According to a report from Strategy Analytics, nearly half of all U.S. households had broadband Internet access in 2006, with broadband Internet penetration expected to reach 73% by 2010. In addition, IDC estimates that the average speed of downstream access for a broadband connection, the speed at which an end-user accesses media files, doubled from the third quarter of 2004 to the same quarter of 2006 (“Market Analysis: U.S. Broadband Services 2006-2010 Forecast,” IDC, September 2006). The proliferation of broadband Internet connections has provided an increasing number of users with the capability to access rich media content efficiently.

The proliferation of broadband Internet has fundamentally changed the way that consumers access and interact with media content. According to Forrester Research, Inc., consumers between the ages of 18-26 spend approximately 12 hours per week using the Internet, compared to approximately 10.5 hours per week watching television (“State of the Consumers and Technology: Benchmark 2006,” Forrester Research, Inc., July 2006). In addition, eMarketer estimates that at the end of 2006, nearly 60% of all Internet users regularly watched videos online. That number is expected to climb to 80% by the end of 2010.

Through technologies like Internet search, personal digital video recorders, video-on-demand and social media platforms, consumers are increasingly accustomed to immediate, on-demand access to media content, including videos, music and photos provided by media or content providers or by users themselves.

The proliferation of devices that are capable of connecting to the Internet, such as MP3 players, mobile phones and videogame consoles, has given users even more control and flexibility over how and where they access and use media content from the Internet.

In designing and building its content delivery network, the Company built and deployed a globally-distributed network of thousands of servers specially configured for the delivery of rich media content.

The Company’s network infrastructure consists of dense clusters of specially-configured servers organized into large, logical CDN locations. The extensive storage capacity of these logical CDN locations leads to fewer cache misses than would occur in an early CDN architecture and provides maximum scalability and responsiveness to surges in end-user demand.

The Company’s logical CDN locations are directly connected to hundreds of user access networks, which are computer networks connected to end-users.

The Company has developed proprietary software that manages its content delivery system. This software intelligently manages the delivery of content objects, storage and retrieval of customer content libraries, activity logging and information reporting.

The Company handles both download and streaming deliveries, and does so across one of the broadest range of formats in the industry, including Adobe Flash, MP3 audio, QuickTime, RealNetworks RealPlayer and Windows Media.

The Company’s Content Delivery provides HTTP/web distribution of digital media files such as video, music, games, software and social media.

The Company’s Streaming Media provides on-demand and/or live streaming for all major formats including Adobe Flash, MP3 audio, QuickTime, RealNetworks RealPlayer and Windows Media. When media files are streamed to an end-user, the files are not stored on the user’s computer, but rather are received directly and played by the user’s media player software in real-time.

The Company’s Custom CDN provides customized content delivery deployments and solutions, built with some or all of the Company’s standard CDN components, but in a configuration unique to the customer.

The Company has developed an innovative system for Internet-based delivery of digital media, based on a content delivery network built specifically for large media files, high bit-rate media streams, expanding content libraries and global audiences.

Cost of revenue was $36 million for the year ended December 31, 2006 and $11.9 million for the year ended December 31, 2005, an increase of $24.1 million, or 203%.

Sales and marketing expenses were $6.8 million for the year ended December 31, 2006 and $3.1 million for the year ended December 31, 2005, an increase of $3.8 million, or 122%.

Research and development expenses were $3.2 million for the year ended December 31, 2006 and $462,000 for the year ended December 31, 2005, an increase of $2.7 million, or 582%.

Interest expense was $1.8 million for the year ended December 31, 2006 and $955,000 for the year ended December 31, 2005, an increase of $827,000, or 87%.