Forward Looking Statements

Certain information included in this Quarterly Report on Form 10-Q (including Management's Discussion and Analysis of Financial Condition and Results of Operations regarding revenue growth, gross profit margin and liquidity) constitute forward-looking statements that involve a number of risks and uncertainties. Forward-looking statements may be identified by the use of forward-looking words such as "may," "will," "expects," "intends," "anticipates," "estimates" or "continues" or the negative thereof or variations thereon or comparable terminology. The following factors are among the factors that could cause actual results to differ materially from the forward-looking statements: our ability to retain and grow our customer base of retailers participating in the Pay-Per-Transaction system (the "PPT System") ("Participating Retailers") and customers for our business intelligence software and services; the financial stability of the Participating Retailers and their performance of their obligations under our PPT System; business conditions and growth in the video industry and general economic conditions, both domestic and international; customer demand for movies in various media formats; competitive factors, including increased competition, expansion of revenue sharing programs other than the PPT System by motion picture studios or other licensees or owners of the rights to certain video programming content ("Program Suppliers") and new technology; the continued availability of home entertainment content products (DVDs, Blue-ray Discs, etc.) (collectively "Units") leased/licensed to home video specialty stores and other retailers from Program Suppliers; the loss of significant Program Suppliers; our ability to successfully develop and market new services, including our business intelligence services, to create new revenue streams; and the development of similar business intelligence services by competitors with substantially greater financial and marketing resources than our company. This Quarterly Report on Form 10-Q further describes some of these factors. In addition, some of the important factors that could cause actual results to differ from our expectations are discussed in Item 1A to our fiscal 2009 Form 10-K, which was filed with the Securities and Exchange Commission on June 11, 2009. These risk factors have not significantly changed since the filing of the fiscal 2009 Form 10-K.

Business Trends

Our corporate structure includes separate Pay-Per-Transaction ("PPT") and Advanced Media and Information ("AMI") operating divisions and, accordingly, we report certain financial information by individual segment under this structure.

Our PPT Division manages our business operations that deliver Units and related rental and sales information for the content to home video specialty stores and other retailers, on a revenue sharing basis. We lease product from various suppliers, typically motion picture studios. Under our PPT System, retailers sublease that product from us and rent it to consumers. Retailers then share a portion of the revenue from each retail rental transaction with us and we share a portion of the revenue with the studio. Since we collect, process and analyze rental and sales information at the title level, we report that information to both the studio and the respective retailers.

Our PPT Division also includes our Traditional and Digital Direct Revenue Sharing ("DRS") services, which encompasses the collection, tracking, auditing and reporting of transaction and revenue data generated by DRS retailers, such as Blockbuster Entertainment, Movie Gallery and Netflix, to our respective DRS clients, for rented entertainment content received both on physical product as well as digitally, under established agreements on a fee for service basis.

Our AMI Division manages our Essentials Suite™ of business information services. Our Essentials Suite™ software and services, offered primarily on a recurring subscription basis, provide unique data collection, management, analysis and reporting functions, resulting in business information valuable to our clients.

The PPT Division

The financial results from the PPT Division continue to be affected by the changing dynamics in the home video rental market as well as overall economic trends and conditions. This market is highly competitive and influenced greatly by consumer spending patterns and behaviors. The end consumer has a wide variety of choices from which to select their entertainment content and can easily shift from one provider to another. Some examples include renting Units of product from our Participating Retailers or other Retailers, purchasing previously viewed Units from our Participating Retailers or other Retailers, ordering product via online subscriptions and/or online distributors (mail delivery), renting or purchasing product from kiosk locations, subscribing to at-home movie channels, downloading or streaming content via the Internet, purchasing and owning the Unit directly, or selecting an at-home "pay-per-view" or "on demand" option from a satellite or cable provider. Our PPT system focuses on the traditional "brick and mortar" retailer. We believe that our system successfully addresses the many choices available to consumers and affords our Participating Retailers the opportunity to stock their stores with a wider selection of titles and a greater supply of popular box office releases. Many of our arrangements are structured so that the Participating Retailers pay minimal upfront fees and lower per transaction fees in exchange for ordering Units of all titles offered by a particular Program Supplier (referred to as "output" programs). Since these programs usually result in more overall Units rented, our Participating Retailers' revenue and the corresponding share with the studios also increase.

