The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying consolidated financial statements and related notes thereto.

Overview

Cash on hand at March 31, 2008 was $6.7 million (not including $0.2 million restricted for outstanding letters of credit). The Company has incurred net losses from continuing operations of $3.7 million and $6.9 million for the three months ended March 31, 2008 and 2007, respectively, with results for 2008 including $2.3 million in non-cash expenses relating to the accounting treatment for stock, warrants, and options. Additionally, cash used in operating activities from continuing operations was $3.9 million and $5.0 million for the three months ended March 31, 2008 and 2007, respectively. The Company's recurring losses and negative cash flows from operations raise substantial doubt about its ability to continue as a going concern.

Notwithstanding the above, the Company continues to find support amongst its shareholders and other investors, as evidenced by the $19.0 million financing completed in the first quarter of 2008. This capital was used to pay off essentially all of the Company's outstanding debt. The balance of the funds will be used for operations and to support the Company's successful new business development efforts.

Results of Operations

Three months ended March 31, 2008 compared to 2007

Total revenues for the three months ended March 31, 2008 were $9.5 million compared to $4.0 million for the same period in 2007, representing a 138% increase. This increase is primarily due to the recognition of revenue in the first quarter of 2008 in connection with a significant new contract in our Optimization Solutions line of business.

Revenues generated from Optimization Solutions totaled $6.5 million for the three months ended March 31, 2008 compared to $1.9 million for the same period in 2007, which represents professional services, remote network management services, and the use of our automated pricing software. The Connectivity Solutions business recorded $3.0 million for the three months ended March 31, 2008 compared to $2.1 million for the same period in 2007, which is from the design, delivery, and management of networks.

The consolidated gross margin rate was 54% for the three months ended March 31, 2008 compared to 27% for the same period in 2007. This increase was driven primarily by the delivery of optimization services to the new customer mentioned above.

Operating expenses for the first quarters of 2008 and 2007 consists of the following:

                                            Three Months Ended March 31,
                                              2008                2007
                                                   (in thousands)
         Compensation                    $         4,289     $         2,841
         Professional services                     2,142                 360
         Depreciation and amortization               536                 938
         All other operating expenses                715               1,033

         Total operating expenses        $         7,682     $         5,172

Compensation expense increased $1.4 million for the three months ended March 31, 2008 as compared to the three months ended March 31, 2007, due in part to higher commission expense, which is consistent with the increase in revenue. Also included in compensation expense for 2008 are non-cash charges of $2.0 million related to the accounting treatment (pursuant to SFAS 123R) of certain stock option grants as compared to $1.4 million for the same period in 2007.

Professional services increased $1.8 million for the three months ended March 31, 2008 as compared to the three months ended March 31, 2007, due in part to the pay-off of the senior and junior secured facilities. In addition, we incurred additional advisory expenses and utilized outside contractors in lieu of full-time staff for certain projects.

Depreciation and amortization expense relates primarily to the Network Operating Center in suburbs of Boston and the fair value assigned to the Company's intellectual property.

Other operating expenses decreased $0.3 million for the three months ended March 31, 2008 as compared to the same period for 2007. This decease is due to decreased occupancy expense resulting from a reduction in our leased space.

Any significant increase in future operating costs is expected to be a direct result of a corresponding increase in revenues, excluding any additional stock-based compensation expense. Any significant increase in revenues is anticipated to outpace the increase in related operating costs.

Results for the three months ended March 31, 2008 reflect interest of $5.8 million. This interest includes $4.3 million related to the amortization of the fair value assigned to the warrants issued with the debt. The Debentures had a weighted average interest rate of 8.0%.

Liquidity and Capital Resources

Cash used in operating activities from continuing operations during the three months ended March 31, 2008 and 2007 was $3.9 million and $5.0 million, respectively. The cash used in operating activities from continuing operations was principally due to the net loss from continuing operations of $3.7 million. The primary variance between operating loss and net cash used in operating activities from continuing operations during the three months ended March 31, 2008 was due to stock option expense of $2.0 million, and the amortization of the fair value assigned to the warrants issued with debt of $4.3 million. In addition, accounts receivable increased by $4.9 million in connection with billings under a significant new contract. These amounts were partially offset by a $4.8 million change in the fair value of embedded derivatives and warrants, and a $1.4 million reduction in accrued expenses. The primary variance between operating loss and net cash used in operating activities from continuing operations during the three months ended March 31, 2007 was due to stock option expense of $1.4 million and warrant expense of $1.9 million. These amounts were partially offset by a $1.9 million reduction in accrued expenses.

