UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549


FORM
10-K





T           ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d)


OF
THE SECURITIES EXCHANGE ACT OF 1934




For the
fiscal year ended:December 31,
2007




OR




£           TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d)


OF
THE SECURITIES EXCHANGE ACT OF 1934




Commission
file number 0-26809





UVUMOBILE,
INC.


(Exact
Name of Registrant as Specified in Its Charter)




Delaware
            
            91-1962104(State
      or Other Jurisdiction of Incorporation of Organization)
            
            (I.R.S.
      Employer Identification No.)





2160
      Satellite Boulevard, Suite 130
              Duluth,
      Georgia
            
            30097(Address
      of Principal Executive Offices)
            
            (Zip
      Code)





Registrant's
Telephone Number, Including Area Code: (678) 417-2000





Securities
registered pursuant to Section 12(b) of the Act:  None







Securities
registered pursuant to Section 12(g) of the Act:




Title
      of Each Class
            
            Name
      of Each Exchange on Which RegisteredCommon
      Stock, $0.001 par value
            
            OTC
      Bulletin Board




Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.




Yes
      £
            No
      T




Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.




Yes
      £
            No
      x




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 twelve 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 T
            No
      £




Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K.  T




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.




Large
      accelerated filer  £
            Accelerated
      filer  £
            Non-accelerated
      filer  £
            Smaller
      reporting company  T




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).




Yes £
            No
      T




The
aggregate market value of voting Common Stock held by non-affiliates of the
Registrant, based upon the average of the closing bid and asked price of Common
Stock on the OTC Bulletin Board system on June 29, 2007 of $0.14 was
approximately $7,247,845.




As of
March 7, 2008, the Registrant had 67,645,299 shares of Common Stock issued and
outstanding.




Documents
Incorporated by Reference: None.









Tableof Contents
            
            PagePART
      IItem
      1.
            
            Business
            
            2Item
      1A
            
            Risk Factors
            
            5Item
      1B
            
            Unresolved Staff Comments
            
            12Item
      2.
            
            Properties
            
            12Item
      3.
            
            Legal Proceedings
            
            12Item
      4.
            
            Submission of Matters to a Vote of Security
      Holders
            
            14PART
      IIItem
      5.
            
            Market for the Registrant's Common Equity, Related
      Stockholder Matters and Issuer Purchases of Equity
      Securities
            
            15Item
      6.
            
            Selected Financial Data
            
            18Item
      7.
            
            Management's Discussion and Analysis of Financial Condition
      and Results of Operations
            
            18Item
      7A.
            
            Quantitative and Qualitative Disclosures about Market
      Risk
            
            23Item
      8.
            
            Financial Statements and Supplementary
    Data
            
            23Item
      9.
            
            Changes in and Disagreements with Accountants on Accounting
      and Financial Disclosure
            
            23Item
      9A.
            
            Controls and Procedures
            
            23Item
      9B
            
            Other Information
            
            24PART
      IIIItem
      10.
            
            Directors, Executive Officers and Corporate
      Governance
            
            25Item
      11.
            
            Executive Compensation
            
            26Item
      12.
            
            Security Ownership of Certain Beneficial Owners and
      Management and Related Stockholder Matters
            
            33Item
      13.
            
            Certain Relationships and Related Transactions, and
      Director Independence
            
            35Item
      14
            
            Principal Accountant Fees and Services
            
            35PART
      IVItem
      15.
            
            Exhibits and Financial Statement
    Schedules
            
            37Signatures
            
            42CONSOLIDATED BALANCE SHEETS
            
            F-3CONSOLIDATED STATEMENTS OF
      OPERATIONS
            
            F-4CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
      DEFICIT
            
            F-5CONSOLIDATED STATEMENTS OF CASH
    FLOWS
            
            F-6NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS
            
            F-7










Unless the context otherwise
requires, all references to “uVuMobile,TM”the “Company,” “we,” “us” or “our”
refers to uVuMobile, Inc. and its subsidiary. References in this report to
annual financial data for uVuMobile refer to fiscal years ended December
31.




General
information about uVuMobile can be found at www.uvumobile.com. The Company makes
its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K and amendments to these reports filed or furnished pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 available free of
charge on its Website, as soon as reasonably practicable after they are
electronically filed with the SEC. The information on our website is not
incorporated into this report.




FORWARD-LOOKING
STATEMENTS




The
information contained in this Form 10-K, including the information incorporated
by reference into this Form 10-K, includes forward-looking statements as defined
in the Private Securities Reform Act of 1995.  Forward looking
statements are based on current expectations rather than historical facts and
they are indicated by words or phrases such as “anticipate,” “could,” “may,”
“might,” “potential,” “predict,” “should,” “estimate,” “expect,” “project,”
“believe,” “intend,” “plan,” “envision,” “continue,” “target,” “contemplate,” or
“will” and similar words or phrases or comparable terminology.  These
statements involve estimates, assumptions and uncertainties that could cause
actual results to differ materially from those expressed for the reasons
described in this Form 10-K.  You should not place undue reliance on
these forward-looking statements.




