The following Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Unaudited Consolidated Financial Statements and Notes thereto appearing elsewhere in this report.

Cautionary Note Regarding Forward-Looking Statements

The Securities and Exchange Commission ("SEC") encourages companies to disclose forward-looking information so that investors can better understand a company's future prospects and make informed investment decisions. Certain statements contained herein may be deemed to constitute "forward-looking statements."

Words such as "may," "anticipate," "estimate," "expects," "projects," "future," "intends," "will," "plans," "believes" and words and terms of similar substance used in connection with any discussion of future operating or financial performance, identify forward-looking statements. All forward-looking statements are management's present expectations of future events and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include, among other things:

† our potential inability to further identify, develop and achieve commercial success for new products;

† the possibility of delays in product development;

† the development of competing distribution products;

† our ability to protect our proprietary technologies;

† patent-infringement claims;

† risks of new, changing and competitive technologies;

† the potential need for additional capital to fund our technology development programs; and

† other factors discussed elsewhere herein under the heading "Risk Factors."

In light of these assumptions, risks and uncertainties, the results and events discussed in the forward-looking statements contained herein might not occur. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this filing. We are not under any obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable law. All subsequent forward-looking statements attributable to management or to any person authorized to act on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

Critical Accounting Policies and Estimates

The following discussion and analysis of the financial condition and results of operations are based on the unaudited consolidated financial statements and notes to unaudited consolidated financial statements contained in this report that have been prepared in accordance with the rules and regulations of the SEC and do not include all the disclosures normally required in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates that affect the reported amounts of assets, liabilities, sales and expenses, and related disclosures of contingent assets and liabilities. We base these estimates on historical results and various other assumptions believed to be reasonable, all of which form the basis for making estimates concerning the carrying values of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates.

Our significant accounting policies are described in Note 2 to the consolidated financial statements presented in our Annual Report on Form 10-K for the year ended December 31, 2008. Our critical accounting policies are described in Management's Discussion and Analysis of Financial Condition and Results of Operations in the Annual Report. Our significant and critical accounting policies have not changed significantly since the filing of our Annual Report.

Overview

We are a leading provider of digital technology services that enable the electronic delivery of advertisements, syndicated programs, and video news releases from advertising agencies and other content providers to traditional broadcasters, online publishers and other media outlets. Our primary source of revenue is the delivery of television and radio advertisements, or spots, which are typically delivered digitally but sometimes physically. We offer a digital alternative to the dub-and-ship delivery of spots. We generally bill our services on a per transaction basis. Our business can be impacted by several factors including the financial stability of our customers, the overall advertising market, new emerging digital technologies, the increasing trend towards delivering high definition data files, and the continued transition from analog to digital broadcast signal transmission.

Part of our business strategy is to acquire similar and/or ancillary businesses that will increase our market penetration and, in some cases, result in operating synergies. Consistent with this business strategy we have recently completed the following transactions:

Merger with Enliven

† On October 2, 2008, we acquired all of the issued and outstanding shares of Enliven Marketing Technologies Corporation's ("Enliven") common stock we did not previously own in exchange for 2.9 million shares of our common stock. In the aggregate, including shares of Enliven previously held and an estimated 0.1 million shares that will be issued related to a preacquisition earnout, the total purchase price is estimated to be approximately $75 million. Enliven has two principal operating units, Unicast Communications Corp. ("Unicast") and Springbox Ltd. ("Springbox"). Unicast offers an online advertising campaign management product and Springbox is an Internet based marketing firm.

Purchase of Vyvx

† On June 5, 2008, we completed the acquisition of substantially all the assets and certain liabilities of the Vyvx advertising services business ("Vyvx"), including its distribution, post-production and related operations, from Level 3 Communications, Inc. ("Level 3"). Vyvx operated an advertising services and distribution business similar to our video and audio content distribution business. The acquisition was completed pursuant to an asset purchase agreement among Level 3, certain affiliates of Level 3 and us for a purchase price of approximately $135 million in cash.