In an effort to stabilize and maintain our current level of overall PPT revenue and earnings, we have implemented strategies to obtain new Participating Retailers, as well as assist in the retention and growth of our current Participating Retailers. The popularity of other choices an end consumer has to obtain entertainment content has been growing and our Participating Retailers' market share has been negatively affected. Thus, for the foreseeable future, we expect their market share to experience low to mid single digit annual percentage declines and we are evaluating other initiatives to offset the effect this trend has on our PPT revenue and earnings.

We continue to be in good standing with our Program Suppliers and we make on-going efforts to strengthen those business relationships through enhancements to our current service offerings and the development of new service offerings, such as the addition of Blu-ray product.

We are also continually seeking to develop business relationships with new Program Suppliers. Our relationships with Program Suppliers typically may be terminated without cause upon thirty days' written notice by either party.

AMI and Other Divisions

We continue to allocate significant resources towards our business information service offerings, both those services that are currently operational as well as those that are in various stages of development. Our suite of business information services has been well received in the various targeted markets to date, as our offerings fit well with the needs identified by those market participants. Our Essentials™ business information service offerings that are fully operational and no longer in significant stages of development, realized a revenue increase of $2.5 million, or 40.2%, in the first six months of fiscal 2010 compared to the first six months of fiscal 2009. During the second quarter of fiscal 2010, we completed a long-term contract and recognized $1.1 million of revenue, which had previously been deferred.

The AMI Division lines of business which contribute most of the revenues currently are Box Office Essentials™, which reports domestic and international gross receipt theatrical ticket sales, and Multi-Screen Essentials™, which includes OnDemand Essentials™, which measures and reports anonymous video on demand ("VOD") usage data, TV Essentials™ and Mobile Essentials™. We are making significant investments in TV Essentials™, which provides our clients with the ability to analyze anonymous audience viewing of programming and advertising across linear and interactive television and Digital Video Recorder ("DVR"), and have begun generating corresponding revenues.

Box Office Essentials™ primarily reports domestic and international theatrical gross receipt ticket sales to motion picture studios and movie theater owners. We provide studios with access to box office performance data pertaining to specific motion pictures and movie theater circuits, both real-time and

historical. Data is currently collected for virtually all movie theaters in North America, Guam and Puerto Rico and is primarily obtained via electronic connectivity to theater box offices. We continue to make on-going efforts to strengthen our business relationships with our existing clients as well as focus on our syndication services and international expansion plans and recently expanded into Russia.

OnDemand Essentials™ provides multi-channel operators, content providers (including broadcast/cable networks and studios) and advertisers with a transactional tracking and reporting system to view and analyze the viewership of on demand content. We currently have over 100 OnDemand Essentials™ service clients and 33 operator partners representing over 70 million set-top boxes ("STBs"), including the top 25 cable operators that offer video on demand programming. One of our new operator partners is Rogers Communications, the largest multi-channel provider in Canada, opening up further sales opportunities. We are well positioned to continue to grow this business by adding new clients and adjusting rates as the business activity increases and as advanced advertising technology is rolled out by the industry.

TV Essentials'™ comprehensive suite of research tools enables customers to analyze anonymous audience viewing of programming and advertising across linear and interactive television, video on demand and DVR across all three TV platforms - cable, satellite and telecommunications. Utilizing proprietary technology to process massive amounts of click-stream data, our TV Essentials™ system is able to aggregate and report second-by-second information from 100 million digital STBs. Today, based on data from our current operator partners, we are translating viewing patterns from over 14 million digital STBs into insights for our clients. We have announced 7 national network subscribers and expect continued success and growth.

Our development of TV Essentials™ has yielded commercial relationships with AT&T and, recently, a trial agreement with Charter Communications. We are making progress in expanding our data partners and also have a relationship with DISH Network ("Dish") to provide TV Essentials™ for its internal use for a subscription fee as we work toward commercialization of that relationship. The Dish relationship has resulted in the creation of our DVR and iTV reporting, which can be rolled out to other partners once the data to drive those services becomes available to us. We are also working on securing national ad occurrence data in order to launch the ad module of TV Essentials™ services and are building research capabilities to begin creating syndicated products for our measurement service.

