UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

þ		QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 0-51838

Global Traffic Network, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Nevada (State or other jurisdiction of incorporation or organization)		33-1117834 (I.R.S. Employer Identification No.)
880 Third Avenue, 6th Floor New York, New York (Address of principal executive offices)		10022 (Zip Code)

     Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer o		Non-accelerated filer o		Smaller reporting company þ
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of May 9, 2011, the registrant had 19,050,172 shares of common stock outstanding.

 

 

Global Traffic Network, Inc.

Index

		Page
		Number
Part I. Financial Information			3
Item 1. Financial Statements			3
Consolidated Balance Sheets as of March 31, 2011 and June 30, 2010			3
Consolidated Statements of Income for the three and nine months ended March 31, 2011 and 2010			4
Consolidated Statements of Cash Flows for the nine months ended March 31, 2011 and 2010			5
Notes to Consolidated Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			15
Item 3. Qualitative and Quantitative Disclosures About Market Risk			24
Item 4. Controls and Procedures			25
Part II. Other Information			25
Item 5. Other Information			25
Item 6. Exhibits			25
Signatures			26
Exhibit Index			27
EX-31.1
EX-31.2
EX-32.1
EX-99.1

Part 1 Financial Information

Item 1 — Financial Statements

GLOBAL TRAFFIC NETWORK, INC.

CONSOLIDATED BALANCE SHEETS
(In thousands)

		March 31,				June 30,
		2011				2010
		(Unaudited)				(Unaudited)
ASSETS:
Current Assets:
Cash and cash equivalents		$	36,972			$	19,564
Accounts receivable net of allowance for doubtful accounts of $140 and $69 at March 31, 2011 and June 30, 2010			22,579				18,790
Prepaids and other current assets			1,518				1,989
Deferred tax assets			354				239
Total current assets			61,423				40,582
Property and equipment, net			6,441				6,693
Intangible assets, net			11,909				13,013
Goodwill			4,565				4,257
Deferred tax assets			182				129
Other assets			332				414
Total assets		$	84,852			$	65,088
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current Liabilities:
Accounts payable and accrued expenses		$	15,555			$	11,709
Deferred revenue			645				810
Income taxes payable			1,800				1,306
Total current liabilities			18,000				13,825
Deferred tax liabilities			3,039				2,747
Other liabilities			464				349
Total liabilities			21,503				16,921
Preferred stock, $.001 par value; 10,000,000 authorized; 0 issued and outstanding as of March 31, 2011 and June 30, 2010			—				—
Common stock, $.001 par value; 100,000,000 shares authorized; 19,010,851 shares issued and outstanding as of March 31, 2011 and 18,409,834 shares issued and outstanding as of June 30, 2010			19				18
Additional paid in capital			54,149				51,391
Accumulated other comprehensive income			7,916				389
Retained earnings (accumulated deficit)			1,265				(3,631	)
Total shareholders’ equity			63,349				48,167
Total liabilities and shareholders’ equity		$	84,852			$	65,088

See accompanying notes to the consolidated financial statements

GLOBAL TRAFFIC NETWORK, INC.

CONSOLIDATED STATEMENTS OF INCOME
(In thousands except share and per share amounts)

		Three Months Ended								Nine Months Ended
		March 31								March 31
		2011				2010				2011				2010
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Revenues		$	26,788			$	24,113			$	83,902			$	70,094
Operating expenses (exclusive of depreciation and amortization shown separately below)			18,875				15,998				53,196				47,685
Selling, general and administrative expenses			6,006				5,397				18,102				15,813
Depreciation and amortization expense			1,509				1,353				4,422				3,910
Net operating income			398				1,365				8,182				2,686
Interest expense			—				—				—				15
Other (income) (including interest income of $367 and $200 for the three months ended March 31, 2011 and 2010 and interest income of $907 and $513 for the nine months ended March 31, 2011 and 2010)			(368	)			(246	)			(916	)			(754	)
Other expense			32				2				39				32
Net income before income taxes			734				1,609				9,059				3,393
Income tax expense			922				1,126				4,163				3,122
Net (loss) income		$	(188	)		$	483			$	4,896			$	271
(Loss) income per common share:
Basic		$	(0.01	)		$	0.03			$	0.27			$	0.01
Diluted		$	(0.01	)		$	0.03			$	0.26			$	0.01
Weighted average common shares outstanding:
Basic			18,298,051				18,118,170				18,214,696				18,100,262
Diluted			18,298,051				18,139,989				18,607,610				18,109,126

See accompanying notes to the consolidated financial statements

GLOBAL TRAFFIC NETWORK, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

		Nine Months
		Ended
		March 31,
		2011				2010
		(Unaudited)				(Unaudited)
Cash flows from operating activities:
Net income		$	4,896			$	271
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			4,422				3,910
Allowance for doubtful accounts			71				(54	)
Non-cash compensation expense			1,033				949
Change in deferred taxes			14				(211	)
Foreign currency translation income			—				(101	)
Loss on disposal or write-down of assets			92				26
Changes in assets and liabilities (net of effects from purchase of controlled entity):
Accounts receivable			(788	)			(1,371	)
Prepaid and other current assets and other assets			790				14
Accounts payable and accrued expenses and other liabilities			1,872				1,031
Deferred revenue			(298	)			(474	)
Income taxes payable			183				(782	)
Net cash provided by operating activities			12,287				3,208
Cash flows from investing activities:
Purchase of property and equipment			(1,723	)			(1,204	)
Acquisition of business			—				(3,488	)
Net cash used in investing activities			(1,723	)			(4,692	)
Cash flows from financing activities:
Proceeds from exercise of warrants			1,791				—
Repayment of long term debt			—				(414	)
Net cash provided (used) in financing activities			1,791				(414	)
Effect of exchange rate changes on cash and cash equivalents			5,053				1,853
Net increase (decrease) in cash and cash equivalents			17,408				(45	)
Cash and cash equivalents at beginning of fiscal period			19,564				21,419
Cash and cash equivalents at end of fiscal period		$	36,972			$	21,374
Supplemental disclosures of cash flow information:
Cash paid during fiscal period for:
Interest		$	—			$	15
Income taxes		$	3,990			$	4,142

See accompanying notes to the consolidated financial statements

GLOBAL TRAFFIC NETWORK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share amounts unless noted)

Information as of March 31, 2011 and 2010 and for the three and nine months ended March 31,
2011 and 2010 is unaudited

NOTE 1 — Description of the Company’s Business

     Global Traffic Network, Inc. (the “Company”) provides traffic and news information reports to radio and television stations in international markets. The Company provides traffic information reports to radio and television stations in Australia and Canada and traffic information reports to radio stations in the United Kingdom, provides news and information reports to radio stations in Canada, entertainment news reports to radio stations in the United Kingdom and has an inventory of commercial advertising embedded in radio news reports in Australia. The Company derives a substantial majority of its revenues from the sale of commercial advertising embedded within these information reports. The Company obtains this advertising inventory from radio and television stations in exchange for providing stations with information reports and/or cash compensation. The Company also derives revenues from providing traffic related reporting services to government agencies in the United Kingdom.

NOTE 2 — Basis of Presentation

     The consolidated financial statements consist of the Company and its four wholly owned subsidiaries, The Australia Traffic Network Pty Limited (“ATN”), Global Traffic Canada, Inc. (“GTC”) including its wholly owned subsidiary Canadian Traffic Network ULC (“CTN”), Global Traffic Network (UK) Limited (“UKTN”) including its wholly owned subsidiary Global Traffic Network (UK) Commercial Limited (“UK-Commercial”) and Global Alert Network, Inc. (“GAN”). Effective October 12, 2010, GAN changed its name from Mobile Traffic Network, Inc. (“MTN”). GTC is a holding company and had no assets or liabilities other than its ownership of CTN at March 31, 2011 and June 30, 2010. Because the financial statements are presented on a consolidated basis, all material intercompany transactions and balances have been eliminated in the consolidation. All adjustments that in the opinion of management are necessary for a fair presentation have been included. All such adjustments are of a normal and recurring nature. The results of operations for the period ended March 31, 2011 is not necessarily indicative of the operating results for a full fiscal year.

     Although ATN’s functional currency is Australian dollars, CTN’s functional currency is Canadian dollars and UKTN and UK-Commercial’s functional currency is British pounds, for reporting purposes the Company’s financial statements are presented in United States dollars. The financial statements have been translated into United States dollars in accordance with FASB Statement No. 52, “Foreign Currency Translation” (“SFAS 52”). Effective July 1, 2009, the provisions of SFAS 52 were incorporated in the Codification under FASB ASC 830. Income statement amounts are translated from Australian dollars, Canadian dollars, or British pounds to United States dollars based on the average exchange rate for each quarterly period. Assets and liabilities are translated based on the exchange rate as of the applicable balance sheet date. Equity contributions are translated based on the exchange rate at the time of the applicable investment. Foreign currency translation adjustments upon translation of the Company’s financial statements to United States dollars are recognized as other comprehensive income (loss). Realized gains and losses resulting from currency translation adjustments are recognized in the accompanying statements of income as other expense (income).