The Company's business is seasonal as a large portion of its revenues follow the advertising patterns of its customers. Revenues tend to be lowest in the first quarter, build throughout the year and are generally the highest in the fourth quarter. Further, the Company's revenues are affected by political advertising, which peaks every other year consistent with the national, state and local election cycles.

Results of Operations



Three Months Ended March 31, 2009 vs. Three Months Ended March 31, 2008



The following table sets forth certain historical financial data (in thousands,
except percentages).



                                                            % Change    As a % of Revenue
                                    Three Months Ended        2009      Three Months Ended
                                         March 31,            vs.           March 31,
                                     2009         2008        2008       2009        2008
Revenues                          $    41,412   $  29,217         42 %    100.0 %     100.0 %
Costs and expenses:
Cost of revenues (a)                   18,699      11,665         60       45.2        39.9
Sales and marketing                     2,584       1,799         44        6.2         6.2
Research and development                1,110       1,138         (2 )      2.7         3.9
General and administrative              6,072       4,188         45       14.7        14.3
Depreciation and amortization           6,273       3,291         91       15.1        11.3
Total costs and expenses               34,738      22,081         57       83.9        75.6

Income from operations                  6,674       7,136         (6 )     16.1        24.4

Other (income) expense:
Interest expense                        4,008         887        352        9.7         3.0
Unrealized loss on derivative
warrant                                     -       1,093                     -         3.7
Interest income and other                 (35 )      (124 )      (72 )     (0.1 )      (0.4 )

Income before income taxes              2,701       5,280        (49 )      6.5        18.1
Provision for income taxes              1,108       2,113        (48 )      2.7         7.3

Net income                        $     1,593   $   3,167        (50 )      3.8        10.8

Revenues. For the three months ended March 31, 2009, revenues increased $12.2 million, or 42%, as compared to the same period in the prior year. The increases were $10.4 million and $1.8 million from the Video and Audio Content Distribution and the Other segments, respectively. The increase in the Video and Audio Content Distribution segment was primarily due to (i) a $7.2 million increase in total HD revenue ($10.9 million in 2009 vs. $3.7 million in 2008),
(ii) incremental non-HD revenues from the June 2008 acquisition of Vyvx, and
(iii) $2.4 million in revenue from the October 2008 acquisition of Unicast, partially offset by (iv) a decrease in the number of deliveries on the Company's legacy business (i.e., excluding Vyvx and Enliven) and (v) a $1.1 million decrease in political advertising in 2009 that had occurred in connection with the 2008 national, state and local elections. The $1.8 million increase in the Other segment relates to the addition of Springbox (acquired with Unicast in October 2008).

Cost of Revenues. For the three months ended March 31, 2009, cost of revenues increased $7.0 million, or 60%, as compared to the same period in the prior year. As a percentage of revenues, cost of revenues increased to 45.2% in the current period as compared to 39.9% in the same period in the prior year. The increase, on a percentage basis, was primarily attributable to (i) duplicative infrastructure costs associated with the acquisition of Vyvx and (ii) the inclusion of Springbox in the Company's results as Springbox has much lower gross profit margins than the remainder of the Company. The Company anticipated its acquisition of Vyvx would increase its cost of revenues on a percentage basis for a period of time prior to fully implementing planned cost synergies. In March 2009, the Company successfully completed the transition of all the former Vyvx customers over to its Irving, Texas network operations center ("NOC") and eliminated quaterly costs of $0.6 million associated with the former Vyvx NOC in Tulsa, Oklahoma.

Sales and Marketing. For the three months ended March 31, 2009, sales and marketing expense increased $0.8 million, or 44%, as compared to the same period in the prior year. The increase was attributable to the addition of Unicast. Sales and marketing efficiencies gained, on a percentage basis, from the acquisition of Vyvx were offset by increases in costs associated with Unicast.

Research and Development. For the three months ended March 31, 2009, research and development costs were substantially the same as compared to the same period in the prior year. A $0.5 million increase in research and development costs associated with Unicast was offset by capitalizing certain costs related to software development.

