ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

GENERAL

THE FOLLOWING DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND RESULTS OF OUR OPERATIONS SHOULD BE READ IN CONJUNCTION WITH FINANCIAL STATEMENTS AND THE NOTES TO THOSE STATEMENTS INCLUDED ELSEWHERE IN THIS REPORT. THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS REFLECTING OUR CURRENT EXPECTATIONS THAT INVOLVE RISKS AND UNCERTAINTIES. ACTUAL RESULTS AND THE TIMING OF EVENTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN THESE FORWARD-LOOKING STATEMENTS DUE TO A NUMBER OF FACTORS, INCLUDING THOSE DISCUSSED UNDER BUSINESS- RISK FACTORS NOTED IN OUR 10KSB FOR THE YEAR ENDED FEBRUARY 28, 2008 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

OVERVIEW

Modavox, Inc. is the successor to SurfNet Media Group, Inc., a corporation founded in 1999 and InnerSpace Corporation. On February 28, 2006, we acquired, through merger, Kino Interactive LLC, which owned the rights to proprietary software ("Kino Software") utilized in the creation of platforms that distribute audio/visual streaming over the internet ("Modavox Platforms"). Until the merger with Kino, we produced and distributed online talk radio programming, principally through our VoiceAmerica Network through our Patented Internet Radio and Internet Advertising System. As a result of the merger with Kino, we have used the Kino Software to create a new platform for VoiceAmerica to distribute talk radio over the internet and have used the Modavox Platforms to develop customized audio & video streaming products utilized for online applications, destinations, geographical and database driven solutions, websites that contain online interactive advertising and enterprise level online interactive communication products, and website enhancements that create or upgrade audio and video streaming. We operate our Company in two distinctive product lines, our Interactive Agency Division and our Interactive Network Division. On March 3, 2007, Modavox purchased certain equipment and intangible assets from World Talk Radio LLC (WTR), a San Diego based internet talk Radio Company, for 900,000 shares of common stock valued at $1,260,000 based upon the market price at the date of purchase. The purchase agreement provides that another 100,000 common shares be retained in escrow for one year. Of these escrow shares, 30,000 have been issued as of and the remaining 70,000 are accrued as of November 30, 2008. In addition, we incurred $25,138 of fees associated with the transaction. We purchased property and equipment valued at $35,000 and certain intangible assets, consisting of the trade name, domain name and various archived internet radio programs valued at $1,250,138. At the time of the purchase, WTR had two employees and minimal operating activity. In addition, the technology, marketing, and operating activities were abandoned and replaced with a Modavox version. As a result, we accounted for this transaction as an asset purchase and not an acquisition of a business. On May 15, 2008, Modavox purchased certain assets from Avalar, Inc., a Washington based internet radio software developer to enhance our current BoomBox Radio offering. We acquired the internet radio assets and enhancement platform for 250,000 shares and $50,000 of cash. The purchase provided us with all of the intangible assets and no liabilities of Avalar, Inc. These shares were valued at $1.85 per share for a share value of $277,500 for the 150,000 issued immediately, while the purchase agreement provided that Modavox will hold in escrow 100,000 common shares for six months while Modavox implements the software and integrates the systems. At November 30, 2008, an accrual has been set up for the 100,000 shares. At the time of the purchase, Avalar had one employee who provided front line support of the system integration and texting through October 15, 2008. In addition, the technology, marketing, and operational activities, where they existed, were abandoned following integration and replaced with Modavox versions. As a result, we accounted for the transaction as an asset purchase and not an acquisition of a business.

You can learn more about us by visiting our website at www.modavox.com. Our offices are at 1900 W University Dr, Suite 230, Tempe, AZ 85281 (480) 553-5795. On January 30, 2002 our common stock began trading on the OTC Bulletin Board Service. Our stock symbol is MDVX.

Historically, however, the Company's revenues have been less than its expenses. As a result, the Company has been dependent on raising capital to continue its operations.

Results of Operations

The discussion of the results of operations compares the three months ended November 30, 2008 with the three months ended November 30, 2007 and is not necessarily indicative of the results which may be expected for any subsequent periods. Our limited operating history makes predicting future operating results very difficult. Our prospects should be considered in light of the risks, expenses and difficulties encountered by companies in similar positions. We may not be successful in addressing these risk and difficulties.

THREE MONTHS ENDED NOVEMBER 30, 2008 VS. 2007

For the quarter ended November, 2008, revenues were $718,695 compared to $797,559 for the quarter ended November 30, 2007. Revenues for the quarter ended November 30, 2008 included $79,313 from the Interactive Media Division and $529,342 from the Broadcast Media Division, and deferred revenue in the amount of $110,040. The Broadcast Media division revenues in 2008 include $36,866 from Avalar which was acquired on May 15, 2008 and $15,900 from World Talk Radio which was acquired on March 3, 2007. Revenues from the Interactive Media division in 2008 included an aggregate of $48,875 from hosting services and $12,535 from website development compared to $117,867 in monthly hosting and $81,650 in website development in 2007. The decrease in revenue for the Broadcast Media division is related to the reduction of the sales team for World Talk Radio and to the significant downturn of the economy. The decrease in revenue for the Interactive Media division is related to the significant downturn in the economy, our production time lines and product delivery.