     These financial statements should be read in conjunction with the audited financial statements and footnotes included in the Company’s Annual Report on Form 10-K filed on September 15, 2010. Certain amounts reported in prior years have been reclassified to conform to the current year presentation.

     Subsequent events have been evaluated up to the date on which these financial statements were filed.

NOTE 3 — Earnings per Share

     Basic earnings per share is calculated by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share is based upon the sum of the weighted average number of shares of common stock outstanding plus all additional common stock equivalents outstanding during the period, when dilutive. For the periods ended March 31, 2011 and 2010, there were common equivalent shares outstanding due to outstanding stock options of 1,111,998 and 1,158,400, respectively, restricted common shares of 307,719 and 248,329, respectively, and warrants issued to the underwriter of the Company’s IPO to purchase common shares of 0 and 380,000, respectively. The warrants, which had a strike price of $6.00 and an expiration date of March 23, 2011, were outstanding for part of the three and nine months ended March 31, 2011 and are therefore part of the common stock equivalents for the period ended March 31, 2011. All 380,000 warrants were exercised (both for cash and pursuant to the cashless exercise option) and resulted in an additional 335,879 common shares being issued as well as $1,791 additional net cash proceeds after costs to the Company.

Common Stock Equivalents

		Three Months				Three Months				Nine Months				Nine Months
		Ended				Ended				Ended				Ended
		March 31,				March 31,				March 31,				March 31,
		2011				2010				2011				2010
Stock options			N/A				21,819				283,761				8,864
Restricted stock			N/A				—				19,268				—
Warrants			N/A				—				89,885				—
Total common stock equivalents			N/A				21,819				392,914				8,864

     For the three month period ended March 31, 2010, 680,000 stock options with exercise prices between and $5.00 and $8.70 were excluded from the calculation of diluted shares outstanding because they were anti-dilutive. For the nine month period ended March 31, 2010, 793,400 stock options with exercise prices between $4.66 and $8.70 were excluded from the calculation of diluted shares outstanding because they were anti-dilutive. For the three and nine month periods ended March 31, 2010 there were no common stock equivalents due to restricted stock although restricted stock was not anti-dilutive for the periods. This is due to the treasury method calculation which yielded no common stock equivalents because of the level of unrecognized compensation expense as of March 31, 2010 and the average share prices for the three and nine months ended March 31, 2010. For the three and nine month period ended March 31, 2010, 380,000 warrants with an exercise price of $6.00 were excluded from the calculation of diluted shares outstanding because they were anti-dilutive. Due to the net loss for the three months ended March 31, 2011, all common stock equivalents were anti-dilutive and were excluded from the calculation of diluted shares outstanding.

     Since March 31, 2011, 78,334 additional stock options have been exercised (both for cash and in a cashless manner) resulting in $31 of proceeds to the Company and the issuance of 39,321 additional common shares.

		Three Months				Three Months				Nine Months				Nine Months
		Ended				Ended				Ended				Ended
		March 31,				March 31,				March 31,				March 31,
		2011				2010				2011				2010
Basic Shares Outstanding			18,298,051				18,118,170				18,214,696				18,100,262
Stock Options, Restricted Stock & Warrants			N/A				21,819				392,914				8,864
Diluted Shares Outstanding			18,298,051				18,139,989				18,607,610				18,109,126

NOTE 4 — Recent Accounting Pronouncements

     In December 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2010-28, “When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts” (“ASU 2010-28”) which amends FASB ASC Topic 350 (Intangibles — Goodwill and Other) to modify Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts to require performing Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. ASU 2010-28 is effective for fiscal years and the interim periods within those years beginning after December 15, 2010. Early adoption is not permitted. The Company intends to adopt the provisions of ASU 2010-28 effective July 1, 2011 and does not expect the adoption to have a material impact on its consolidated financial position or results of operations.

NOTE 5 — Concentration of Credit Risk

     The Company maintains cash balances with what management believes to be high credit quality financial institutions. Balances have exceeded and continue to exceed those amounts insured and the majority of the Company’s cash is maintained in instruments not subject to FDIC or other insurance. In addition, a substantial majority of the Company’s cash balances is held in two financial institutions located in Australia. Furthermore, a majority of the Company’s cash is maintained in foreign currencies, which is also subject to currency exchange rate fluctuation risk.

		March 31,				June 30,
		2011				2010
Cash and cash equivalents consist of the following:
Domestic currency		$	2,289			$	234
Foreign currencies			34,683				19,330
Total cash and cash equivalents		$	36,972			$	19,564

     Money market investments with a fair value of $1,726 are included in cash and cash equivalents as of March 31, 2011. Fair value has been determined based on the fair value of identical investments in active markets. All cash and cash equivalents are classified as level 1 as defined in FASB ASC 820.

NOTE 6 — Major Suppliers

     Approximately 18% of the Company’s radio commercial airtime inventory in Australia (which, when sold to advertisers, generates a material amount of the Company’s Australian revenues) comes from a large broadcaster in Australia, which includes inventory received from this broadcaster under a four year agreement effective July 1, 2008 to provide radio traffic reporting services and receive radio traffic and news

commercial airtime inventory. At March 31, 2011, trade payables to this supplier comprised approximately 26% of the Company’s trade payables balance.

     Approximately 16% of the Company’s radio commercial airtime inventory in Australia (which, when sold to advertisers, generates a material amount of the Company’s Australian revenues) comes from a different large broadcaster in Australia. Radio commercial advertising inventory is received from this broadcaster under a four year agreement effective July 1, 2008 to provide radio traffic reporting services and receive radio traffic commercial airtime inventory and an agreement through May 31, 2012 to receive radio news commercial airtime inventory. At March 31, 2011, trade payables to this supplier comprised approximately 8% of the Company’s trade payables balance.

     Nineteen of the Company’s Canadian radio station affiliates, which represent approximately 27% of the Canadian radio stations (excluding regional suburban stations) with which the Company has contracted to provide radio traffic reports, are owned by one company. These stations account for approximately 36% of the Company’s radio commercial airtime inventory (excluding regional suburban stations) in Canada. The sale of such inventory constitutes a substantial portion of the Company’s Canadian revenues. The Company’s provision of traffic reports to 18 of these radio stations is governed by a four year agreement effective January 1, 2009. At March 31, 2011, trade payables to this supplier comprised approximately 8% of the Company’s trade payables balance.

     Approximately 16% of the Company’s radio traffic commercial airtime inventory in the United Kingdom (which, when sold to advertisers, generates a material amount of the Company’s United Kingdom revenues) comes from a large broadcaster in the United Kingdom. In addition, this commercial airtime inventory comprises approximately 27% of the audience delivery (“impacts”) of the Company’s United Kingdom radio traffic network. The Company provides radio traffic reports and receives radio traffic commercial inventory under a three year agreement effective November 1, 2010. The agreement may be cancelled prior to the end date by either party upon 90 days prior notice during the period commencing August 31, 2012 and ending October 1, 2012. At March 31, 2011, trade payables to this supplier comprised approximately 5% of the Company’s trade payables balance.

     Approximately 16% of the Company’s radio traffic commercial airtime inventory in the United Kingdom (which, when sold to advertisers, generates a material amount of the Company’s United Kingdom revenues) comes from another large broadcaster in the United Kingdom. This commercial airtime inventory comprises approximately 25% of the impacts of the Company’s United Kingdom radio traffic network. The Company provides radio traffic reports and receives radio traffic commercial inventory to sell (on a variable cost basis) under the terms of a 26 month agreement that commenced September 1, 2010. This broadcaster also provides a material portion of the Company’s radio entertainment news commercial airtime inventory (also on a variable cost basis) under the terms of a separate 26 month agreement that commenced September 1, 2010. At March 31, 2011, trade payables to this supplier comprised approximately 11% of the Company’s trade payables balance.

NOTE 7 — Comprehensive Income (Loss)

     Comprehensive income (loss) is comprised of net income and all changes to shareholders’ equity except those due to investment by, distributions to and repurchases from shareholders.

