Summary of GLOBAL TRAFFIC NETWORK, INC.

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction with the Company's unaudited consolidated financial statements and notes thereto included elsewhere in this quarterly report on Form 10-Q and the annual audited financial statements and notes thereto included in the Company's annual report on Form 10-K for the fiscal year ended June 30, 2008, as filed with the Securities and Exchange Commission.
Executive Overview
Our Company and Its Subsidiaries
Global Traffic Network, Inc., a Delaware corporation (the "Global Delaware") was established on May 16, 2005 to be a holding company. On December 12, 2007, we formed a wholly-owned subsidiary, Global Traffic Network, Inc., a Nevada corporation ("Global Nevada"), for the purpose of changing Global Delaware's state of incorporation from Delaware to Nevada. On February 26, 2008, Global Delaware merged with and into Global Nevada, with Global Nevada remaining as the surviving corporation. Aside from the state of incorporation, there were no substantive changes to the Company's business, management, employees, headquarters, benefit plans, assets, liabilities or net worth (other than immaterial costs incident to the reincorporation) as a result of the merger. All references in this report to the "Company" refer to Global Delaware for time periods prior to the merger and to Global Nevada for time periods following the merger.
Our direct and indirect wholly-owned subsidiaries include The Australia Traffic Network Pty Limited, an Australian proprietary company organized on June 20, 1997 and registered under the Corporations Act of Australia, Global Traffic Canada, Inc., a Delaware corporation incorporated on May 20, 2005, Canadian Traffic Network ULC, an Alberta business corporation formed on July 5, 2005, Global Traffic Network (UK) Limited, a private company limited by shares, incorporated in England and Wales on October 19, 2006, Mobile Traffic Network, Inc., a Nevada corporation incorporated on March 7, 2008, and Global Traffic Network (UK) Commercial Limited (formerly The Unique Broadcasting Company Limited), a private company limited by shares, incorporated in England and Wales, that we acquired on March 1, 2009. We refer to these entities throughout this report as "Australia Traffic Network", "Global Canada", "Canadian Traffic Network", "UK Traffic Network", "Mobile Traffic Network" and "UK Traffic Network
- Commercial", respectively. Prior to our March 2006 initial public offering, Australia Traffic Network was a separate entity controlled by the same shareholder base that controlled us. On March 23, 2006, the effective date of our initial public offering, and pursuant to a Securities Exchange Agreement (the "Securities Exchange Agreement") dated December 13, 2005 among us, Australia Traffic Network and the holders of all of the outstanding ordinary shares of Australia Traffic Network, we exchanged 4,000,000 shares of our common stock and issued an aggregate of $1.4 million in promissory notes to the shareholders of Australia Traffic Network for all of the outstanding ordinary shares of Australia Traffic Network. We refer to this transaction throughout this report as the "Share Exchange." As a result of the Share Exchange, Australia Traffic Network became our wholly-owned subsidiary. The promissory notes issued in the Share Exchange (the "Share Exchange Notes"), which were intended to cover the estimated tax consequences to the Australia Traffic Network shareholders of the Share Exchange, were repaid in their entirety on March 29, 2006, the closing date of our initial public offering, out of the net proceeds from the initial public offering. References in this report to time periods prior to the May 16, 2005 establishment of Global Traffic Network, Inc. pertain solely to operations of Australia Traffic Network. We are a holding company and conduct no operations. Unless we indicate otherwise, the discussion below regarding our financial condition and results of operations presents information on a consolidated basis which assumes that the Share Exchange had been completed prior to the periods discussed such that Australia Traffic Network and Global Canada were each wholly-owned subsidiaries of ours throughout such periods. Balance sheet information for periods prior to the Share Exchange does not reflect the issuance of the Share Exchange Notes. In each case, all inter-company transactions and balances have been eliminated.
Overview of Our Business
We provide traffic and news information reports to radio and television stations in international markets. We are the largest provider of traffic information reports to radio and television stations in Australia, Canada and the United Kingdom. We also provide entertainment news information reports to radio stations in the United Kingdom, news information reports to radio stations in Canada and we believe that we maintain the largest inventory of commercial advertising embedded in radio news reports in Australia. On March 1, 2009, our United Kingdom subsidiary acquired The Unique Broadcasting Company Limited ("Unique"), which is the largest provider of traffic and entertainment news reports to radio stations in the United Kingdom. Prior to the Unique acquisition, we generated substantially all of our revenue in the United Kingdom pursuant to a government contract under which we provide service to the United Kingdom's Highways Agency. In addition, we have been exploring opportunities for expansion into several European markets but have not entered into any agreements with radio stations to provide our services.
We derive a substantial majority of our revenues from the sale to advertisers of commercial advertising inventory associated with the information reports that we provide. We obtain this advertising inventory from radio and television stations in exchange for the provision of our information reports and/or, for certain broadcasters, cash compensation. Our commercial advertising inventory is primarily comprised of ten second advertising spots embedded in information reports that are broadcast on radio or television stations; however our advertising spots in the United Kingdom vary in length depending on the advertiser and are generally 20 to 40 seconds in length. Our inventory is generally sold as advertising packages on a local, regional or national network basis. Because we market our advertising packages on a percentage-based rotation, each advertiser receives its pro rata share of our aggregate advertising inventory, which airs primarily during prime morning and afternoon drive periods. Because we consolidate our commercial advertising inventory on a network basis, we are able to offer advertisers a cost-effective, broad-based advertising vehicle that reaches mass audiences.