The cash used in investing activities from continuing operations during the three months ended March 31, 2008 and 2007 was $0.01 million and $0.2 million for the three months ended March 31, 2008 and 2007, respectively. Our capital expenditures in both 2008 and 2007 consisted primarily of computer-related equipment. Although we currently do not anticipate any significant capital expenditures in the near future, we may have a need to make additional capital expenditures related to the integration of our operations.

Net cash provided by financing activities from continuing operations during the three months ended March 31, 2008 and 2007 was $9.8 million and $6.1 million, respectively. The cash provided from financing activities during the three months ended March 31, 2008 resulted from the sale of the secured convertible debentures of $19.0 million completed on March 11, 2008. These proceeds were partially offset by the repayment of the Senior Secured and Junior Secured facilities and financing payments on the secured convertible debentures. The remaining proceeds were retained for working capital purposes. The cash provided from financing activities during the three months ended March 31, 2007 was the result of the debt and equity offerings funded primarily during the three months ended March 31, 2007. We also generated cash from the issuance of the Senior Secured and Junior Secured credit facilities. These amounts were partially offset by the repayment of debt during the three months ended March 31, 2007.

Historically, our working capital requirements have been met through proceeds of private equity offerings and debt issuances. We currently believe our working capital will be sufficient to fund the business until we start generating positive cash flow from operations, which we expect will occur starting in the second quarter of 2008. However, if our revenues do not materialize as anticipated, we may be forced to raise additional capital through issuance of new equity or increasing our debt load, or a combination of both.

Future contractual obligations as of March 31, 2008 are as follows:

                                              Operating        Debt
                                               Leases       Obligations
             Remaining nine months of 2008   $       381   $          18
             2009                                    434              24
             2010                                    442              24
             2011                                    371              24
             2012                                    272              24
             Thereafter                               -           19,028

             Total contractual obligations   $     1,900   $      19,142

From time to time, we may evaluate potential acquisitions of businesses, products, or technologies. A portion of our cash may be used to acquire or invest in complementary businesses or products or to obtain the right to use third party technologies. In addition, in making such acquisitions or investments, we may assume obligations or liabilities that may require us to make payments or otherwise use additional cash in the future.

Recent Accounting Pronouncements

On December 4, 2007, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards (SFAS) No. 141(R), Business Combinations (SFAS 141R). SFAS 141R replaces SFAS 141, Business Combinations and applies to all transactions or other events in which an entity obtains control of one or more businesses. SFAS 141R requires the acquiring entity in a business combination to recognize the acquisition-date fair value of all assets acquired and liabilities assumed including contingent consideration and those relating to minority interests. SFAS 141R also requires acquisition-related transaction expenses and restructuring costs to be expensed as incurred, rather than capitalized as a component of the business combination. SFAS 141R is effective for fiscal years beginning after December 15, 2008 and may not be applied before that date. The provisions of SFAS 141R will impact the Company if it is party to a business combination after the pronouncement has been adopted.

On December 4, 2007, the FASB issued SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements (SFAS 160). SFAS 160 amends Accounting Research Bulletin (ARB) No. 51, Consolidated Financial Statements to establish accounting and reporting standards for the non-controlling interest (previously referred to as minority interests) in a subsidiary and for the deconsolidation of a subsidiary by requiring all non-controlling interests in subsidiaries be reported in the same way (i.e., as equity in the consolidated financial statements) and eliminates the diversity in accounting for transactions between an entity and non-controlling interests by requiring they be treated as equity transactions. SFAS 160 is effective for fiscal years beginning after December 15, 2008 and may not be applied before that date. The Company does not currently expect the adoption of SFAS 160 to have a material effect on its consolidated results of operations and financial condition.

On January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurement (SFAS 157). This statement provides a single definition of fair value, a framework for measuring fair value, and expanded disclosures concerning fair value. SFAS 157 applies to other pronouncements that require or permit fair value measurements; but it does not require any new fair value measurements. The adoption of this statement did not have a material effect on the Company's financial position, results of operations, or cash flows.

In February 2008, the FASB issued FASB Staff Positions ("FSP") No. 157-1 and No. 157-2 (FSP 157-1 and FSP 157-2). FSP 157-1 removes certain leasing transactions from the scope of SFAS 157. FSP 157-2 partially defers the effective date of SFAS 157 for one year for certain non-financial assets and non-financial liabilities that are recognized at fair value on a nonrecurring basis (at least annually). The Company does not currently expect the adoption the recently issued Staff Positions to have a material effect on its consolidated result of operations and financial condition.