		Nine months				Nine months
		ended				ended
		March 31,				March 31,
		2011				2010
Net income		$	4,896			$	271
Foreign currency translation adjustment			7,527				1,658
Comprehensive income		$	12,423			$	1,929

NOTE 8 — Income Taxes

     Tax expense for the nine months ended March 31, 2011 and 2010 was $4,163 and $3,122, respectively. The effective tax rate for the nine months ended March 31, 2011 and 2010 was 46.0% and 92.0%, respectively. The rates differ from the United States federal statutory rate of approximately 35% primarily due to the Company’s Australian operations reporting a taxable profit and tax expense while the Company’s Canadian operations generate a net loss without recording an income tax benefit.

     Although UK-Commercial is profitable on a tax basis, the Company’s United Kingdom operations are unable to utilize the group relief provision of the United Kingdom tax code until UK-Commercial’s net operating loss carry forwards have been exhausted. The valuation allowance for the period ending March 31, 2011 was reduced due to the use of previously valued deferred tax assets of $1,654 pertaining primarily to ATN net income that was recognized by Global Traffic Network, Inc. (the unconsolidated parent) (“GTN”) during the period, which was partially offset by $1,469 of additions to the valuation allowance primarily for net operating losses of CTN as well as certain other deferred tax assets. Prior to July 1, 2009, the Company considered all earnings of ATN to be indefinitely reinvested abroad and therefore did not recognize a deferred tax liability with regards to the undistributed earnings of ATN. As a result of the change in permanent investment status, GTN has recognized deferred tax liabilities of $14,879 for undistributed earnings and profits of ATN to date which are partially offset by foreign tax credit deferred tax assets of $11,440.

     The Company realized a tax benefit of $551 due to a reduction of the deferred tax liability that was established due to the acquisition of Unique. The initial amount of this tax liability was $4,342 and the current carrying value is $3,304 (the balance has decreased less than the cumulative tax benefit realized due to increases in currency exchange rates). The Company has not recorded any other tax benefit for the periods ended March 31, 2011 and 2010 because the Company recorded a valuation allowance against all of the Company’s net deferred tax assets for GTN/MTN and CTN, as well as certain deferred tax assets of UKTN at March 31, 2011 and June 30, 2010 due to the uncertainty surrounding the realization of the tax deductions in future tax returns. This valuation allowance will be reduced to the extent the Company determines that the deferred tax assets will more likely than not be realized. The Company had tax carried forward losses (prior to the valuation allowance) of $5,538 and $5,292 as of March 31, 2011 and June 30, 2010, respectively. As of March 31, 2011, all of the tax carried forward losses related to the Company’s foreign operations. The Company recorded a deferred tax asset of $1,252 associated with the net operating losses of Unique which the Company acquired March 1, 2009. The Company has not recorded a valuation allowance against this deferred tax asset since it believes it is more likely than not that it will be able to utilize these net operating losses against future taxable income of UK-Commercial. The deferred tax asset related to the UK-Commercial net operating losses was $265 as of March 31, 2011 and the Company recognized $641 of non-cash income tax expense for the nine months ended March 31, 2011 due to the utilization of this asset. The Company will continue to assess this position and, if necessary, establish a valuation allowance in order that the net carrying value of the deferred tax asset approximates its net realizable value. UK-Commercial has generated taxable income since its acquisition date.

		March 31,				June 30,
		2011				2010
Tax carried forward losses		$	5,538			$	5,292
Other deferred tax assets			5,405				4,272
Total deferred tax assets			10,943				9,564
Total deferred tax liabilities			6,762				5,074
Net deferred tax assets before valuation allowance			4,181				4,490
Valuation allowance			(6,684	)			(6,869	)
Net deferred tax (liabilities)		$	(2,503	)		$	(2,379	)

NOTE 9 — Commitments

     The Company has various non-cancelable, long-term operating leases for its facilities and office equipment. The facility leases have escalation clauses and provisions for payment of taxes, insurance, maintenance and repair expenses. Total rent expense under these leases is recognized ratably over the lease terms. Future minimum payments, by year and in the aggregate, under such non-cancelable operating leases with initial or remaining terms of one year or more, consists of the following as of March 31, 2011:

		March 31,
		2011
Year 1		$	959
Year 2			724
Year 3			413
Year 4			212
Year 5			107
Thereafter			139
Total		$	2,554

     Total rent expense charged to expenses in the accompanying statements of income for the three and nine months ended March 31, 2011 and 2010 was $329, $296, $940 and $916, respectively. Rent expense on an annualized basis exceeds rental commitments primarily due to many of the Company’s operations and hangar arrangements being short term in nature.

     The Company generally enters into multi-year contracts with radio and television stations. These contracts require the Company to provide various levels of service (including, but not limited to providing professional broadcasters, gathering information, communications and aviation services) and, in some cases, cash compensation or reimbursement of expenses. Station compensation and reimbursement is a component of operating expense and is recognized over the term of the applicable contracts, which is not materially different than when the services are performed.

Contractual station commitments by year and in the aggregate are as follows:

		As of
		March 31,
		2011
Year 1		$	45,405
Year 2			24,890
Year 3			8,710
Year 4			526
Year 5			—
Thereafter			—
Total		$	79,531

     The Company’s UK-Commercial subsidiary outsources the majority of its radio traffic and entertainment news operations pursuant to contracts with unrelated third parties. Expenses associated with these arrangements are a component of operating expense and are recognized over the term of the applicable contracts, which is not materially different than when the services are provided. The minimum future payments under these contracts by year and in the aggregate are as follows:

		As of
		March 31,
		2011
Year 1		$	3,216
Year 2			2,344
Year 3			—
Year 4			—
Year 5			—
Thereafter			—
Total		$	5,560

     In April 2011, CTN purchased a fixed wing aircraft for its Vancouver operations at a cost of approximately $95.

NOTE 10 — Stock based compensation

     The Company maintains an Amended and Restated 2005 Stock Incentive Plan (the “Plan”) under which 2,400,000 shares are authorized for issuance. Adoption of the Plan and all amendments thereto have been approved by the Company’s stockholders, including an amendment on December 15, 2010 to increase the number of shares authorized for issuance under the Plan from 1,800,000 to 2,400,000. Stock options and restricted stock that are issued, outstanding or available for future issuance under the Plan are summarized below:

		As of
		March 31,
		2011
Shares authorized under the Plan			2,400,000
Stock options outstanding			(1,111,998	)
Stock options exercised			(184,670	)
Restricted shares outstanding			(307,719	)
Restricted shares converted into common shares upon lapse of restrictions			(225,006	)
Shares available for issuance under the Plan			570,607

     Stock Options

     The Company is required to determine the fair value of employee and director stock options issued under the Plan. The fair value of these options was estimated at the date of grant using the Black-Scholes option pricing model based on the following assumptions:

		Nine months
		Ended
		March 31,
		2011
Risk-free interest rate			1.41-2.11%
Volatility factor			70.05-70.55%
Weighted volatility			70.53%
Dividend yield			—
Option price			$ 5.30-$5.51
Weighted average expected life of options		6 years
Weighted average grant date fair value per share			$ 3.50

     The following table summarizes the Company’s stock option activity for the nine month period ended March 31, 2011:

										Weighted
						Weighted				Average
						Average				Remaining				Aggregate				Aggregate
						Exercise				Contractual				Fair				Intrinsic
		Options				Price				Term				Value				Value
Balance, June 30, 2010			1,148,401			$	5.14				—			$	3,309			$	—
Exercisable, June 30, 2010			763,737			$	5.38				—			$	2,173			$	—
Grants			145,000			$	5.50				—			$	508			$	—
Exercised			(159,736	)		$	4.58				—			$	(408	)		$	1,114
Forfeitures/expirations			(21,667	)		$	5.74				—			$	(75	)		$	—
Balance, March 31, 2011			1,111,998			$	5.26			6.88 years				$	3,334			$	8,021
Exercisable, March 31, 2011			738,339			$	5.44			6.05 years				$	2,165			$	5,189

     Based on the following assumptions, the fair value with regards to all options issued and outstanding as of March 31, 2011 is $3,334. As of March 31, 2011, there was $902 of unrecognized compensation expense related to non-vested share-based compensation under the Plan. The cost of the unrecognized compensation is expected to be recognized over a weighted average period of 1.5 years. This expense assumes that there will be no forfeitures, and this assumption is based on the positions of the option recipients within the Company and the low number of past forfeitures. Since the Plan was adopted, the largest previous forfeitures were due to outside directors becoming employees of the Company. In such instances, the forfeited director stock options were simultaneously replaced with a like number of employee stock options. Stock option expense for the nine months ended March 31, 2011 and 2010 was $412 and $559, respectively, and is included in selling, general and administrative expenses. There is no income tax benefit reflected in the accompanying income statements because a valuation allowance has been created for the net deferred tax assets of GTN as of March 31, 2011.

