Atrinsic Reports Fiscal 2007 Fourth Quarter and Annual Results

Business Wire, March 27, 2008

Revenues Increase 98% Year-Over-Year; Up 33% Sequentially; Atrinsic Ends the Year with Active, Billable Subscriber Base Exceeding 825,000

NEW YORK -- New Motion, Inc., doing business as Atrinsic (NASDAQ: NWMO), a premier mobile entertainment company, today reported its financial results for the fiscal fourth quarter and year ended December 31, 2007. The results do not reflect the merger with Traffix, Inc., which was completed on February 4, 2008.

Net revenue for the fourth quarter of fiscal 2007 was $13.9 million, an increase of 126%, or $7.8 million, from $6.2 million in the comparable quarter of fiscal 2006. For comparison purposes, revenue for the fourth quarter increased 33% sequentially compared to the $10.5 million for the third quarter of 2007. The year-over-year and sequential increases in revenue were directly attributable to an increase in the Company's subscriber base.

Burton Katz, the Company's CEO, commented, "The fourth quarter represented a strong end to an exciting year, as we benefited from the investments made in new products, technology infrastructure and our unique business model. We exceeded 825,000 active, billable subscribers as of the end of the year. Just as importantly, our cost per subscriber, a critical operating metric for the Company, remained at a highly competitive rate of below $10 per customer. We enter 2008 with a new corporate branding strategy, wholly owned content, proprietary premium-billed products and a robust distribution network. I remain very excited about the future outlook for Atrinsic."

Gross profit for the quarter was $12.6 million, or 90% gross profit margin compared to gross profit of $5.9 million, or 96% gross profit margin in the prior-year fourth quarter. Total operating expenses for the quarter were $13.7 million, up 108% compared to total operating expenses of $6.7 million in the prior-year fourth quarter. The Company's loss from operations for the fourth quarter was approximately $1.2 million, an increase of approximately 45% compared to the fourth quarter of fiscal 2006's operating loss of $0.8 million. The loss from operations declined sequentially by 46% compared to $2.1 million in the third fiscal quarter of 2007. Factors impacting the Company's comparable periods operating loss were an increase of $4.6 million in marketing expenditures and an approximate $2.8 million increase in general and administrative expenses, principally attributable to increases in employee headcount to build out the Company's product line.

Mr. Katz continued, "We closed our merger transaction on February 4, 2008, where we effectively acquired Traffix, Inc., an Internet marketing company that had traded on the NASDAQ prior to the acquisition. Already, as part of our integration efforts, we have identified merger-related efficiencies which will reduce our marketing expenses. We are currently working to identify and map out additional synergies which when completed and approved by the Board will provide other near-term and longer-term expense reductions. We are targeting, as an initial goal, at least $3.5 million in additional annualized operating efficiencies as a result of the merger and integration. In the four weeks since the merger's effective date, my optimism and confidence has been reinforced as we have made great progress in assembling a powerful organization poised to become a recognized leader in a rapidly expanding space. As previously announced our Board approved the adoption of the Atrinsic brand name, we have moved to secure such brand as a DBA until such time that we can present such name change to our shareholders for their approval."

The net loss for the fourth quarter of fiscal 2007 was approximately $0.9 million, an increase of 137%, from a net loss of $0.4 million, in the comparable quarter of fiscal 2006. Based on 12.0 million diluted shares at December 31, 2007, the loss per share was $0.08 compared to a loss per share of $0.05 for the prior-year fourth quarter, based on 7.3 million diluted shares.

Net revenue for the year ended December 31, 2007 was $37 million, an increase of 98%, or $18.3 million, from $18.7 million in fiscal 2006. The loss from operations for the year was approximately $5.5 million as compared with approximately $1.5 million of income from operations in fiscal 2006. The operating loss was the result of an increase of $13 million in marketing expenditures and an approximate $7.8 million increase in general and administrative expenses, principally attributable to increases in investments in new products and employee headcount.

Pro forma 2007 Results

On a pro forma basis, giving consideration to the February 4, 2008 merger as having occurred on January 1, 2007, net revenue for fiscal 2007 would have approximated $114.3 million on a pro forma basis. Pro forma gross profit for the Fiscal 2007 would have approximated $45.2 million, and the pro forma loss from operations would have approximated $4.7 million. This $4.7 million pro forma loss from operations included over $1.5 million in professional and other related expenses directly attributable to the merger that were expensed by Traffix. In accordance with accounting rules, New Motion capitalized all of their related merger costs as a component of the purchase price. Pro forma basic and diluted loss per share would have approximated $0.17 per share, compared to New Motion's stand alone reported basic and diluted loss per share of $0.37. Note that Traffix also had a disproportionately high effective tax rate in the pro forma Fiscal 2007 period due to the permanent difference arising out of the fees and expenses attributable to the merger that did not yield a tax deduction for such period. In terms of earnings per share, this amounted to approximately $0.04, and would have reduced pro forma loss per share, at both the basic and diluted levels, to approximately $0.14. On a pro forma basis, the combined organization completed the year with $35 million in cash and 25.8 million fully diluted shares outstanding.