You
should be aware that our actual results could differ materially from those
contained in the forward-looking statements due to a number of factors,
including:




·
            general
      economic conditions;




·
            significant
      uncertainty inherent in the mobile entertainment services
      industry;




·
            we
      face intense and increasing competition from the telecommunications
      industry and the satellite and cable television industry; new competitors
      are likely to emerge and new technologies may further increase
      competition;




·
            our
      programming costs may increase beyond our current expectations and we may
      be unable to obtain or renew programming agreements on acceptable terms or
      at all;




·
            we
      are heavily dependent on complex information technologies and their
      support infrastructures; weaknesses in our information technology systems
      could have an adverse impact on our business; we may have difficulty
      attracting and retaining qualified personnel to maintain our information
      technology infrastructure;




·
            lack
      of funding to continue our operations and our ability to obtain future
      financing or funds;




·
            our
      ability to successfully obtain a diverse customer base or retain our
      existing customers;




·
            our
      ability to protect our intellectual property through patents, trademarks,
      copyrights and confidentiality
agreements;




·
            our
      ability to attract and retain a qualified employee
  base;




·
            our
      ability to respond to new developments in technology and new applications
      of existing technology before our
competitors;




·
            our
      ability to develop, maintain and enhance our strategic relationships with
      wireless carriers, multi-service operators (MSO’s), handset manufacturers
      and distributors, key streaming media technology companies and content
      providers;




·
            acquisitions,
      business combinations, strategic partnerships, divestures, and other
      significant transactions may involve additional
    uncertainties;




·
            our
      ability to maintain and execute a successful business strategy;
      and




·
            we
      may face other risks described from time to time in periodic and current
      reports we file with the United States Securities and Exchange Commission
      (“SEC”).




You
should also consider carefully the statements under “Risk Factors” and other
sections of this Form 10-K, which address additional factors that could cause
actual results to differ from those set forth in the forward-looking statements
and could materially and adversely affect the Company’s business, operating
results and financial condition. All subsequent written and oral forward-looking
statements attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by the applicable cautionary
statements.




The
forward-looking statements speak only as of the date on which they are made,
and, except to the extent required by federal securities laws, we undertake no
obligation to update any forward-looking statement to reflect events or
circumstances after the date on which the statement is made or to reflect the
occurrence of unanticipated events. In addition, the Company cannot assess the
impact of each factor on its business or the extent to which any factor, or
combination of factors, or factors it is unaware of, may cause actual results to
differ materially from those contained in any forward-looking
statements.





- 1
-
 Table of Contents





PART
I




Item1.
            Business




uVuMobile,
Inc. (hereinafter sometimes referred to as  “uVuMobileTM,” the
“Company,” “we,” “us,” or “our”) is a provider of video content distribution
services and technology.





Incorporated
in 1984, the Company acquired OVT, Inc., d/b/a SmartVideo, in November 2002,
subsequently changing its name to SmartVideo Technologies, Inc., and in June
2007, the Company changed its name to uVuMobile, Inc.  Although the
core business of the Company has remained constant, the Company has changed its
focus from distributing business-to-business services to the distribution of
video content to consumers.




Since
2002, the Company has been a provider of technology engaged in the aggregation
and distribution of streaming video content to consumers connected to the public
Internet. The Company has been in the business of purchasing the rights to video
and television content and delivering that content to subscribers for a fee.
Additionally, the Company also provides managed services for Internet
network operators (carriers) and for major producers, owners and distributors of
content. The Company intends to continue expanding its market opportunities
by delivering video services to all forms of devices capable of receiving an
Internet Protocol (IP) data stream and rendering that data stream into visible
images on displays.




In
January 2005, the Company launched its direct-to-consumer mobile video service
providing its customers with access to high-quality video programming that is
transmitted directly to SmartPhone cellular handsets and to Wi-Fi enabled PDA
devices. In addition, the Company has developed Real Time Streaming
Protocol (RTSP) and Java 2 Platform, Micro Edition (J2ME)
compatibility.





During
the fourth quarter of 2006, the Company expanded its product offerings to
include a new suite of mobile technology and content solutions, bringing
together a myriad of implementation choices, business models and marketing
plans. The Company believes these new products will aid its customers that are
seeking to capitalize on mobile technology opportunities. These new media
services combine TV, radio, and other media platforms with user-friendly
personalization, interactivity and targeted advertising.