     The total fair value of options vesting during the nine months ended March 31, 2011 and 2010 was $446 and $468, respectively. The total intrinsic value of options exercised during the nine months ended March 31, 2011 and 2010 was $1,114 and $0, respectively.

     Restricted Stock

     The Company has awarded restricted shares of its common stock under the Plan to certain employees and directors. The awards, which are comprised of shares of common stock that are subject to transfer and forfeiture restrictions, have restriction periods tied solely to continued employment or service on the Company’s board of directors and vest over three years. The value of these restricted stock awards is calculated at the fair market value of the shares on the date of grant, net of estimated forfeitures, and is expensed pro rata over the vesting period.

     The following table summarizes the restricted stock activity for the nine month period ended March 31, 2011:

						Nine months
						Ended
						March 31,
						2011
						Weighted
						Average Grant
						Date Fair
						Value
		Shares				Per Share
Unvested, beginning of period			248,329			$	5.47
Grants			177,725				9.66
Converted to common stock upon lapse of restrictions			(118,335	)			—
Forfeited			—				—
Unvested, end of period			307,719			$	7.68

     As of March 31, 2011, there was $2,189 of unrecognized compensation expense related to restricted stock grants. The unrecognized compensation expense is expected to be recognized over a weighted average period of 2.5 years. Total compensation expense with regards to restricted stock for the nine month periods ended March 31, 2011 and 2010 was $621 and $390, respectively and is included in selling, general and administrative expenses.

NOTE 11 — Segment Reporting

     The Company primarily operates in three geographic areas, Australia, Canada and the United Kingdom, through its wholly owned subsidiaries ATN, GTC, which operates through its wholly owned subsidiary CTN, and UKTN, including its wholly owned subsidiary UK-Commercial. Select income statement information and capital expenditures for the periods ended March 31, 2011 and 2010 and select balance sheet information as of March 31, 2011 and 2010 is provided below. The All Other category consists primarily of GAN (previously MTN and renamed effective October 12, 2010) and corporate overhead and assets of GTN. Management fees charged are treated as a contra-expense and eliminate on consolidation. All revenue is from external clients and there is no intersegment revenue. Intercompany advances are treated as non-current assets or liabilities and eliminate on consolidation.

		Three months				Three months				Nine months				Nine months
		Ended				Ended				Ended				Ended
		March 31,				March 31,				March 31,				March 31,
Australia		2011				2010				2011				2010
Revenues		$	15,199			$	14,210			$	49,717			$	42,227
Interest expense			—				—				—				15
Interest revenue			364				200				899				511
Depreciation & amortization expense			266				251				799				750
Intercompany management fee expense			463				405				1,316				1,196
Income tax expense			888				1,050				4,048				3,291
Segment profit			2,035				2,458				9,395				7,637
Expenditure for property and equipment			291				74				592				335

		March 31,				March 31,
		2011				2010
Segment assets		$	45,045			$	33,608
Current assets			42,284				30,574
Property & equipment, net			2,319				2,466
Deferred tax assets, net			536				400
Intangible assets, net			40				36
Goodwill			—				—
Segment liabilities			11,162				9,522

		Three months				Three months				Nine months				Nine months
		Ended				Ended				Ended				Ended
		March 31,				March 31,				March 31,				March 31,
Canada		2011				2010				2011				2010
Revenues		$	3,010			$	2,678			$	10,494			$	6,487
Interest expense			—				—				—				—
Interest revenue			—				—				—				—
Depreciation & amortization expense			515				370				1,474				903
Intercompany management fee expense			—				—				—				—
Income tax expense			—				—				—				—
Segment (loss)			(1,157	)			(1,001	)			(1,726	)			(3,545	)
Expenditure for property and equipment			689				20				1,119				754

		March 31,				March 31,
		2011				2010
Segment assets		$	9,682			$	8,466
Current assets			5,823				3,460
Property & equipment, net			3,744				4,832
Deferred tax assets (liabilities), net			—				—
Intangible assets, net			70				138
Goodwill			—				—
Segment liabilities			30,718				25,970

		Three months				Three months				Nine months				Nine months
		Ended				Ended				Ended				Ended
		March 31,				March 31,				March 31,				March 31,
United Kingdom		2011				2010				2011				2010
Revenues		$	8,579			$	7,225			$	23,691			$	21,349
Interest expense			—				—				—				—
Interest revenue			3				—				8				1
Depreciation & amortization expense			728				707				2,148				2,179
Intercompany management fee expense			90				—				90				—
Income tax expense (benefit)			25				61				90				(184	)
Segment (loss) profit			(39	)			(3	)			176				(963	)
Expenditure for property and equipment			6				38				12				115

		March 31,				March 31,
		2011				2010
Segment assets		$	27,786			$	25,629
Current assets			10,977				6,956
Property & equipment, net			378				583
Deferred tax (liabilities), net			(3,039	)			(2,977	)
Intangible assets, net			11,799				13,701
Goodwill			4,565				4,325
Segment liabilities			10,441				30,178

		Three months				Three months				Nine months				Nine months
		Ended				Ended				Ended				Ended
		March 31,				March 31,				March 31,				March 31,
All Other		2011				2010				2011				2010
Revenues		$	—			$	—			$	—			$	31
Interest expense			—				—				—				—
Interest revenue			—				—				—				1
Depreciation & amortization expense			—				25				1				78
Intercompany management fee revenue			(553	)			(405	)			(1,406	)			(1,196	)
Income tax expense			9				15				25				15
Segment loss			(1,027	)			(971	)			(2,949	)			(2,858	)
Expenditure for property and equipment			—				—				—				—

		March 31,				March 31,
		2011				2010
Segment assets		$	60,256			$	51,957
Current assets			2,339				824
Property & equipment (net)			—				1
Deferred tax assets (liabilities), net			—				—
Intangible assets, net			—				25
Goodwill			—				—
Segment liabilities			3,865				2,927

		March 31,				March 31,
Intercompany eliminations		2011				2010
Segment assets		$	(57,917	)		$	(51,107	)
Current assets			—				—
Property & equipment (net)			—				—
Deferred tax assets (liabilities), net			—				—
Intangible assets, net			—				—
Goodwill			—				—
Segment liabilities			(34,683	)			(50,226	)

		Three months				Three months				Nine months				Nine months
		Ended				Ended				Ended				Ended
		March 31,				March 31,				March 31,				March 31,
Total		2011				2010				2011				2010
Revenues		$	26,788			$	24,113			$	83,902			$	70,094
Interest expense			—				—				—				15
Interest revenue			367				200				907				513
Depreciation & amortization expense			1,509				1,353				4,422				3,910
Intercompany management fee expense			—				—				—				—
Income tax expense			922				1,126				4,163				3,122
Net (loss) profit			(188	)			483				4,896				271
Expenditure for property and equipment			986				132				1,723				1,204

		March 31,				March 31,
		2011				2010
Total assets		$	84,852			$	68,553
Current assets			61,423				41,814
Property & equipment, net			6,441				7,882
Deferred tax (liabilities) assets, net			(2,503	)			(2,577	)
Intangible assets, net			11,909				13,900
Goodwill			4,565				4,325
Total liabilities			21,503				18,371

     Non-cash stock based compensation is not allocated to the operating subsidiaries and is a component of the All Other segment above. Non-cash stock based compensation expense was $358, $316, $1,033 and $949 for the three and nine month periods ended March 31, 2011 and 2010, respectively.

     Effective February 2011, the Company converted a majority of the intercompany advance to UKTN to an equity investment, which significantly reduced the UK segment liabilities. There was no impact on the consolidated balance sheet of the Company as the advance/equity eliminates in consolidation. Effective January 1, 2011, the Company commenced charging a management fee to UKTN. The amount of the management fee was $90 for the three and nine month period ended March 31, 2011.

     The Company offers four primary products in the markets in which it operates. The products consist of radio traffic advertising commercials, radio news advertising commercials, television advertising commercials and government services relating to traffic. Not all products are offered in all markets or in all periods covered by the financial statements. These products are not operated as separate segments but are the responsibility of the regional management of the various segments outlined above. All revenues are generated from external clients.