General and Administrative. For the three months ended March 31, 2009, general and administrative expense increased $1.9 million, or 45%, as compared to the same period in the prior year. The increase was primarily attributable to higher stock-based compensation ($1.0 million) and the inclusion of Unicast and Springbox ($0.7 million) in the Company's consolidated results.

Depreciation and Amortization. For the three months ended March 31, 2009, depreciation and amortization expense increased $3.0 million, or 91%, as compared to the same period in the prior year. The increase was primarily attributable to (i) amortization of certain intangible assets acquired in the Vyvx and Enliven transactions ($1.6 million), (ii) greater amounts of depreciation associated with (a) the increase in machinery and network equipment ($0.6 million) and (b) the shortening of machinery and network equipment depreciable lives in the fourth quarter 2008 ($0.2 million), and (iii) more amortization ($0.5 million) associated with the increase in capitalized software.

Interest Expense. For the three months ended March 31, 2009, interest expense increased $3.1 million as compared to the same period in the prior year. The increase was due to (i) increased borrowings and amortization of loan fees in connection with the acquisition of Vyvx, and (ii) a higher weighted average interest rate during the current period. Our weighted average interest rate increased as a result of borrowing $65 million under the Bridge Loan facility in connection with funding the Vyvx acquisition in June 2008. Based on the expected term of the Bridge Loan facility we accrued interest at an annual effective rate of 13.3% (excluding the amortization of fees and expenses). The Bridge Loan facility was refinanced in March 2009 with proceeds from (i) a $40 million increase in the Term Loans, (ii) $20 million of borrowings under the Revolving Loans and (iii) cash on hand. Excluding the amortization of fees and expenses, the weighted average annual interest rate on our debt was 6.5% at March 31, 2009 vs. 9.0% at December 31, 2008.

Unrealized Loss on Derivative Warrant. For the three months ended March 31, 2008, the fair value of the Company's Enliven warrant decreased by $1.1 million. The warrant had met the definition of a derivative instrument which requires changes in the fair value of the warrant to be recorded in the statement of income. In connection with the October 2008 acquisition of Enliven, the Company's Enliven warrant was effectively canceled.

Interest Income and Other. For the three months ended March 31, 2009 and 2008, interest income and other was $0.0 million and $0.1 million, respectively. Interest income represents earnings from the investment of cash on hand.

Provision for Income Taxes. For the three months ended March 31, 2009 and 2008 the provision for income taxes was 41% and 40%, respectively, of income before income taxes. The provisions for both periods differ from the expected federal statutory rate of 35% for the 2009 period and 34% for the 2008 period, as a result of state income taxes and certain non-deductible expenses. The Company expects its taxable income (before the utilization of net operating loss carryforwards) to remain at levels which will result in an overall 35% federal income tax rate.

Financial Condition



The following table sets forth certain major balance sheet accounts of the
Company as of March 31, 2009 and December 31, 2008 (in thousands):



                                            March 31,     December 31,
                                              2009            2008
Assets:
Cash and cash equivalents                  $    10,793   $       17,180
Accounts receivable, net                        36,952           42,971
Property and equipment, net                     37,684           37,980
Deferred income taxes, net                       7,152            7,777
Goodwill and intangible assets, net            358,967          361,769

Liabilities:
Accounts payable and accrued liabilities        14,292           22,398
Debt                                           164,762          173,137

Stockholders' equity                           271,969          269,518

Cash and cash equivalents fluctuate with operating, investing and financing activities. In particular, cash and cash equivalents fluctuate with
(i) operating results, (ii) the timing of payments, (iii) capital expenditures,
(iv) acquisition and investment activity, (v) borrowings and repayments of debt, and (vi) capital raising activity. The decrease in cash and cash equivalents primarily relates to cash used in connection with refinancing the Bridge Loan in March 2009.

Accounts receivable generally fluctuate with the level of revenues. As revenues increase, accounts receivable tend to increase. Days' sales outstanding were 80 days and 76 days as of March 31, 2009 and December 31, 2008, respectively. Days sales outstanding were higher at March 31, 2009 due to increased accounts receivable resulting from higher revenues in the last month of the quarter.