Our
Business Strategy




The
Company’s overall goal is to capitalize on the ever increasing demand by
consumers for personalized and interactive entertainment in the mobile
technology industry.  In connection with this goal, the Company
provides its clients with high-quality, interactive media solutions to mobilize
their content.  The
initial target market includes media and entertainment companies, consumer and
retail brands, portals and user oriented communities.




Key
Initiatives




In order
to be successful with the Company’s business strategy, it is focusing on the
following key initiatives:




Increase Sales of
our Products– The Company
believes that improvement in the following areas will facilitate increased sales
of its products: 1) Implementation of diverse and effective distribution
programs; 2) Increasing its marketing resources and 3) Continuing to
develop exciting new media solutions.




Technology
Leadership– The Company believes
that technological leadership will play an important role in its ability to
introduce services that are customer-friendly at a reducedcost. The Company
intends to continue developing its core technology, with particular interest in
new media services that combine TV, radio and other media with user-friendly
personalization and interactivity.




Expand the Number
of Compatible Handsets– The Company’s products
and services are compatible with Microsoft Windows Mobile O/S, Symbian O/S, J2ME
and Palm wireless handsets, representing about 35 % of the U.S. market and all
Windows O/S PDA devices, which comprise about 85% of all PDA
handsets.  The Company intends to expand its market opportunity by
expanding the compatibility of its products and services with additional handset
types and operating systems.




Key
Strengths




Core Technology–The Company has
developed a core technology platform that is optimized for the efficient
utilization of Internet bandwidth in conjunction with streaming video. The
Company believes that it delivers the highest quality video stream for any given
Internet bandwidth utilized.




- 2
-
 Table of Contents




Adaptability– The Company
believes that it can develop custom applications to meet the requirements of a
variety of application segments and integrate feature sets core to each of these
platforms delivering comprehensive turnkey solutions for a variety of mobile
applications.




Compatibility– The Companybelieves that it has a
technological infrastructure that is compatible with nearly all data network
configurations, Wi-Fi data networks, and a significant number of handset
models.




High-Quality
Picture and Sound–The Company believes its programming provides customers with high quality
video for a given bandwidth. The Company believes that its live linear video
feed compares favorably to download-and-play technology, without the extended
wait time for the download to complete. This reduced wait time and high quality
provide a significant competitive advantage. The Company believes that quality
is a key differentiation between its service and all competing
services.




Product
Offerings




uVuMobile’s
principal business is characterized by the following product
offerings:




Mobile Video
Hosting Services-The Company has developed one of the leading Mobile Content Delivery
Networks (CDNs) in the digital media delivery services industry. The Company
believes that no other CDN can match its performance in delivering high quality
digital media over wireless networks. The Company's mobile hosting and streaming
solutions enable the distribution of content to mobile users on any carrier
network and to multiple types of compatible devices. In addition to providing
content management, encoding, hosting, streaming and reporting services for
Live, Simulated Live or Video-on-Demand (VOD), it also provides the following
value added services:




·
            Multiple
      Billing Services - includes credit card, carrier direct bill and carrier
      PSMS (Premium Short Message
Service)




·
            Advertising
      Support - includes ad serving in streams, support of integration with
      mobile networks




·
            Client
      Application Development - standard and custom application
      support




·
            Content
      Services - The Company can sub-license to customers unique and compelling
      content packages




uVuRadio-The Company has
developed and intends to market an innovative interactive mobile platform for
the next generation of digital radio. The Company plans to combine innovative
ground-breaking technology with content to create an interactive radio service
for mobile data devices. The Company believes that this product will help
revolutionize the radio industry, bringing what it believes to be some of the
best terrestrial radio content combined with advanced mobile application
features to wireless users.




The
Company has developed a digital media solution that integrates local and
syndicated terrestrial and Internet radio programming with IP communications and
the rich media capabilities of mobile devices, delivering an exciting user
experience that it believes will extend radio far beyond broadcast audio into a
fully mobile and interactive multimedia experience.




Mobile Media
Solutions-The
Company provides a comprehensive turnkey solution for a variety of mobile
applications delivering client and browser based applications across all major
mobile platforms which include J2ME, BREW, Windows Mobile, Palm and WAP/xHTML.
The Company can develop applications to meet the requirements of a variety of
application segments and integrate feature sets core to each of these segments
including:




·
            Multimedia
      - pictures, music, movies, interactive text messaging,
  etc.




·
            Commerce
      - mobile shopping, location based services, cross-promotional marketing,
      etc.




·
            Communications
      - mobile IM, mobile e-mail, etc.




Subscription
Figures




As of
December 31, 2007, the Company had approximately 23,000 subscribers for all of
its subscription packages.