Revenues		Traffic				News				Television				Government				Total
Three months ended March 31, 2011		$	20,821			$	4,090			$	852			$	1,025			$	26,788
Three months ended March 31, 2010		$	18,118			$	3,859			$	901			$	1,235			$	24,113
Nine months ended March 31, 2011		$	64,367			$	14,076			$	2,446			$	3,013			$	83,902
Nine months ended March 31, 2010		$	52,948			$	11,906			$	2,395			$	2,845			$	70,094

NOTE 12 — Change in Accounting Estimate

     Effective March 1, 2010, the Company changed its estimate of the useful lives of helicopters owned by CTN from eight years to six years and the lives of CTN helicopter engine rebuilds from three years to two years. This change was implemented because the Company determined that the annual flight hours are more than originally anticipated. The life of a helicopter is based upon a blend of the life of the engine, which is approximately 2,200 flight hours, and the life of the airframe. The Company does not anticipate getting less use from the helicopters due to this change in useful life. Also, ATN helicopters were unaffected by this change in useful life as their annual flight hours have been in line with expectations. This change had the effect of increasing depreciation expense $152 and $444, reducing net operating income and net income $152 and $444 and reducing both basic and diluted earnings per share $0.01 and $0.02 for the three and nine month periods ended March 31, 2011. For the three and nine month period ended March 31, 2010, this change had the effect of increasing depreciation expense $48, reducing net operating income and net income $48, and had no impact on basic or diluted earnings per share.

NOTE 13 — Termination of Agreement

     In October 2010, UKTN was informed that the its Traffic Radio services contract with the United Kingdom’s Highways Agency would not be extended beyond its current expiration date of August 31, 2011 due to budgetary constraints of the Highways Agency. For the three and nine month periods ended March 31, 2011, revenue related to this contract was $1,010 and $2,998, operating income and net income was $199 and $666 and basic and diluted earnings per share was $0.01 and $0.04, respectively.

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, 2010, as filed with the Securities and Exchange Commission.

Executive Overview

     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 stations in Australia, Canada and the United Kingdom and we provide traffic information reports to television stations in Australia and Canada. We also provide news information reports to radio stations in Canada, entertainment news reports to radio stations in the United Kingdom and we believe that we maintain the largest inventory of commercial advertising embedded in radio news reports in Australia. We derive a substantial majority of our revenues from the sale to advertisers of commercial advertising inventory associated with these information reports. We obtain this advertising inventory from radio and television stations in exchange for providing stations with information reports and/or, for certain broadcasters, cash compensation. 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. However, we do offer our mobile phone traffic products to radio and television stations in the United States.

     Our operations are conducted through the following wholly owned direct and indirect subsidiaries:

	•		The Australia Traffic Network Pty Limited (“Australia Traffic Network”);
	•		Canadian Traffic Network ULC (“Canadian Traffic Network”);
	•		Global Traffic Network (UK) Limited and Global Traffic Network (UK) Commercial Limited (“UK Traffic Network” and “UK Commercial Traffic Network,” respectively); and
	•		Global Alert Network, Inc. (“Global Alert Network”), formerly named Mobile Traffic Network, Inc. (“Mobile Traffic Network”).

     Global Traffic Network, Inc. is a holding company and conducts no operations. Unless we indicate otherwise, the discussions below regarding our financial condition and results of operations present information on a consolidated basis and all material inter-company transactions and balances have been eliminated.

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 categories, radio traffic reports, radio news reports and TV reports, 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.” In addition, we currently provide radio traffic reports under a Traffic Radio service contract with the United Kingdom’s Highways Agency, which is an executive agency of the United Kingdom Department of Transport.

     The radio stations that contract to provide us with traffic and news report advertising inventory 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.” We currently offer radio traffic and television traffic reports and video footage to our network affiliates in Australia, while obtaining radio news report advertising inventory by paying cash compensation to our news network affiliates. 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. We provide radio traffic reports and TV reports to our network affiliates in Canada, as well as news, weather, business and sports reports to radio network affiliates on a limited basis. In the United Kingdom, we provide radio stations with traffic and entertainment news information and reports that are primarily provided through third party out-source providers that we compensate. Our network affiliates by market and product currently are as follows:

						Radio News,
						Sports,
						Weather,
						Business
						and
						Entertainment
		Radio Traffic				News				TV Reports
Australia			84				32				14
Canada			80				22				4
United Kingdom			247				125				—

     The number of our traffic network affiliates in the UK has decreased from the prior period primarily due to a decision by Global Radio Services to consolidate a number of their Heart branded radio stations by simulcasting their programming over multiple stations that had previously been programmed on a standalone basis. This had the effect of us having fewer network affiliates each with a larger audience. The overall audience delivery was not significantly impacted therefore the consolidation of radio stations had no impact on our revenue potential in the United Kingdom market.

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. We generate revenues by packaging and selling this commercial advertising inventory for cash to advertisers on a local, regional or national network basis, except in the United Kingdom where it is sold on a national basis only. To date, we have not recognized any 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 main factors that determine the amount of revenue we generate from our commercial advertising inventory include the audience reach of our networks, which is determined by the number of advertising spots we have to sell as well as the audience of our network affiliates, the percentage of the available market that our network covers, the advertising rates in the markets in which we operate networks, the length of time we have been established in the market and the training and abilities of our sales staffs. Although the number of network affiliates that we maintain in a market may influence certain of these factors, the number may not be directly correlated to the amount of revenue that we generate in that market.

     The majority of our revenues have been generated from our Australian operations, including approximately $49.7 million, or 59%, of our revenues for the nine month period ended March 31, 2011, of which approximately $36.0 million, or 43% of our total revenues, has been generated from the sale of commercial advertising inventory related to our Australian radio traffic reports. For the nine month period ended March 31, 2010, approximately $42.2 million, or 60% of our revenues, was generated by our Australian operations, of which approximately $32.1 million, or 46%, was 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 obtain more news report inventory in Australia. We began accumulating commercial advertising inventory from our Canadian operations in December 2005 and began generating limited revenue in Canada in January 2006. Currently, we have operations in eight Canadian cities: Calgary, Toronto, Hamilton, Vancouver, Montreal, Ottawa, Edmonton and Winnipeg. We anticipate expanding our radio and television advertising inventory primarily by adding new network affiliates in our existing markets, as we have not penetrated the Canadian markets to the extent that we have done so in Australia or United Kingdom. However, we will continue to explore the expansion of our advertising inventory by both the introduction of new products as well as entering new Canadian markets. We obtained the majority of our United Kingdom radio advertising inventory as a result of our acquisition of The Unique Broadcasting Company Limited (“Unique”) on March 1, 2009, which we subsequently renamed UK Commercial Traffic Network. We are actively seeking to expand the amount of our traffic and entertainment news inventory from both new and existing radio affiliates in the United Kingdom. As commercial advertising inventory generated from our Australian, Canadian and United Kingdom operations increase, we expect to sell the increased commercial advertising 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 revenues from the sale of such inventory. We expect to experience such delays in realizing revenues from the sale of commercial advertising inventory associated with additional radio news reports in Australia, our provision of radio traffic reports in Canada and increases in radio advertising inventory in the United Kingdom.

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, salaries and benefits for our on-air personalities who deliver the information reports and payments to third parties that provide information and reporting services. 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 revenues 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 and the operating costs (including fuel, maintenance, and insurance costs) associated with the operation of the fleet of aircraft we own. Our fleet of leased and owned aircraft currently consists of:

		Australia								Canada								United Kingdom
		Leased				Owned				Leased				Owned				Leased				Owned
Fixed-wing aircraft			0				1				2				1				0				2
Helicopters			0				4				0				7				0				0

     Selling expenses include salaries and benefits for our sales personnel and commissions paid on sales of our commercial advertising inventory. General and administrative expenses consist of corporate overhead, including administrative salaries, real property lease payments, insurance, salaries and benefits for our corporate executive officers, compensation expense related to stock options and restricted stock and legal and accounting fees. Expenses other than selling expenses are generally expensed evenly over the applicable fiscal year.

Seasonality of Business

     We believe that advertising revenues in general vary moderately over the calendar year, with the three month period ending December 31 generally resulting in the highest revenues and the three month period ending March 31 generally resulting in the lowest revenues. This industry trend is mainly attributable to increases in the level of advertiser demand, and resulting increases in average advertising spot rates and/or number of spots sold, during the months leading up to the Christmas holiday season and lower advertiser demand following the end of the holiday season which leads to lower average advertising spot rates and/or number of spots sold during that time. We believe that this general trend in advertising revenues is applicable to our business. During certain previous years, the impact of seasonality on our results of operations has been offset by the rapid revenue growth of our business and, in certain cases, favorable exchange rate movements. As a result, our revenues for the quarter ending March 31 have frequently exceeded our revenues for the preceding quarter ended September 30. Our expenses other than sales costs are generally spread evenly over the fiscal year. As a result, we generally experience seasonality in the amount of our net income absent growth due to the addition of new network affiliates.

