangible assets, such as the charge that was taken in the fourth quarter of 2008, could materially adversely affect New Motion’s results of operations in future periods.

We may incur liabilities to tax authorities in excess of amounts that have been accrued which may adversely impact our results of operations and financial condition.

The preparation of our consolidated financial statements requires estimates of the amount of income tax that will become payable in each of the jurisdictions in which we operate. We may be challenged by the taxing authorities in these jurisdictions and, in the event that we are not able to successfully defend our position, we may incur significant additional income tax liabilities and related interest and penalties which may have an adverse impact on our results of operations and financial condition.

We may be impacted by the affects of the current slowdown of the United States economy.

Our performance is subject to worldwide economic conditions and their impact on levels of consumer spending. Consumer spending recently has deteriorated significantly as a result of the current economic situation in the United States and may remain depressed, or be subject to further deterioration for the foreseeable future. Purchases of our subscription based services as well as our transactional services tend to decline in periods of recession or uncertainty regarding future economic prospects, as disposable income declines. Many factors affect the level of spending for our products and services, including, among others: prevailing economic conditions, levels of employment, salaries and wage rates, energy costs, interest rates, the availability of consumer credit, taxation and consumer confidence in future economic conditions. During periods of recession or economic uncertainty, we may not be able to maintain or increase our sales to existing customers, make sales to new customers or maintain or increase our international operations on a profitable basis. As a result, our operating results may be adversely and materially affected by downward trends in the United States or global economy, including the current recession in the United States.

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

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

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

Common Stock Repurchases.

On April 8, 2008, the Company’s Board of Directors authorized management to repurchase up to $10 million of common stock through May 31, 2009. The amount and timing of specific repurchases are subject to market conditions, applicable legal requirements, and other factors, including management’s discretion. Repurchases may be made through privately negotiated transactions and in the open market. The Board of Directors of the Company may modify, extend, or terminate the share repurchase program at any time, and there is no guarantee of the exact number of shares that will be repurchased under the program. Repurchases will be funded from available working capital, and subject to other limitations.

During the three months ended March 31, 2009, the Company repurchased an aggregate of 832,392 shares of its common stock at a cost of approximately $1.0 million, at an average of $1.13 per share.

Issuer Purchases of Equity Securities
					(c) Total Number		(d) Approximate
					of Shares		Dollar Value of
					Purchased as Part		Shares That May
	(a) Total Number				Of Publicly		Yet Be Purchased
	Of Shares		(b) Average Price		announced Plans		Under Plans Or
	Purchased		Paid per Share		or Programs		Programs
Beginning balance January 1, 2009		1,908,926				1,908,926	$	5,946,791

January 1 to January 31, 2009		472,392	$	1.02		472,392	$	5,464,944

February 1 to February 28, 2009		-	$	-		-	$	5,464,944

March 1 to March 31, 2009		360,000	$	1.27		360,000	$	5,007,737

Total		2,741,318				2,741,318

Item 6. Exhibits

Exhibit Number		Description of Exhibit
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.

Signatures

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

Dated: May 12, 2009

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