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The radio stations that contract to receive our traffic and news reports become members of our Radio Network. Likewise, the television stations that contract to receive our TV reports become members of our TV Network. Collectively, we refer to the members of these networks as our "network affiliates." In Australia, our operations are conducted by Australia Traffic Network and our network affiliates are currently comprised of 79 radio stations and 14 television stations. In Canada, our Canadian operations are conducted by Canadian Traffic Network and our network affiliates are currently comprised of 82 radio stations and five television stations. Our United Kingdom operations are conducted by UK Traffic Network, including through its wholly-owned subsidiary, UK Traffic Network - Commercial. In the United Kingdom, we currently provide traffic reporting services to approximately 257 radio stations and entertainment news to approximately 129 radio stations. Although we are a Nevada corporation with principal executive offices located in New York, New York, we do not provide, nor do we currently intend to provide traffic or news reports to radio or television stations in the United States. We may, however, provide services in the United States via mobile telephones through our Mobile Traffic Network subsidiary, but do not currently do so.
The Services We Provide - Radio Traffic Reports, Radio News Reports and TV Reports.
The information reports we provide to radio and television stations are divided into three main categories based on the content of the report and the medium in which it is delivered. Collectively, we refer to these reports as our "information reports."
• Radio traffic reports: Through our information-gathering infrastructure and the use of external traffic information services, we provide daily scheduled customized traffic reports to radio stations that contract to receive our services.

• Radio news reports: In July 2005, we began building upon our radio traffic reports platform by obtaining and selling advertising inventory embedded within radio news reports.

• TV reports: In 2003, we began providing regularly scheduled video traffic reports to television stations. In addition, because our aircraft are often already in the air covering traffic conditions, they are often first to arrive at the scene of a breaking news story. In a strategic effort to expand our reach into the television markets, we use this on-the-scene presence to compile video footage of such breaking news, which we provide to certain television stations that contract for our regularly scheduled TV reports in markets where we produce video.

We offer all three categories of services to our network affiliates in Australia, but prior to our acquisition of substantially all the assets of Wise Broadcasting Network Inc., we only provided radio traffic reports and TV reports to our network affiliates in Canada. Effective April 2, 2007, Canadian Traffic Network acquired substantially all the assets of Wise Broadcasting Network Inc., after which we commenced providing news, weather, sports and business information reports to certain of our Canadian network affiliate radio stations on a limited basis. As part of this acquisition, we also started providing content and selling advertising for various digital signage outlets, but this has not been, nor do we expect this to be, a material part of our business. Separately, we have an agreement pursuant to which we currently provide TV reports to five television stations in five of our Canadian markets. We intend to begin providing radio news reports and TV reports to our network affiliates in our remaining Canadian markets as our Canadian operations expand and opportunities present themselves. In the United Kingdom, we currently only provide radio traffic and entertainment news reports.
We currently obtain our Australian radio news advertising inventory from our news network affiliates in exchange for reimbursing them for the costs associated with their news departments and/or paying cash compensation. References to the provision of news reports in Australia throughout this report refer to our purchase from radio stations of news advertising inventory embedded in news reports that we then make available to our advertisers. The radio stations that have contracted with Unique currently receive traffic and entertainment news reports from third parties. Pursuant to UK Traffic Network - Commercial's agreements with these third parties, UK Traffic Network - Commercial is responsible for compensating the third parties and selling the commercial inventory received from the stations.
Our Sources of Revenue - Sale of Commercial Airtime Inventory In exchange for providing our information reports and/or, for certain broadcasters, cash compensation, our network affiliates provide us with commercial advertising inventory comprised of advertising spots embedded in information reports. We generate revenues by packaging and selling this commercial advertising inventory for cash to advertisers on a local, regional or national network basis. Our advertising spots in Australia and Canada are generally ten seconds in length, while our advertising spots in the United Kingdom vary in length depending on the advertiser and are generally 20 to 40 seconds in length. To date, we have recognized no revenue related to the bartering of goods and services and do not anticipate entering into barter transactions for the sale of our commercial advertising inventory in the future.
The substantial majority of our historical revenues have been generated from our Australian operations, including approximately $32.5 million, or 77%, of our revenues for nine months ended March 31, 2009. Of our total revenues for the period, approximately $24.6 million, or 58%, has been generated from the sale of commercial advertising inventory related to our Australian radio traffic reports. We expect to accumulate increasing amounts of commercial advertising inventory from our Australian operations as we continue to enter into agreements to receive commercial inventory associated with radio news reports in Australia. We began accumulating commercial advertising inventory from our Canadian operations in December 2005 and began generating revenue in Canada in January 2006. As of March 31, 2009, we had operations in eight Canadian cities:
Calgary, Toronto, Hamilton, Vancouver, Montreal, Edmonton, Ottawa and Winnipeg. We commenced operations in our eighth market, Ottawa in January 2009.