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 prevailing exchange rate 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 September 30 and December 31, 2010 and 2009 and March 31, 2011 and 2010 and applicable to our balance sheet data as of March 31, 2011 and June 30, 2010 are set forth below:

Australia

Balance

Income Statement Period

Exchange Rate

Sheet Date

Exchange Rate

Three month period ended March 31, 2011

1.0056

March 31, 2011

1.0329

Three month period ended December 31, 2010

0.9887

Three month period ended September 30, 2010

0.9057

Three month period ended March 31, 2010

0.9039

Three month period ended December 31, 2009

0.9094

Three month period ended September 30, 2009

0.8340

June 30, 2010

0.8408

Canada

Balance

Income Statement Period

Exchange Rate

Sheet Date

Exchange Rate

Three month period ended March 31, 2011

1.0141

March 31, 2011

1.0303

Three month period ended December 31, 2010

0.9873

Three month period ended September 30, 2010

0.9623

Three month period ended March 31, 2010

0.9606

Three month period ended December 31, 2009

0.9469

Three month period ended September 30, 2009

0.9115

June 30, 2010

0.9399

United Kingdom

Balance

Income Statement Period

Exchange Rate

Sheet Date

Exchange Rate

Three month period ended March 31, 2011

1.6028

March 31, 2011

1.6028

Three month period ended December 31, 2010

1.5803

Three month period ended September 30, 2010

1.5510

Three month period ended March 31, 2010

1.5614

Three month period ended December 31, 2009

1.6344

Three month period ended September 30, 2009

1.6411

June 30, 2010

1.4945

     We estimate that the impact from currency changes on our operating results for the three and nine month periods ended March 31, 2011 compared to the three and nine month periods ended March 31, 2010 has been to increase (decrease) income statement amounts as follows:

		Three months				Nine months
		Ended				Ended
		March 31,				March 31,
		2011				2011
		(in thousands)				(in thousands)
Australia
Revenues		$	1,537			$	4,290
Operating expenses (exclusive of depreciation and amortization)			924				2,287
Sales, general & administrative expenses			327				876
Canada
Revenues			159				499
Operating expenses (exclusive of depreciation and amortization)			141				375
Sales, general & administrative expenses			50				143
United Kingdom
Revenues			222				(466	)
Operating expenses (exclusive of depreciation and amortization)			175				(360	)
Sales, general & administrative expenses			28				(43	)
Australia, Canada and United Kingdom combined
Revenues			1,918				4,323
Operating expenses (exclusive of depreciation and amortization)			1,240				2,302
Sales, general & administrative expenses			405				976

     When discussing changes in income statement accounts from the three and nine month periods ended March 31, 2010, the analysis under “Results of Operations” below includes both the impact of currency changes and changes in revenues and expenditures in the local currency.

     Foreign currency exchange rates in the markets in which we operate have been subject to substantial fluctuation. Any fluctuation between the U.S. dollar and the currencies of the countries in which we operate will impact the amount of our revenues and expenses. To the extent foreign currencies depreciate relative to the U.S. dollar, there will be a negative impact on the revenues we report due to such fluctuation. It is possible that the impact of currency fluctuations will result in a decrease in reported sales even though we have experienced an increase in sales when reported in the applicable foreign currency. This occurred in Australia for the three months ended March 31, 2009, when revenue increased by approximately 11.7% when measured in Australian dollars but our reported Australia revenue in U.S. dollars decreased by approximately 18.1%, in each case when compared to the three months ended March 31, 2008. Conversely, a weak U.S. dollar may mask lower performance in local currencies as it is possible for us to report higher revenues in U.S. dollars despite revenue declines in local currency in the markets in which we operate. This was the case in Australia during the three-month period ended March 31, 2011, when revenue decreased by approximately 3.8% when measured in Australian dollars but our reported Australia revenue in U.S. dollars increased by approximately 7.0%, in each case when compared to the three months ended March 31, 2010.

     For our third fiscal quarter ended March 31, 2011, the Australian dollar was stronger than during the quarter ended December 31, 2010. This trend has continued to date during the fourth fiscal quarter of 2011. Should the exchange rate between the U.S. and Australian dollar remain at current levels, this will have the effect of increasing revenues and expenses reported in U.S. dollars from our Australian operations (which constitute the majority of our business) for our fourth fiscal quarter ended June 30, 2011 absent any change in performance in local currency.

     In October 2010, UKTN was informed that its Traffic Radio services contract with the United Kingdom’s Highways Agency would not be extended beyond its current expiration date of August 31, 2011 due to budgetary constraints of the Highways Agency. We expect the contract will continue under its current terms until the expiration date and thus will have no impact on our financial results for the remainder of the current fiscal year. For the three and nine months ended March 31, 2011, revenue related to this contract was $1,010 and $2,998, operating income and net income was $199 and $666 and basic and diluted earnings per share was $0.01 and $0.04. Assuming stable exchange rates, we expect that the contract’s quarterly contribution to our results throughout its remaining term will be consistent with results seen during the third fiscal quarter of 2011, as the revenue and expenses related to the contract are fairly consistent on a quarter to quarter basis.

Results of Operations

Three Months Ended March 31, 2011 Compared With Three Months Ended March 31, 2010

     Revenues. Revenues increased from approximately $24.1 million for the three months ended March 31, 2010 to approximately $26.8 million for the three months ended March 31, 2011, an increase of approximately 11.2%. Australian revenues increased approximately $1.0 million, or approximately 7.0%, compared to the quarter ended March 31, 2010. The increase in Australian revenues pertained primarily to our radio network. All of the increase in Australian revenues was due to the Australian dollar being stronger in the third fiscal quarter 2011 compared to the third fiscal quarter 2010. As reflected in Changes in Key Operating Statistics in Local Currencies, Australian revenues decreased approximately 3.8% when measured in local currency compared to the three month period ended March 31, 2010. The Australian revenue decrease in local currency was driven primarily by a decrease in the number of spots sold compared to the previous year quarter. The decrease in spots sold was due to a decrease in the percentage of available spots being sold compared to the previous year period. The percentage of spots sold in Australia decreased from approximately 85% for the three months ended March 31, 2010 to approximately 76% for the three months ended March 31, 2011. We believe that the reduced demand for our inventory was due to weaker than expected retail market during the quarter, as we have significant retail clients that reduced their expected expenditures. Revenues from our United Kingdom operations increased approximately $1.4 million (approximately 19.4%) which related primarily to our traffic and entertainment news network advertising sales. As reflected in Changes in Key Operating Statistics in Local Currencies, United Kingdom revenues increased approximately

15.7% when measured in British pounds. Revenues from the sale of inventory related to our Canadian operations increased approximately $0.3 million, or approximately 11.1%, from the previous year quarter. The revenue increase in local currency was driven mainly by an increase in rate, which increased approximately 40% compared to the three months ended March 31, 2010. The rate in the previous period had been impacted by “per inquiry” and guaranteed bonus spots, which became less prevalent in the current quarter due to increased advertiser demand. The curtailment of these low yield spots also contributed to a lower sell-out in the current quarter compared to the three months ended March 31, 2010. As reflected in Changes in Key Operating Statistics in Local Currencies, Canadian revenues increased approximately 6.5% when measured in Canadian dollars.

     Operating expenses (exclusive of depreciation and amortization discussed below). Operating expenses increased from approximately $16.0 million for the three months ended March 31, 2010 to approximately $18.9 million for the three months ended March 31, 2011, an increase of approximately 18.1%. Australian operating expenses increased approximately $1.4 million primarily due to an increase in station compensation of approximately $1.2 million and an increase in employee costs of approximately $0.2 million. Approximately $0.9 million of the approximately $1.4 million overall increase in Australian operating expenses discussed above was related to currency movements as the Australian dollar was stronger in the current fiscal quarter when compared to the quarter ended March 31, 2010. As reflected in Changes in Key Operating Statistics in Local Currencies, Australian operating expenses increased by approximately 6.4% when measured in local currency. Operating costs related to our United Kingdom operations increased approximately $1.1 million compared to the quarter ended March 31, 2010, primarily due to an increase in station compensation. The increase in station compensation was due to increases in fixed compensation related to certain contract renewals as well as higher variable compensation resulting from the increased revenue during the quarter. As reflected in Changes in Key Operating Statistics in Local Currencies, United Kingdom operating expenses increased by approximately 15.0% in local currency. Operating expenses related to our Canadian operations increased approximately $0.3 million due to an increase in station compensation of approximately $0.2 million and an increase in employee costs of approximately $0.1 million. As reflected in Changes in Key Operating Statistics in Local Currencies, Canadian operating expenses increased by approximately 4.1% in local currency. Global Alert Network operating expenses increased approximately $0.2 million as spending increased in an effort to commercialize our alerting product for mobile phones.