Competition




The
mobile entertainment industry is still in the early stage in its development
cycle, with each competitor offering distinctive services and distinctive
business models.  Our competition includes companies that offer video,
audio, interactive programming, telephony, data and other entertainment
services, including cable television, wireless companies, Direct-to-Home (DTH)
companies, Regional Bell Operating Companies (RBOCs) and companies that are
developing new technologies. Many of our competitors have access to
substantially greater financial and marketing resources than it has. However,
the Company believes that the quality and variety of video, audio, interactive
programming, access to service, customer service and price are the key elements
for gaining and maintaining market share.




- 3
-
 Table of Contents




Wireless Carriers–The Company
faces substantial competition in the mobile video industry from cellular
telephone companies. Most cellular carriers have a large, established customer
base, and many have significant investments in companies that provide
programming content. It is unclear whether a carrier developed and deployed
product will be a long-term player in this market, or whether the carrier will
co-brand and adopt the services of a content aggregator who provides a high
value-added service and delivery infrastructure.




Content
Aggregators–The Company encounters
competition in the mobile video industry from third-party content aggregators.
These content aggregators perform services similar to it.




Governmental
Regulation




At this
time, our service is not subject to any governmental regulation; however, in the
future, we may be subject to U.S. government regulation, primarily by the FCC
and, to a certain extent, by Congress, other federal agencies, state and local
authorities and the International Telecommunications Union (ITU), a specialized
agency of the United Nations within which governments and the private sector
coordinate global telecommunications networks and services. Depending upon the
circumstances, noncompliance with legislation or regulations promulgated by
these entities could result in the suspension or revocation of our licenses or
registrations, the termination or loss of contracts or the imposition of
contractual damages, civil fines or criminal penalties.




Employees




As of
February 26, 2008, the Company had a staff of 14 employees and
consultants.  The Company believes that its employee relations are
good.  None of the Company’s employees are represented by labor
unions.





Segment
Reporting




The
Company has been operated and evaluated by management as a single operations
segment in accordance with the provisions of Statement of Financial Accounting
Standards (“SFAS”) No. 131 - “Disclosures about Segments of an Enterprise and
Related Information.”




Seasonality
and Backlog




uVuMobile’s
business is not subject to significant seasonal fluctuations. There are no
material backlogs in its business.




Recent
Developments





On
February 13, 2008, the Company received the consent of a majority of the
outstanding holders of record of its common stock, par value $0.001 per share,
the Company’s Series A-1 Convertible Preferred Stock, par value $0.001 per
share, and the Company’s Series B Convertible Preferred Stock, par value $0.001
per share, to amend the Company’s Certificate of Incorporation to increase the
number of authorized shares of common stock from 150,000,000 shares to
300,000,000 shares.  The amendment to the Certificate of Incorporation
became effective on February 13, 2008, upon the filing of the Certificate of
Amendment to the Certificate of Incorporation with the Secretary of State of the
State of Delaware.




- 4
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Item1A.
            Risk
      Factors





You should carefully consider the
risks described below before making an investment decision. The risks described
below are not the only ones facingtheCompany. Additional risks not
presently known tothe
Company or that itcurrently believesare immaterial may also impair its
business operations. The Company’sbusiness could be harmed by any of
theserisks. The
trading price of itscommon stock could decline due to any of these risks and you may lose all or
part of your investment. In assessing these risks, you should also refer to the
other information contained in this report, including our consolidated financial
statements and related notes.





Risks
Related to The Company’s Business




uVuMobile’s
independent auditor’s report contains a going concern qualification, and the
Company continues to experience losses from operations.




The
report of the Company’s independent registered public accounting firm for the
fiscal year ended December 31, 2007, contains an explanatory paragraph which
states that the Company has suffered recurring losses from operations and a
working capital deficiency that raise substantial doubt about its ability to
continue as a going concern. The Company has incurred substantial net losses of
$19,740,274, $24,488,876 and $8,841,345 for the years ended December 31, 2005,
2006 and 2007, respectively.




The
Company has used the proceeds received from private placements conducted in
March, November and December 2005, July 2006 and December 2007 for the
acquisition of programming rights, marketing and sales initiatives, and further
improvements to its technology, as well as to increase staffing levels to
support these marketing and technology efforts, all of which will adversely
affect operating results until revenues from sales of its services reach a level
at which operating costs can be supported. In the Company’s efforts to
strengthen its marketing and sales initiatives of the distribution of its
services, it is critical that the Company obtain distribution partners in order
to begin generating revenues.




The
Company did not generate cash flows from operating activities during 2007
sufficient to offset its operating expenditures. Based on the information
currently available regarding its proposed plans and assumptions relating to
operations, the Company anticipates that the net proceeds from its last
financing in 2007, together with projected cash flow from operations, will not
be sufficient to meet its cash requirements for working capital and capital
expenditures beyond the second quarter of 2008. As a result, it will be
necessary for the Company to secure additional financing to support its
operations. There can be no assurance that the Company will be able to obtain
such financing on acceptable terms, or at all. If adequate funds are not
available or not available on acceptable terms, the Company will be unable to
continue as a going concern. The Company currently has no firm commitments for
any additional capital.




uVuMobile
has a limited operating history and insufficient revenue to generate positive
cash flows from its operations.