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As we generate increased amounts of commercial airtime inventory in Australia and Canada, we expect to sell such inventory in the same manner as we have sold commercial advertising inventory generated from our provision of radio traffic reports in Australia. Our experience indicates, however, that there is generally a delay between acquiring commercial advertising inventory from new or expanded operations and the realization of increasing revenue from the sale of such inventory. We experienced such a delay when we added Austereo as a network affiliate of our Radio Network in fiscal year 2004. Although the additional commercial advertising inventory we acquired from Austereo led to increased revenues during fiscal year 2004, the full impact on revenues from the sale of such inventory was not realized until fiscal year 2005. We expect to experience similar delays in realizing revenues from the sale of increased commercial advertising inventory attributable to radio news reports in Australia and our provision of radio traffic and information reports and TV reports in Canada.
Effective July 1, 2008, UK Traffic Network began providing service under a government contract with the United Kingdom's Highways Agency, which is an executive agency of the United Kingdom Department for Transport responsible for operating, maintaining and improving the strategic trunk road network in England on behalf of the Secretary of State for Transport. Under the terms of the contract, the Company provides traffic radio reports via digital audio broadcasting stations throughout England, with a possible expansion of the service to Scotland, Wales and Northern Ireland. Although similar to our core business in that it involves broadcasting traffic reports over radio stations, our contract with the Highways Agency differs in that it is not advertising supported. Instead of receiving commercial airtime inventory, we are paid a fee by the Highways Agency to provide our service. Effective March 1, 2009, we acquired Unique and commenced operations of a radio traffic and entertainment news network in the United Kingdom similar to the networks we operate in Australia and Canada.
Our Expenses
Our expenses are primarily comprised of three categories: operating expenses, selling expenses and general and administrative expenses. Operating expenses consist of station compensation and all expenses related to the gathering, producing, and broadcasting of our information reports, including aviation costs and expenses and salaries and benefits for our on-air personalities who deliver the information reports. Station compensation consists of the reimbursement of expenses incurred by stations which we would otherwise incur in providing services to the station, as well as any additional cash consideration paid to a network affiliate in exchange for commercial advertising inventory. We may incur increased expenses in the form of station compensation in connection with adding certain broadcasters to our base of network affiliates. As mentioned above, our experience indicates that in such instances there is generally a delay between acquiring commercial advertising inventory from new network affiliates and the realization of increased revenue from the sale of such inventory. Aviation costs relate to the costs of our airborne surveillance, an integral part of our information gathering, and consist both of payments to outside vendors to lease aircraft, as well as the operating costs (including fuel, maintenance, and insurance costs) associated with the operation of our fleet of owned aircraft. Our fleet of leased and owned aircraft currently consists of:

                                   United Kingdom          Australia              Canada
                                 Leased      Owned      Leased     Owned     Leased     Owned

          Fixed Wing Aircraft       0           2           2         1         2          0
          Helicopters               0           0           0         4         0          7

Selling expenses include salaries and benefits for our sales personnel and commissions paid on sales of our commercial airtime inventory. General and administrative expenses consists of corporate overhead, including administrative salaries, real property lease payments, salaries and benefits for our corporate executive officers, expense related to non-cash equity compensation and legal and accounting fees as well as expense from doubtful accounts. Expenses other than selling expenses are generally spread evenly over the applicable fiscal year.
Basis of Presentation
We have derived substantially all of our revenues to date from our Australian, Canadian and United Kingdom operations. However, the financial information contained in this report, including the financial statements, report our financial condition and results of operation in United States dollars and, unless stated otherwise, all references to dollar amounts refer to United States dollars. Income statement amounts are converted from Australian dollars, Canadian dollars or British pounds to United States dollars based on the average exchange rate for the period covered. Assets and liabilities are converted based on the exchange rate as of the applicable balance sheet date. Equity is converted based on the exchange rate in place at the time of the applicable investment. Foreign currency translation adjustments occur when the income statement and balance sheet are converted at different exchange rates and are recognized as other comprehensive income or loss in the financial statements. For reference, the exchange rates to United States dollars from Australian dollars, Canadian dollars and British pounds applicable to our income statement data for each of the three months periods ended March 31, 2009 and 2008, December 31 and September 30, 2008 and 2007, and applicable to our balance sheet data as of March 31, 2009 and June 30, 2008 are set forth below:

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