     Selling, general and administrative expenses. Selling, general and administrative expenses increased from approximately $5.4 million for the three months ended March 31, 2010 to approximately $6.0 million for the three months ended March 31, 2011, an increase of approximately 11.1%. Australia Traffic Network selling, general and administrative expenses increased approximately $0.3 million dollars compared to the quarter ended March 31, 2010, of which approximately $0.3 million related to currency translation differences as the Australia dollar was stronger relative to the U.S. dollar compared to the year ago period. As reflected in Changes in Key Operating Statistics in Local Currencies, Australian selling, general and administrative expenses decreased by approximately 0.7% when measured in local currency. Sales expense as a percentage of revenue in Australia decreased from approximately 13.8% for the three months ended March 31, 2010 to approximately 13.4% for the three months ended March 31, 2011. Canada Traffic Network selling, general and administrative expenses increased approximately $0.1 million primarily due to an increase in costs related to our sales staff due to commissions on increased sales, the hiring of additional sales representatives and sales managers and severance for terminated employees. Selling, general and administrative expenses increased approximately $0.3 million in the United Kingdom primarily due to approximately $0.2 million in commissions and bonuses associated with the higher revenue as well as approximately $0.1 million in management fees charged by Global Traffic Network which eliminates in consolidation. Selling, general and administrative expenses for Global Traffic Network (the unconsolidated parent) were reduced approximately $0.1 million due to the increased management fees discussed above. Management fee revenue is treated as a contra-expense and eliminates in consolidation. Non-cash compensation expense resulting from grants of employee and director stock options and restricted stock was approximately $0.4 million for the three month period ended March 31, 2011 compared to approximately $0.3 million for the three months ended March 31, 2010.

     Depreciation and amortization expense. Depreciation and amortization expense increased from approximately $1.4 million for the three months ended March 31, 2010 to approximately $1.5 million for the three months ended March 31, 2011. The increase mainly related to shortening the useful lives of the Canadian Traffic Network helicopters from eight years to six years and reducing the Canadian Traffic Network helicopter engine rebuild useful lives from three years to two years in March 2010. This change in estimate was made due to our flying more hours per year in Canada than originally anticipated.

     Interest expense. Interest expense was $0 for the three months ended March 31, 2011 as the Company has no outstanding debt.

     Other (income) expense. Other (income) (net) was approximately $0.3 million for the three months ended March 31, 2011, compared to approximately $0.2 million for the three months ended March 31, 2010. Other (income) consists primarily of interest income on our cash balances.

     Income tax expense. Income tax expense decreased from approximately $1.1 million for the three months ended March 31, 2010 to approximately $0.9 million for the three months ended March 31, 2011. The decrease resulted primarily from lower tax expense in Australia due to the lower income before taxes for the three months ended March 31, 2011 compared to the three month period ended March 31, 2010. The effective tax rate in Australia was 30.4% for the three month period ended March 31, 2011 and 29.9% for the three month period ended March 31, 2010, compared to the statutory federal rate of 30.0%. There was no income tax benefit for the United States or Canada as a valuation allowance has been created for 100% of the Company’s net deferred tax assets in those countries. The UK Traffic Network realized approximately $0.2 million tax benefit due primarily to the utilization of the deferred tax liability created by the Unique acquisition. The UK Traffic Network tax benefit was offset by approximately $0.2 million of tax expense related to the utilization of UK Commercial Traffic Network’s net operating loss carry-forwards. UK Commercial Traffic Network’s tax benefit and tax expense are both non-cash items.

     Net income (loss). Net income decreased from approximately $0.5 million for the three months ended March 31, 2010 to a net loss of approximately $0.2 million for the three months ended March 31, 2011. The decrease in net income is primarily attributable to $0.5 million decrease in Australia Traffic Network net income due to lower sales and higher expenses. In addition, Global Alert Network’s loss increased approximately $0.2 million due to increased expenses related to our mobile phone alerting product.

Changes in Key Operating Statistics in Local Currencies

     The table below sets forth changes in certain of our key operating statistics for our Australian operations for the comparable periods presented without taking into account foreign currency exchange rates. Amounts are expressed in Australian dollars. The exchange rates from Australian dollars to United States dollars applicable to the three month periods ended March 31, 2011 and 2010 were 1.0056 and 0.9039, respectively.

		Three Months				Three Months
		Ended				Ended				Percentage
		March 31,				March 31,				Increase
Key operating statistic		2011				2010				(Decrease)
		(In thousands)				(In thousands)
Revenues		$	15,116			$	15,721				(3.8	)%
Operating expenses			9,087				8,542				6.4	%
Selling, general and administrative expenses			3,219				3,241				(0.7	)%
Depreciation and amortization expense			265				278				(4.7	)%
Interest expense			—				—				—
Other (income)			(362	)			(221	)			63.8	%
Income tax expense			883				1,162				(24.0	)%
Net income			2,024				2,719				(25.6	)%

     The table below sets forth changes in certain of our key operating statistics for our Canadian operations for the comparable periods presented without taking into account foreign currency exchange rates. Amounts are expressed in Canadian dollars. The exchange rates from Canadian dollars to United States dollars applicable to the three month periods ended March 31, 2011 and 2010 were 1.0141 and 0.9606, respectively.

		Three Months				Three Months
		Ended				Ended				Percentage
		March 31,				March 31,				Increase
Key operating statistic		2011				2010				(Decrease)
		(In thousands)				(In thousands)
Revenues		$	2,968			$	2,788				6.5	%
Operating expenses			2,643				2,538				4.1	%
Selling, general and administrative expenses			937				906				3.4	%
Depreciation and amortization expense			508				385				31.9	%
Interest expense			—				—				—
Other expense			21				2				950.0	%
Income tax expense			—				—				—
Net loss			(1,141	)			(1,043	)			9.4	%

     The table below sets forth changes in certain of our key operating statistics for our United Kingdom operations for the comparable periods presented without taking into account foreign currency exchange rates. Amounts are expressed in British pounds. The exchange rates from British pounds to United States dollars applicable to the three month periods ended March 31, 2011 and 2010 were 1.6028 and 1.5614, respectively.

		Three Months				Three Months
		Ended				Ended				Percentage
		March 31,				March 31,				Increase
Key operating statistic		2011				2010				(Decrease)
		(In thousands)				(In thousands)
Revenues		£	5,353			£	4,628				15.7	%
Operating expenses			4,230				3,677				15.0	%
Selling, general and administrative expenses			680				491				38.5	%
Depreciation and amortization expense			454				453				0.2	%
Interest expense			—				—				—
Other (income)			(2	)			(30	)			(93.3	)%
Income tax expense			16				39				(59.0	)%
Net loss			(25	)			(2	)			1,150.0	%

Nine Months Ended March 31, 2011 Compared With Nine Months Ended March 31, 2010

     Revenues. Revenues increased from approximately $70.1 million for the nine months ended March 31, 2010 to approximately $83.9 million for the nine months ended March 31, 2011, an increase of approximately 19.7%. Australian revenues increased approximately $7.5 million, or approximately 17.8%, compared to the nine months ended March 31, 2010. The increase in Australian revenues pertained primarily to our radio network. Approximately $4.3 million of the overall approximately $7.5 million increase in Australian revenues was due to the Australian dollar being stronger in the first three fiscal quarters 2011 compared to fiscal 2010, while the remaining approximately $3.2 million was due to increased sales in local currency. As reflected in Changes in Key Operating Statistics in Local Currencies, Australian revenues increased approximately 7.8% when measured in local currency compared to the nine month period ended March 31, 2010. Revenues from our United Kingdom operations increased approximately $2.4 million (approximately 11.3%) which primarily related to our traffic and entertainment news network advertising sales. Unlike the Australian and Canadian dollar, the British pound was actually weaker over the first three fiscal quarters of this year (although not the current quarter) compared to the same period of last year. As reflected in Changes in Key Operating Statistics in Local Currencies, United Kingdom revenues increased approximately 13.2% when measured in British pounds. Revenues from the sale of inventory related to our Canadian operations increased approximately $4.0 million, or approximately 61.5%, from the previous year period. As reflected in Changes in Key Operating Statistics in Local Currencies, Canadian revenues increased approximately 54.8% when measured in Canadian dollars.