Mobile Essentials™ has been developed to provide a comprehensive system to track usage and consumer dynamics in the mobile sector including video, video clips, games, music, mobile web, small message servicing ("SMS") data (also known as text messaging), ring tones, wallpaper and other mobile content. We recently announced our first Mobile Essentials™ customer, NBC Universal ("NBCU"). In August 2009, FLO TV and Rentrak announced the launch of the first comprehensive audience measurement and reporting system for multicast mobile TV in the U.S. To serve the video Internet space, we have launched Internet TV Essentials™ and Digital Download Essentials. We have announced a trial with NBCU for Digital Download Essentials and have another content provider as a beta user of Internet TV Essentials™. Our multi-platform product is in active development and will serve as the link tying all products together as we work toward measuring and comparing entertainment consumption across multiple platforms, which will help us expand our Multi-Screen Essentials™ suite of services.

We intend to continue to invest in our existing, as well as new, business information services in the near-term as we expand the markets we serve and our service lines. The cost of these investments will likely lower our earnings in the short-term. For example, during the first six months of fiscal 2010, we invested heavily in our Multi-Screen Essentials™ line of businesses, including expansion of our executive, sales and marketing team located in New York City, New York, which reduced our gross margin as a percentage of sales. Our income from operations within our AMI Division has increased due to completion of the long-term contract noted above. Longer-term, we believe we will be able to leverage these investments in order to provide significant future revenue and earnings streams and contribute to our overall success.

Sources of Revenue

Revenue by segment includes the following:

PPT Division

• transaction fees generated when retailers rent Units to consumers; additionally, certain arrangements include guaranteed minimum revenues from our customers; we recognize the guaranteed minimum revenue on the street (release) date in accordance with ASC 926-10, "Entertainment - Films - Overall," provided all other revenue recognition criteria are met;

• sell-through fees generated when retailers sell previously-viewed rental Units to consumers and/or buy-out fees generated when retailers purchase Units at the end of the lease term;

• Traditional and Digital DRS fees from data tracking and reporting services provided to Program Suppliers; and

• Other fees, which primarily include order processing fees generated when Units are ordered by, and distributed to, retailers.

AMI Division

Subscription fee revenues from:

• Box Office Essentials™;

• Home Entertainment Essentials™; and

• Multi-Screen Essentials™, which includes OnDemand Essentials™, TV Essentials™ and Mobile Essentials™.

Other Division

• revenue relating to other products and/or services that are still in the development stage, including AdEssentials™, which will capture census-level data regarding viewing patterns of on demand advertising for reporting to marketers and advertising agencies.

Results of Operations

Certain information by segment was as follows (in thousands):



                                              PPT        AMI     Other(1)        Total
    Three Months Ended September 30, 2009
    Sales to external customers             $ 16,299   $ 5,024   $      -       $ 21,323
    Gross margin                               4,812     3,609          -          8,421
    Income (loss) from operations              2,951     1,354      (3,803 )         502

    Three Months Ended September 30, 2008
    Sales to external customers             $ 21,240   $ 3,087   $      -       $ 24,327
    Gross margin                               5,543     2,433          -          7,976
    Income (loss) from operations              3,521       282      (2,524 )       1,279

    Six Months Ended September 30, 2009
    Sales to external customers             $ 34,365   $ 8,595   $      -       $ 42,960
    Gross margin                               9,951     5,870          -         15,821
    Income (loss) from operations              6,077     1,132      (6,595 )         614

    Six Months Ended September 30, 2008
    Sales to external customers             $ 43,550   $ 6,130   $      -       $ 49,680
    Gross margin                              11,647     4,870          -         16,517
    Income (loss) from operations              7,440       560      (5,040 )       2,960

(1) Includes revenue and expenses relating to products and/or services that are still in early stages, as well as corporate expenses and other expenses that are not allocated to a specific segment.