The
Company formally launched its Internet based products and services in 2003. To
date, it has earned only minimal revenue from these services and the revenue is
presently insufficient to generate positive cash flows from its operations.
Additionally, the income potential of its business and from its markets is
unproven. Because of the emerging nature of the mobile entertainment industry,
its executives have limited experience in it. As a young company operating in an
emerging market, uVuMobile face risks and uncertainties relating to its ability
to implement its business plan successfully. The Company’s future revenues and
success depend significantly upon acceptance of its mobile entertainment
services and the mobile entertainment industry as a whole. The Company’s future
revenues and success also depend on the development of revenue growth from its
services. The Company’s ability to successfully introduce new services and the
expected benefits to be obtained from these new services may be adversely
affected by a number of factors, such as unforeseen costs and expenses,
technological changes, economic downturns, and competitive factors or other
events beyond its control. The Company incurred operating losses in fiscal
2007 and cannot be assured that it will successfully market any services, or
operate profitably in the future.




The
Company’s quarterly financial results will continue to fluctuate, making it
difficult to forecast its operating results.




The
Company’s quarterly operating results have fluctuated in the past, and it
expects its revenues and operating results may vary significantly from
quarter-to-quarter due to a number of factors, many of which are beyond its
control, including:




·
            variability
      in demand and usage for its product and
  services;




·
            market
      acceptance of new and existing services offered by the Company, its
      competitors and potential competitors;
and




·
            governmental
      regulations affecting the use of the Internet, including regulations
      concerning intellectual property rights and security
    features.




The
Company’s current and future levels of expenditures are based primarily on its
growth plans and estimates of expected future revenues. Such expenditures are
primarily fixed in the short-term and its sales cycle can be lengthy.
Accordingly, the Company may not be able to adjust spending or generate new
revenue sources timely to compensate for any shortfall in revenues. If the
Company’s operating results fall below the expectation of investors, its stock
price will likely decline significantly.  In addition, potential
fluctuations in its operating results could lead to fluctuations in the market
price for its common stock.




- 5
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Since
the Company expects to continue incurring net losses, it may not be able to
implement its business strategy and the price of its stock may
decline.




As of
December 31, 2007, the Company had an accumulated deficit of $73,533,077. The
Company has incurred net losses quarterly from inception through December 31,
2007, and it expects to continue to incur net losses for the foreseeable
future.




Accordingly,
the Company’s ability to operate its business and implement its business
strategy may be hampered by negative cash flows in the future, and the value of
its stock may decline as a result. The Company’s capital requirements may vary
materially from those currently planned if, for example, the Company incurs
unforeseen capital expenditures or unforeseen operating expenses or make
investments to maintain its competitive position.  If this is the
case, the Company may have to delay or abandon some or all of its development
plans or otherwise forego market opportunities. The Company will need to
generate significant additional revenues to be profitable in the future, and it
may not generate sufficient revenues to be profitable on either a quarterly or
annual basis in the future. To address the risks and uncertainties facing its
business strategy, the Company must, among other things:




·
            achieve
      broad customer adoption and acceptance of its products and
      services;




·
            successfully
      raise additional capital in the
future;




·
            successfully
      integrate, leverage and expand its sales
force;




·
            successfully
      scale its current operations;




·
            implement
      and execute its business and marketing
  strategies;




·
            address
      intellectual property rights issues that affect its
    business;




·
            develop
      and maintain strategic relationships to enhance the development and
      marketing of its existing and new products and services;
    and




·
            respond
      to competitive developments in the mobile entertainment services
      industry.




The
Company may not be successful in achieving any or all of these business
objectives in a cost-effective manner, if at all, and the failure to achieve
these could have a serious adverse impact on its business, results of operations
and financial position. Each of these objectives may require significant
additional expenditures on its part. Even if the Company ultimately does achieve
profitability, it may not be able to sustain or increase profitability on a
quarterly or annual basis.




The
Company’s failure to respond to rapid changes in technology and its applications
and intense competition in the mobile entertainment services industry products
could make its services obsolete.




The
mobile entertainment services industry is subject to rapid and substantial
technological development and product innovations. To be successful, the Company
must respond to new developments in technology, new applications of existing
technology and new treatment methods. The Company’s response may be stymied if
it requires, but cannot secure, rights to essential third-party intellectual
property. The Company competes against numerous companies offering alternative
systems, some of which have greater financial, marketing and technical resources
to utilize in pursuing technological development. The Company’s financial
condition and operating results could be adversely affected if its mobile
entertainment services fail to compete favorably with these technological
developments, or if it fails to be responsive in a timely and effective manner
to competitors’ new services or price strategies.