     Operating expenses (exclusive of depreciation and amortization discussed below). Operating expenses increased from approximately $47.7 million for the nine months ended March 31, 2010 to approximately $53.2 million for the nine months ended March 31, 2011, an increase of approximately 11.5%. Australian operating expenses increased approximately $3.9 million primarily due to an increase in station compensation of approximately $3.4 million and an increase in employee costs of approximately $0.6 million. Approximately $2.3 million of the approximately $3.9 million overall increase in Australian operating expenses discussed above was related to currency movements as the Australian dollar was stronger in the current fiscal year to date period when compared to the nine month period ended March 31, 2010. As reflected in Changes in Key Operating Statistics in Local Currencies, Australian operating expenses increased by approximately 7.4% when measured in local currency. Operating costs related to our United Kingdom operations increased approximately $0.8 million compared to the period ended March 31, 2010. Employee costs were reduced approximately $0.2 million, third party traffic out source provider costs were reduced approximately $0.3 million while station compensation increased approximately $1.3 million compared to the previous year period. As reflected in Changes in Key Operating Statistics in Local Currencies, United Kingdom operating expenses increased by approximately 6.4% in local currency. Operating expenses related to our Canadian operations increased approximately $0.6 million due to an increase in station compensation of approximately $0.4 million, approximately $0.1 million loss on write-off of a blown helicopter engine, an increase of approximately $0.2 million in employee costs and a decrease of approximately $0.1 million in aviation costs. As reflected in Changes in Key Operating Statistics in Local Currencies, Canadian operating expenses increased by approximately 3.1% in local currency. Global Alert Network operating expenses increased approximately $0.2 million as spending increased in the current quarter in an effort to commercialize our alerting product for mobile phones.

     Selling, general and administrative expenses. Selling, general and administrative expenses increased from approximately $15.8 million for the nine months ended March 31, 2010 to approximately $18.1 million for the nine months ended March 31, 2011, an increase of approximately 14.6%. Australian selling, general and administrative expenses increased approximately $1.4 million compared to the period ended March 31, 2010, of which approximately $0.9 million related to currency translation differences as the Australia dollar was stronger relative to the U.S. dollar compared to the year ago period. The majority of the increase in Australian selling, general and administrative in local currency pertained to higher sales employee compensation mainly resulting from the higher revenues for the period and to a lesser extent increases in administrative salaries. Sales expense as a percentage of revenue in Australia decreased from approximately 13.9% for the nine months ended March 31, 2010 to approximately 13.4% for the nine months ended March 31, 2011. Canada Traffic Network selling, general and administrative expenses increased approximately $1.0 million primarily due to a $0.7 million increase in costs related to our sales staff due to commissions on increased sales, the hiring of additional sales representatives and sales managers as well as severance for terminated employees. Selling, general and administrative expenses increased approximately $0.1 million in the United Kingdom primarily due to the management fee from Global Traffic Network that was implemented in the quarter. Non-cash compensation expense resulting from grants of employee and director stock options and restricted stock was approximately $1.0 million for the nine months ended March 31, 2011 and approximately $0.9 million for the nine months ended March 31, 2010.

     Depreciation and amortization expense. Depreciation and amortization expense increased from approximately $3.9 million for the nine months ended March 31, 2010 to approximately $4.4 million for the nine months ended March 31, 2011. Approximately $0.4 million of the increase related to shortening the useful lives of the Canadian Traffic Network helicopters from eight years to six years and reducing the Canadian Traffic Network helicopter engine rebuild useful lives from three years to two years in March 2010. This change in estimate was made due to our flying more hours per year in Canada than originally anticipated.

     Interest expense. Interest expense was $0 for the nine months ended March 31, 2011 as the Company has no outstanding debt.

     Other (income) expense. Other (income) (net) increased from approximately $0.7 million for the nine months ended March 31, 2010 to $0.9 million for the nine months ended March 31, 2011. Other (income) consists primarily of interest income on our cash balances. For the nine month period ended March 31, 2010, there was approximately $0.1 million of foreign translation income. This income resulted from the repayment of balances due to the Company by Australia Traffic Network during the prior year period. Intercompany balances between the Company and its subsidiaries are translated from the local currencies to U.S. dollars at each balance sheet date. To the extent these balances are intended to be ongoing, that is, settlement is neither planned nor anticipated, the translation adjustments to balance intercompany are reflected as a component of other comprehensive income. The repayment of the Australia Traffic Network intercompany balance triggered a realized foreign exchange income during the period ended March 31, 2010.

     Income tax expense. Income tax expense increased from approximately $3.1 million for the nine months ended March 31, 2010 to approximately $4.2 million for the nine months ended March 31, 2011. The increase was primarily due to higher net profit in Australia which led to an approximately $0.7 million increase in income tax expense for the nine months ended March 31, 2011 compared to the nine month period ended March 31, 2010. The effective tax rate in Australia was 30.1% for the nine month periods ended March 31, 2011 and 2010 compared to the statutory federal rate of 30.0%. There was no income tax benefit for the United States or Canada as a valuation allowance has been created for 100% of the Company’s net deferred tax assets in those countries. In addition, tax expense related to our United Kingdom operations increased approximately $0.3 million due to increased profits from UK Commercial Traffic Network. The UK Traffic Network realized approximately $0.5 million tax benefit due primarily to the utilization of the deferred tax liability created by the Unique acquisition. The UK Traffic Network tax benefit was offset by approximately $0.6 million of tax expense related to the utilization of UK Commercial Traffic Network’s net operating loss carry-forwards. UK Commercial Traffic Network’s tax benefit and tax expense are both non-cash items.

     Net income. Net income increased from approximately $0.3 million for the nine months ended March 31, 2010 to approximately $4.9 million for the nine months ended March 31, 2011. The increase is primarily attributable to a smaller Canadian Traffic Network net loss due in large part to significantly higher sales in that market, increased Australia Traffic Network net income resulting from higher sales and favorable currency movements and the financial performance of UK Traffic Network improving from a net loss to net income, primarily based upon the performance of UK Commercial Traffic Network.

Changes in Key Operating Statistics in Local Currencies

     The table below sets forth changes in certain of our key operating statistics for our Australian operations for the comparable periods presented without taking into account foreign currency exchange rates. Amounts are expressed in Australian dollars. The exchange rates from Australian dollars to United States dollars for each of the applicable periods is set forth in the Executive Overview section of Management Discussion and Analysis of Financial Condition and Results of Operations under the heading “Basis of Presentation”.

		Nine Months				Nine Months
		Ended				Ended				Percentage
		March 31,				March 31,				Increase
Key operating statistic		2011				2010				(Decrease)
		(In thousands)				(In thousands)
Revenues		$	51,447			$	47,727				7.8	%
Operating expenses			27,140				25,279				7.4	%
Selling, general and administrative expenses			10,485				9,863				6.3	%
Depreciation and amortization expense			827				851				(2.8	)%
Interest expense			—				17				(100.0	)%
Other (income)			(929	)			(580	)			60.2	%
Income tax expense			4,193				3,703				13.2	%
Net income			9,731				8,594				13.2	%

     The table below sets forth changes in certain of our key operating statistics for our Canadian operations for the comparable periods presented without taking into account foreign currency exchange rates. Amounts are expressed in Canadian dollars. The exchange rates from Canadian dollars to United States dollars for each of the applicable periods is set forth in the Executive Overview section of Management Discussion and Analysis of Financial Condition and Results of Operations under the heading “Basis of Presentation”.

		Nine Months				Nine Months
		Ended				Ended				Percentage
		March 31,				March 31,				Increase
Key operating statistic		2011				2010				(Decrease)
		(In thousands)				(In thousands)
Revenues		$	10,623			$	6,864				54.8	%
Operating expenses			7,808				7,570				3.1	%
Selling, general and administrative expenses			3,036				2,134				42.3	%
Depreciation and amortization expense			1,492				958				55.7	%
Interest expense			—				—				—
Other expense (income)			23				(4	)		NM
Income tax expense			—				—				—
Net loss			(1,736	)			(3,794	)			(54.2	)%

     The table below sets forth changes in certain of our key operating statistics for our United Kingdom operations for the comparable periods presented without taking into account foreign currency exchange rates. Amounts are expressed in British pounds. The exchange rates from British pounds to United States dollars for each of the applicable periods is set forth in the Executive Overview section of Management Discussion and Analysis of Financial Condition and Results of Operations under the heading “Basis of Presentation”.

		Nine Months				Nine Months
		Ended				Ended				Percentage
		March 31,				March 31,				Increase
Key operating statistic		2011				2010				(Decrease)
		(In thousands)				(In thousands)
Revenues		£	15,001			£	13,252				13.2	%
Operating expenses			11,775				11,062				6.4	%
Selling, general and administrative expenses			1,699				1,619				4.9	%
Depreciation and amortization expense			1,361				1,352				0.7	%
Interest expense			—				—				—
Other (income)			(6	)			(81	)			(92.6	)%
Income tax expense (benefit)			58				(111	)		NM
Net income (loss)			114				(589	)		NM