Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Certain statements made in this Quarterly Report on Form 10-Q are "forward looking" statements (within the meaning of the Private Securities Litigation Reform Act of 1995, as amended). Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results, performance, or achievements of the Company to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, the Company's actual results could differ materially from those set forth in the forward-looking statements. See Part II Item 1A "Risk Factors" below and Item I Part 1A in the Company's Annual Report on Form 10-K for the year ended December 31, 2008, for a description of certain factors that might cause such a difference.

In August 2008, the Company transferred its 76% ownership interests in TTX (US) LLC and TTX Limited (collectively, "Teletrax"), its digital video monitoring services segment, to Philips Electronics North America Corporation and Koninklijke Philips Electronics N.V., respectively (collectively, "Philips"). In October 2008, the Company sold the client list of Medialink UK Limited ("Medialink UK"), its UK-based media communications services business, to World Television Group plc ("World") and subsequently wound down the operation. The unaudited consolidated financial statements contained in this Form 10-Q reflect both Teletrax and Medialink UK as discontinued operations in all periods presented.

The following discussion and analysis (in thousands of dollars) should be read in conjunction with the Company's unaudited consolidated financial statements and notes thereto.

Results of Operations

Three months ended March 31, 2009, compared to three months ended March 31, 2008

Revenues for the three months ended March 31, 2009, decreased by $1,678, or 34.5%, as compared to the 2008 period due primarily to a decline in the volume of work.

Direct costs decreased by $889 in the first quarter of 2009 primarily as a result of a decline in the volume of work. As a percentage of revenue, direct costs decreased to 39.2% from 44.0% in the comparable 2008 quarter primarily as a result of cost cutting initiatives.

Selling, general, and administrative ("SG&A") expenses in the first quarter of 2009 decreased by $678 as compared to the 2008 period, but as a percentage of revenue increased to 98.8% in the 2009 quarter from 78.6% in the 2008 quarter. SG&A expenses decreased as a result of cost cutting initiatives, including lower payroll costs resulting from headcount reductions, a decrease in occupancy costs as a result of consolidating certain offices, and a reduction in both marketing and non-billable travel and entertainment expenses.

There was no depreciation expense in the first quarter of 2009 due to an impairment charge incurred in 2008 that resulted in no net book value in the Company's fixed assets as of December 31, 2008. Depreciation expense was $239 for the comparable quarter in 2008.

The Company incurred a charge for exit activities of $81 in the first quarter of 2009 related to vacating the remaining portion of its office location in Norwalk, CT. The Company incurred a charge for exit activities of $119 in the first quarter of 2008 related to vacating a portion of its facility in New York.

The Company had an operating loss of $1,289 in the first quarter of 2009 as compared to an operating loss of $1,455 in the comparable quarter in 2008.

The Company had net interest expense of $89 in the first quarter of 2009, as compared to net interest expense of $105 in the 2008 quarter.

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The results of operations for the three months ended March 31, 2009, include a loss from discontinued operations of $120, which consisted of a loss from operations of $90 and a loss on disposal of $30 related to Medialink UK. The results of operations for the three months ended March 31, 2008, include a loss from discontinued operations of $1,057, which consisted of a loss from operations of $825 and $232 for Teletrax and Medialink UK, respectively.

Financial Condition

The Company continues to finance its operations and capital investment requirements from its existing cash balances, which totaled $4,686 at March 31, 2009. Working capital in the first three months of 2009 decreased by $1,491 primarily as a result of the Company funding operating losses during the period.

Cash flows from operating activities of continuing operations increased by $419 during the first three months of 2009 as compared to the comparable period in 2008 due primarily to a Federal tax refund of $574 received in the 2009 period as compared to an increase in prepaid and refundable taxes of $316 in the 2008 period. Such increase was partially offset by a decrease of $463 in cash generated from operations.

The Company expects to incur operating losses throughout 2009 as revenues continue to decline from the prior year in the current economic climate. Revenues in the first quarter of 2009 of $3,182 decreased by $1,678 as compared to the comparable quarter in 2008, and the Company currently forecasts a decline in revenues in the second quarter of 2009 of approximately $1,400 from the comparable quarter in 2008. In addition, during the remainder of 2009 the Company expects to spend approximately $232 related to existing severance obligations to terminated employees that are included as a component of "other liabilities," $375 related to vacant real estate obligations, $100 for costs associated with the disposal of Medialink UK, and $150 for capital improvements for equipment modernization and replacement.

The Company continues to pursue various strategic alternatives, including obtaining additional financing or investment from potentially interested third-party investors or buyers. The Company also continues to take action to reduce its costs, and has completed, and will continue to initiate, various measures in an effort to achieve profitability. If the Company is not successful in these efforts it may not be able to finance its operations and commitments with its working capital, and therefore may not be able to continue as a going concern, which would result in the Company's inability to realize the carrying value of its assets and liquidate its liabilities.

Critical Accounting Policies

Management must make certain estimates and assumptions in preparing the financial statements of the Company. Certain of these estimates and assumptions relate to matters that are inherently uncertain as they pertain to future events. Management believes that the estimates and assumptions used in preparing the financial statements of the Company were the most appropriate at that time, although actual results could differ significantly from those estimates under different conditions. Note 2, "Summary of Significant Accounting Policies," to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2008, provides a detailed discussion of the various accounting policies of the Company. In addition, a summary of critical accounting policies is included in Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's Annual Report on Form 10-K for the year ended December 31, 2008. There have been no significant changes to the critical accounting policies previously disclosed.