The
Company’s success is dependent on the performance and retention of its executive
officers, consultants and key employees.




The
Company’s business and operations are substantially dependent on the performance
of its executive officers and key employees, including William Loughman, Scott
Hughes and Ronald A. Warren. The Company does not maintain “key person” life
insurance on any of its executive officers. The loss of one or several
executives could seriously harm its business. Any reorganization or reduction in
the size of its employee base could harm its ability to attract and retain other
valuable employees critical to the success of its business.




The
Company’s mobile entertainment services and any of its future services may fail
to gain market acceptance, which would adversely affect its competitive
position.




The
Company has not conducted any independent studies with regard to the feasibility
of its proposed business plan, present and future business prospects and capital
requirements. The Company has generated limited commercial distribution for its
mobile entertainment services. The Company’s services may fail to gain market
acceptance and its infrastructure to enable such expansion is still limited.
Even if adequate financing is available and its services are ready for market,
it cannot be certain that its services will find sufficient acceptance in the
marketplace to fulfill its long and short-term goals. Failure of its services to
achieve market acceptance would have a material adverse effect on its business,
financial condition and results of operations.




- 6
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The
Company depends on a limited number of customers and distribution channels for a
majority of its revenues so the loss of, or delay in payment from one or a small
number of customers or distribution channel partners could have a significant
impact on its revenues and operating results.




During
2007, the Company experienced a shift from a business-to-business model to a
subscription-based model reducing much of its reliance on revenues from related
parties.  The Company is in the process of developing relationships
with distribution channel partners to increase the size of its customer base.
The Company cannot successfully accomplish its business objectives by relying
solely on its existing customer base. If the Company is unsuccessful in
increasing and broadening its customer base, its ability to maintain and grow
its business will suffer.




Average
selling prices of the Company’s products and services may decrease, which may
harm its gross margins.




The
average selling prices of the Company’s products and services may be lower than
expected as a result of competitive pricing pressures and promotional programs.
The Company expects to experience pricing pressure and anticipates that the
average selling prices and gross margins for its products may decrease over
product life cycles. The Company may not be successful in developing and
introducing on a timely basis new products with enhanced features and services
that can be sold at higher gross margins.




The
Company may face third-party intellectual property infringement claims and other
related claims that could severely impact its business.




It may be
alleged that the Company is liable to third-parties for certain legal matters
relating to video, music, software, and other content that it encodes,
distributes, or makes available to its customers if, among other
things:




·
            the
      content or the performance of its services violates third-party copyright,
      trademark, or other intellectual property
  rights;




·
            its
      customers violate the intellectual property rights of others by providing
      content to the Company or by having it perform digital media services;
      or




·
            content
      that the Company encodes or otherwise handles for its customers is deemed
      obscene, indecent, or defamatory.




Any
alleged liability could damage its business by damaging its reputation,
requiring the Company to incur legal costs in defense, exposing it to awards of
damages and costs and diverting management’s attention, all which could have an
adverse effect on its business, results of operations and financial condition.
The Company’s customers generally agree to hold the Company harmless from claims
arising from their failure to have the right to encode or distribute multimedia
software and other content given to the Company for that purpose. However, in
some cases the Company may not be able to obtain such agreements or customers
may contest this responsibility or not have sufficient resources to defend
claims. In addition, the Company has limited insurance coverage for claims of
this nature and may not be able to cover losses above its insurance coverage
limits.




Because
the Company hosts, streams and deploys audio and video content on or from its
Websites for customers and provide services related to digital media content, it
faces potential liability or alleged liability for negligence, infringement of
copyright, patent, or trademark rights, defamation, indecency and other claims
based on the nature and content of the materials. Claims of this nature have
been brought and sometimes successfully made against content distributors. In
addition, the Company could be exposed to liability with respect to the
unauthorized duplication of content or unauthorized use of other parties’
proprietary technology. Any imposition of liability that is not covered by
insurance or is in excess of insurance coverage or any alleged liability could
harm the Company’s business.




The
Company cannot be certain that third-parties will not claim infringement by it
with respect to past, current, or future technologies. The Company expects that
participants in its markets will be increasingly subject to infringement claims
as the number of services and competitors in its industry segment grows. In
addition, these risks are difficult to quantify in light of the continuously
evolving nature of laws and regulations governing the Internet. Any claim
relating to proprietary rights, whether meritorious or not, could be
time-consuming, result in costly litigation, cause service upgrade delays or
require the Company to enter into royalty or licensing agreements, and the
Company cannot be sure that it will have adequate insurance coverage or that
royalty or licensing agreements will be made available on terms acceptable to it
or at all.