Revenue

Revenue decreased $3.0 million, or 12.3%, to $21.3 million in the three-month period ended September 30, 2009 (the "second quarter of fiscal 2010") compared to $24.3 million in the three-month period ended September 30, 2008 (the "second quarter of fiscal 2009"). Revenue decreased $6.7 million, or 13.5%, to $43.0 million in the six-month period ended September 30, 2009 compared to $49.7 million in the six-month period ended September 30, 2008. The decreases in revenue were primarily due to lower PPT Division revenues as described more fully below.

PPT Division

Transaction fees and sell-through fees are the largest components of our PPT
Division revenue. The remainder of our PPT Division revenue includes DRS fees
and other as detailed in the following tables (dollars in thousands):



                            Three Months Ended Sept. 30,       Dollar
                              2009               2008          Change       % Change
     Transaction fees    $        10,695    $        14,260   $ (3,565 )       (25.0 )%
     Sell-through fees             2,538              3,175       (637 )       (20.1 )%
     DRS                           1,318              1,424       (106 )        (7.4 )%
     Other                         1,748              2,381       (633 )       (26.6 )%

                         $        16,299    $        21,240   $ (4,941 )       (23.3 )%


                             Six Months Ended Sept. 30,        Dollar
                              2009               2008          Change       % Change
     Transaction fees    $        22,303             28,681   $ (6,378 )       (22.2 )%
     Sell-through fees             5,541              6,784     (1,243 )       (18.3 )%
     DRS                           2,976              3,168       (192 )        (6.1 )%
     Other                         3,545              4,917     (1,372 )       (27.9 )%

$ 34,365 $ 43,550 $ (9,185 ) (21.1 )%

The decreases in transaction fees were primarily due to fewer rental transactions at our Participating Retailers, which decreased 15.8% and 13.9%, respectively, while the rate per transaction decreased 1.9% for both periods, excluding the impact of minimum guarantees. The decreases in transactions were due in part to volume decreases as a result of fewer theatrical releases by our Program Suppliers, as well as continued changing market conditions, including changes in consumer behavior, technological advances in entertainment content delivery and the perceived value of other home video entertainment alternatives.

The decreases in sell-through fees were primarily due to a 24.4% and a 17.8% decrease, respectively, in the number of sell-through transactions as a result of an overall decline in Units available for sale. Units shipped decreased 16.4% and 21.5%, respectively.

The decreases in DRS fees were primarily due to a change in the mix of titles released.

AMI Division

Revenues from our AMI division increased $1.9 million, or 62.7%, and $2.5 million, or 40.2%, respectively, in the three and six-month periods ended September 30, 2009 compared to the same periods of the prior fiscal year.

Box Office Essentials™ revenues increased $0.04 million, or 2.4%, and $0.1 million, or 3.5%, respectively, in the three and six-month periods ended September 30, 2009 compared to the same periods of the prior fiscal year, primarily as a result of international expansion. OnDemand Essentials™ increased $0.3 million, or 23.4%, and $0.5 million, or 20.7%, respectively, due to a combination of obtaining new clients and rate increases to existing clients.

TV Essentials™, which began generating recurring revenue for us in the second half of fiscal 2009, contributed $1.6 million and $1.8 million, respectively, to the revenue increases. During the fourth quarter of fiscal 2008 when TV Essentials™ was still in development, we entered into a long-term agreement with

a customer/supplier relating to this line of business, in which we began to develop reporting tools specifically relating to their unique business requirements. We deferred this revenue in accordance with ASC 605-35 "Construction-Type and Production-Type Contracts," applying the completed-contract method. During the second quarter of fiscal 2010, we substantially completed this contract and recognized the $1.1 million of revenue and $0.1 million of related costs.

Revenues related to our Essentials™ business information service offerings have increased primarily due to our continued investment in and successful marketing of these offerings and successful retention of clients. We expect continued future increases in our Essentials™ revenues as a result of further investments and additional successful launches of those services.

Other Division

We did not have any revenues from our Other Division in the fiscal 2010 or fiscal 2009 periods.

Cost of Sales

Cost of sales consists of Unit costs, transaction costs, sell-through costs, handling and freight costs in the PPT Division and costs in the AMI Division associated with certain Essentials™ business information service offerings. These expenditures represent the direct costs to produce revenues.