Property and equipment purchases tend to increase with the level of revenues and as a result of acquisition activity. For the three months ended March 31, 2009 and 2008, purchases of property and equipment were $0.9 million and $0.5 million and capitalized costs of developing software were $2.1 million and $1.1 million, respectively.

Goodwill and intangible assets decreased slightly from December 31, 2008 as a result of amortization of intangible assets, partially offset by nominal increases to goodwill related to the Enliven acquisition.

Accounts payable and accrued liabilities decreased $8.1 million during the three months ended March 31, 2009. The decrease relates primarily to (i) the timing of when certain payments are made and (ii) paying certain liabilities incurred in connection with the purchase of Vyvx.

Debt decreased $8.4 million during the three months ended March 31, 2009 as a result of the Company (i) using $5.0 million of cash on hand to retire a portion of the Bridge Loan in connection with its refinancing in March 2009 and
(ii) making scheduled principal payments of $3.4 million under the Senior Credit Facility.

Stockholders' equity increased $2.5 million during the three months ended March 31, 2009. The increase relates primarily to reporting net income of $1.6 million and recording stock compensation of $1.1 million, partially offset by an adjustment to the Enliven purchase accounting.

Liquidity and Capital Resources



The following table sets forth a summary of the Company's statements of cash
flows (in thousands):



                                                         Three Months Ended
                                                             March 31,
                                                          2009         2008
Operating activities:
Net income                                             $     1,593   $  3,167
Depreciation and amortization                                6,273      3,291
Unrealized loss on derivative warrant investment                 -      1,093
Deferred income taxes and other                              1,712      1,705
Changes in operating assets and liabilities, net            (2,402 )   (2,207 )
Total                                                        7,176      7,049

Investing activities:
Purchases of property and equipment                           (926 )     (541 )
Capitalized costs of developing software                    (2,077 )   (1,100 )
Total                                                       (3,003 )   (1,641 )

Financing activities:
Borrowings (repayments) of debt, net                       (10,611 )   18,496
Other                                                           77         47
Total                                                      (10,534 )   18,543

Effect of exchange rate changes on cash                        (26 )        2

Net increase (decrease) in cash and cash equivalents   $    (6,387 ) $ 23,953

The Company generates cash from net income after adding back certain non cash expenditures such as depreciation and amortization. This cash is typically used to purchase property and equipment, develop software, make strategic investments and to acquire similar and/or ancillary businesses. Generally, completing acquisitions requires additional capital resources, such as borrowings from a credit facility and/or issuing equity instruments.

For the three months ended March 31, 2009, the Company generated $7.2 million from operating activities. This cash was used to repay a portion of the Company's debt, develop internally used software and purchase property and equipment.

At March 31, 2009, the Company had a $175 million Senior Credit Facility of which $10 million was available for additional borrowings. See Note 4 of the Consolidated Financial Statements.

The Company expects to use cash in connection with (i) scheduled payments under its existing debt obligations, (ii) the organic growth of its business, and
(iii) the purchase of property and equipment in the normal course. Further, the Company may use its cash in connection with the acquisition of similar and/or ancillary businesses.

As of March 31, 2009, the Company's sources of liquidity included
(i) $10.8 million of cash on hand, (ii) $10.0 million of availability under the Senior Credit Facility, and (iii) the potential issuance of additional debt and/or equity. In addition, the Company has an effective shelf registration statement on file with the SEC for the issuance of (i) up to 3.5 million shares of its common stock and (ii) up to $25 million of preferred stock. Accordingly, as long as the registration statement remains effective, the Company can sell shares of its common and preferred stock in the market up to the limits specified in the registration statement.

The Company believes its (i) cash on hand and (ii) cash generated from operating and financing activities will satisfy its capital needs for the next 12 months.

Off-Balance Sheet Arrangements

Other than its operating leases the Company is not a party to any off-balance sheet arrangement that management believes is reasonably likely to have a material, current or future, effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.