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The
Company cannot be certain that it will be able to protect its intellectual
property, which could harm its business.




The
Company’s intellectual property is critical to its business, and it seeks to
protect its intellectual property through copyrights, trademarks, patents, trade
secrets, confidentiality provisions in its customer, supplier, potential
investors, and strategic relationship agreements, nondisclosure agreements with
third-parties, and invention assignment agreements with its employees and
contractors. The Company cannot be certain that measures it takes to protect its
intellectual property will be successful or that third-parties will not develop
alternative solutions that do not infringe upon its intellectual
property.




Further,
the Company plans to offer its mobile entertainment services and applications to
customers worldwide including customers in foreign countries that may offer less
protection for its intellectual property than the United States. The Company’s
failure to protect against misappropriation of its intellectual property, or
claims that it is infringing the intellectual property of third-parties could
have a negative effect on its business, results of operations and financial
condition.




The
Company will rely on strategic relationships to promote its services and for
access to licensed technology; if the Company fails to develop, maintain or
enhance these relationships, its ability to serve its customers and develop new
services and applications could be harmed.




The
Company’s ability to provide its services to users of multiple technologies and
platforms depends significantly on its ability to develop, maintain or enhance
its strategic relationships with wireless carriers, handset distributors, key
streaming media technology companies and content providers. The Company will
rely on these relationships for licensed technology and content. Obtaining
comprehensive multimedia content licenses is challenging, as doing so may
require the Company to obtain copyright licenses with various third-parties in
the fragmented multimedia recording and publishing industries. These copyrights
often address differing activities related to the delivery of digital media,
including reproduction and performance, some of which may require separate
licensing arrangements from various rights holders such as publishers, content
providers, artists and record labels. The effort to obtain the necessary rights
by such third-parties is often significant, and could disrupt, delay, or prevent
the Company from executing its business plans. Because of the large number of
potential parties from which the Company must obtain licenses, it may never be
able to obtain a sufficient number of licenses to allow it to provide services
that will meet its customers’ expectations.




Due to
the evolving nature of its industry, the Company will need to develop additional
relationships to adapt to changing technologies and standards and to work with
newly emerging companies with whom it does not have pre-existing relationships.
The Company cannot be certain that it will be successful in developing new
relationships or that its partners will view these relationships as significant
to their own business, or that its partners will continue their commitment to
the Company in the future. If the Company is unable to maintain or enhance these
relationships, it may have difficulty strengthening its technology development
and increasing the adoption of its brand and services.




Competition
may decrease the Company’s market share, revenues, and gross
margins.




The
Company faces intense and increasing competition in the multimedia broadcast
market. If it does not compete effectively or if it experiences reduced market
share from increased competition, its business will be harmed.  In
addition, the more successful the Company is in the emerging market for
multimedia broadcast services, the more competitors are likely to emerge. The
Company believes that the principal competitive factors in its market
include:




·
            service
      functionality, quality and
performance;




·
            ease
      of use, reliability and security of
services;




·
            establishing
      a significant base of customers and distribution
  partners;




·
            ability
      to introduce new services to the market in a timely
  manner;




·
            customer
      service and support; and




·
            pricing.




Although
the Company does not currently compete against any one entity with respect to
all aspects of multimedia broadcast products and services, there are various
competitors that provide various products and services in the following
categories:




·
            collaboration,
      which provides for document and application sharing as well as user
      interactivity;




·
            live
      video and streaming multimedia;




·
            hosted
      services;




·
            training,
      which provides e-learning applications;
and




·
            on-premise
      software.




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There are
a number of companies, such as Verizon, Sprint and MobiTV, among others, that
provide outsourced digital media services. As the multimedia broadcast market
continues to develop, the Company expects to see increased competition from
traditional telecommunication service providers or resellers of those services.
The Company also faces competition from the in-house encoding services,
streaming networks and content management systems and encoding
services.




All of
the Company’s competitors have substantially more capital, longer operating
histories, greater brand recognition, larger customer bases and significantly
greater financial, technical and marketing resources than it does. These
competitors may also engage in more extensive development of their technologies,
adopt more aggressive pricing policies and establish more comprehensive
marketing and advertising campaigns than the Company can.  The
Company’s competitors may develop products and service offerings that it does
not offer or that are more sophisticated or more cost effective than its own.
For these and other reasons, its competitors’ products and services may achieve
greater acceptance in the marketplace than its own, limiting the Company’s
ability to gain market share and customer loyalty and to generate sufficient
revenues to achieve a profitable level of operations. The Company’s failure to
adequately address any of the above factors could harm its business and
operating results.




The
Company’s industry is experiencing consolidation that may intensify
competition.