In the PPT Division, Unit costs, transaction costs and sell through costs represent the amounts due to the Program Suppliers that hold the distribution rights to the Units. Freight costs represent the cost to pick, pack and ship orders of Units to the Participating Retailers. Our cost of sales can also be impacted by the release dates of Units with guarantees. We recognize the guaranteed minimum costs on the release date. The terms of some of our agreements result in 100% cost of sales on titles in the first month in which the Unit is released, which results in lower margins during the initial portion of the revenue sharing period. Once the Unit's rental activity exceeds the required amount for these guaranteed minimums, margins generally expand during the second and third months of the Unit's revenue sharing period. However, since these factors are highly dependent upon the quality, timing and release dates of all new products, margins may not expand to any significant degree during any period. As a result, it is difficult to predict the impact these Program Supplier Revenue Sharing programs with guaranteed minimums will have on future results of operations in any reporting period.

In the AMI Division, a portion of the Essentials™ business information service offerings costs represent costs associated with the operation of a call center for our Box Office Essentials™ services, as well as costs associated with amortizing capitalized internally developed software used to provide the corresponding services and direct costs incurred to obtain, cleanse and process data and maintain our systems.

Cost of sales decreased $3.4 million, or 21.1%, and $6.0 million, or 18.2%, respectively, in the three and six-month periods ended September 30, 2009 compared to the same periods of the prior fiscal year. Cost of sales as a percentage of revenue was 60.5% and 63.2%, respectively, in the three and six-month periods ended September 30, 2009 compared to 67.2% and 66.8%, respectively, in the same periods of the prior fiscal year.

The decreases in cost of sales were primarily due to lower PPT Division revenues as discussed above. The decreases in cost of sales as a percentage of revenue were primarily due to a larger percentage of our revenue being generated by our AMI Division during the first six months of fiscal 2010 compared to the same periods of the prior fiscal year. We achieve higher gross margins on our AMI Division revenue than on our PPT Division revenue. However, in the three and six-month periods ended September 30, 2009, we realized increases in cost of sales within the AMI Division, as a percentage of AMI revenues, as compared to the same periods of the prior fiscal year. These increases were due to increased costs associated with purchasing data within OnDemand and Multi-Screen Essentials™ services, increased costs associated with amortizing capitalized internally developed software used to provide those services and deferred costs associated with the completion of the long-term contract noted above.

Selling and Administrative

Selling and administrative expenses consist primarily of compensation and benefits, development, marketing and advertising costs, legal and professional fees, communications costs, depreciation and amortization of tangible fixed assets and software, real and personal property leases, as well as other general corporate expenses.

Selling and administrative expenses increased $1.1 million, or 17.1%, to $7.8 million in the second quarter of fiscal 2010 compared to $6.7 million in the second quarter of fiscal 2009 and increased $1.5 million, or 11.0%, to $14.9 million in the six-month period ended September 30, 2009 compared to $13.4 million in the same period of the prior fiscal year.

The increases in selling and administrative expenses in the three and six-month periods ended September 30, 2009 compared to the same periods of the prior fiscal year were primarily due to the continued expansion of our Multi-Screen Essentials™ line of business, including the expansion of our executive, marketing and sales team and office in New York, as well as costs incurred as a result of hiring our new Chief Executive Officer, such as legal fees. Of the increases in the three and six-month periods ended September 30, 2009, $0.3 million related to non-cash, stock-based compensation expense recognized for equity awards granted to our new Chief Executive Officer and $0.3 million related to increased non-cash compensation expense associated with two directors who departed from the board. Please refer to Note 4 of Notes to Condensed Consolidated Financial Statements. In addition, we incurred $0.5 million related to one-time costs associated with certain organizational changes. Please refer to Note 9 of Notes to Condensed Consolidated Financial Statements.

Selling and administrative expenses also increased as a percentage of revenue to 36.5% and 34.7%, respectively, for the three and six-month periods ended September 30, 2009 compared to 27.4% and 27.0%, respectively, for the comparable periods of the prior fiscal year as a result of the higher overall costs combined with lower revenues. We expect selling and administrative expenses to continue to increase with the additional non-cash, stock-based compensation expense that will be recognized in future quarters related to awards made in connection with the hiring of our new Chief Operating Officer and Chief . . .