Operating expenses were $312,324 for the November 30, 2008 quarter compared to $65,912 in the quarter ended November 30, 2007 reflecting expense increases related to telephone, hosting, and rent to support additional locations in our Interactive Media Department and sales commissions paid to Network Division Executive Producers related to increased sales, and hosting of our various Internet Based Assets.

Selling, general, and administrative expenses were $820,449 for the quarter ended November 30, 2008 compared with $1,124,782 for the quarter ended 2007. This reduction resulted from better control over costs and a reduction of various expenses, although the 2008 quarter included legal fees of $244,306, as the Company continues to manage through the various legacy legal challenges by former management and focus on our patent strategies.

Depreciation and amortization expense was $222,900 in the 2008 quarter compared with $89,997 in the 2007 quarter. The increase in depreciation and amortization relates to the increased capitalization of internal software and assets purchased in the asset purchases of World Talk Radio, Kino Interactive, and Avalar.

During the quarter ended November 30, 2008, the Company had loss of $636,978 compared to the loss of $483, 132 in the 2007 quarter.

NINE MONTHS ENDED NOVEMBER 30, 2008 VS. 2007

For the nine months ended November 30, 2008 revenues were $2,565,156 compared to $2,531,779 for the nine months ending November 30, 2007. Revenues for the nine months ended November 30, 2008 included $532,794 from the Interactive Media Division and $1,473,415 from the Broadcast Media Division, and deferred revenue in the amount of $558,947 compared to $603,414 from the interactive media division, $1,928,365 from the Broadcast Media Division, respectively for the nine months ended November 30, 2007. The Broadcast Media Division revenues in 2008 included $114,022 from World Talk Radio which was acquired on March 3, 2007 and $45,170 from Avalar which was acquired on May 15, 2008. Revenues from the Interactive Media Division in 2007 included an aggregate of $114,809 from hosting services and $417,985 from other services compared to $301,477 from monthly hosting services in 2007.

Operating expenses were $871,351 for the nine months ended November 30, 2008 compared to $734,817 in 2007. The increase in operating expense reflects increased expense related to distribution of radio and interactive content.

Selling, general and administrative expenses were $2,360,956 for the nine months ended November 30, 2008 compared with $2,160,987 for 2007. The difference is due to increases in payroll costs to key managers and associates, and additional support staff for the Interactive Radio Division and the Broadcast Media Divisions.

Depreciation and amortization expense was $626,035 for the nine months ended November 30, 2008 compared with $314,859 in 2007. The increase is due to depreciation of additional property and equipment and amortization of additional software purchases, the Avalar Asset purchase, and internally capitalized software.

During the nine months ended November 30, 2008, the company had a net loss of $1,293,186 compared to a net loss of $650,207 in 2007. The loss is due to the increase of operating, selling, and general and administration expenses without the corresponding increase in revenue.

LIQUIDITY AND CAPITAL RESOURCES

During the nine months ended November 30, 2008, cash generated from revenues was not adequate to pay the Company's operating expenses, fund research & development, and fund the Avalar, Inc. Asset Purchase.

During the nine months ended November 30, 2008, we raised $1,265,882 through the issuance of common stock. These proceeds were used in part, to provide payment to non-operational activities such as the investigation of the former Chief Executive Officer & Chairman, fund out patent strategies, increase our product offering through the acquisition of the Avalar assets, and resolve legal matters. As of November 30, 2008, Modavox has no outstanding debt other than the related party note payable of $17,069, has paid off the outstanding bank note, and intends to close the credit line opened by former management in 2003.

The Company believes that its required capital expenditures for fiscal year 2009 will exceed $500,000.

As noted above, the Company has not historically had adequate cash or projected cash flow to fund its operations and continuation of its operations until the Company is able to achieve sustainable positive cash flow, is dependent upon its ability to raise additional capital through equity and debt issuance. While the Company is making progress in achieving sustainable positive cash flow, the future growth of the Company and negative cash flow until sustainable positive cash flow is achieved may require that the Company raise additional capital.

RISK FACTORS

PLEASE SEE FORM 10KSB FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 13, 2008 FOR COMPANY RISK FACTORS. IN ADDITION, THE COMPANY BELIEVES THAT THE CREDIT CRISIS AND ECONOMY BOTH HAVE WORSENED AND THIS MAY AFFECT MODAVOX BOTH BY NEGATIVELY IMPACTING REVENUE AND BY MAKING IT MORE DIFFICULT OR IMPOSSIBLE TO GET ACCESS TO ADDITIONAL CAPITAL.

FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-QSB and the documents incorporated herein by reference contain forward-looking statements that have been made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates and projections about our industry, management's beliefs, and certain assumptions made by management. Words such as "anticipate," "expect," "intend" "plans," "believe," "seek," "estimate" and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and actual actions or results may differ materially. These statements are subject to certain risks, uncertainties and assumptions that are difficult to predict, including those noted in the documents incorporated herein by reference. Particular attention should also be paid to the cautionary language appearing elsewhere in this report. We undertake no obligation to update publicly any forward-looking statements as a result of new information, future events or otherwise, unless required by law. Readers should, however, carefully review the risk factors included in other reports or documents we file from time to time with the Securities and Exchange Commission, including in our Annual Report Form 10-KSB for our fiscal year ended February 29, 2008.