The
multimedia broadcast services industries are undergoing substantial change that
has resulted in increasing consolidation and a proliferation of strategic
transactions. Many companies in these industries have been going out of business
or are being acquired by larger entities. As a result, the Company is
increasingly competing with larger competitors that have substantially greater
resources than it does.  The Company expects this consolidation and
strategic partnering to continue. Acquisitions or strategic relationships could
harm it in a number of ways.  For example:




·
            competitors
      could acquire or enter into relationships with companies with which the
      Company has strategic relationships and discontinue its relationship,
      resulting in the loss of distribution opportunities for its products and
      services or the loss of certain enhancements or value-added features to
      its products and services;




·
            competitors
      could obtain exclusive access to desirable multimedia content and prevent
      that content from being available in certain formats, thus decreasing the
      use of the Company’s products and services to distribute and experience
      the content that audiences most desire, and hurting its ability to attract
      customers;




·
            a
      competitor could be acquired by a party with significant resources and
      experience that could increase the ability of the competitor to compete
      with the Company’s products and services;
and




·
            other
      companies with related interests could combine to form new, formidable
      competition, which could preclude the Company from obtaining access to
      certain markets or content, or which could dramatically change the market
      for its products and services.




Any of
these results could put the Company at a competitive disadvantage that could
cause it to lose customers, revenue and market share. They could also force the
Company to expend greater resources to meet the competitive threat, which could
also harm its operating results.




If
the Company fails to enhance its existing services and product applications or
develop and introduce new multimedia broadcast services, applications and
features in a timely manner to meet changing customer requirements and emerging
industry trends or standards, its ability to grow its business will
suffer.




The
market for multimedia broadcast service solutions is characterized by rapidly
changing technologies and short product life cycles. These market
characteristics are heightened by the emerging nature of the Internet and the
continuing trend of companies from many industries to offer Internet-based
applications and services. The widespread adoption of the new Internet,
networking, streaming media, or telecommunications technologies or other
technological changes could require the Company to incur substantial
expenditures to modify or adapt its operating practices or infrastructure. The
Company’s future success will depend in large part upon its ability
to:




·
            identify
      and respond to emerging technological trends in the
  market;




·
            enhance
      its products by adding innovative features that differentiate its digital
      media services and applications from those of its
    competitors;




·
            acquire
      and license leading technologies;




·
            bring
      multimedia broadcast services and applications to market and scale our
      business on a timely basis at competitive prices;
  and




·
            respond
      effectively to new technological changes or new product announcements by
      others.




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The
Company will not be competitive unless it continually introduces new services
and applications or enhancements to existing services and applications that meet
evolving industry standards and customer needs. In the future, the Company may
not be able to address effectively the compatibility and operability issues that
arise as a result of technological changes and evolving industry standards. The
technical innovations required for it to remain competitive are inherently
complex, require long development schedules and are dependent in some cases on
sole source suppliers. The Company will be required to continue to invest in
research and development in order to attempt to maintain and enhance its
existing technologies and products, but it may not have the funds available to
do so. Even if the Company has sufficient funds, these investments may not serve
the needs of customers or be compatible with changing technological requirements
or standards. Most development expenses must be incurred before the technical
feasibility or commercial viability of new or enhanced services and applications
can be ascertained. Revenue from future services and applications or
enhancements to services and applications may not be sufficient to recover the
associated development costs.




The
technology underlying the Company’s services and applications is complex and may
contain unknown defects that could harm its reputation, result in product
liability or decrease market acceptance of its services and
applications.




The
technology underlying the Company’s multimedia broadcast services and
applications is complex and includes software that is internally developed and
software licensed from third-parties. These software products may contain errors
or defects, particularly when first introduced or when new versions or
enhancements are released. The Company may not discover software defects that
affect its current or new services and applications or enhancements until after
they are sold. Furthermore, because its digital media services are designed to
work in conjunction with various platforms and applications, the Company is
susceptible to errors or defects in third-party applications that can result in
a lower quality product for its customers. Because its customers depend on the
Company for digital media management, any interruptions could:




·
            damage
      its reputation;




·
            cause
      its customers to initiate product liability suits against the
      Company;




·
            decrease
      its product development resources;




·
            cause
      the Company to lose revenues; and




·
            delay
      market acceptance of its digital media services and
      applications.




The
Company’s business will suffer if its systems fail or its third-party facilities
become unavailable.




A
reduction in the performance, reliability and availability of the Company’s
systems and network infrastructure may harm its ability to distribute its
products and services to its customers and other users, as well as harm its
reputation and ability to attract and retain customers and content providers.
The Company’s systems and operations are susceptible to, and could be damaged or
interrupted by, outages caused by fire, flood, power loss, telecommunications
failure, Internet breakdown, earthquake and similar events. The Company may not
have any redundancy in its Internet multimedia broadcasting facilities and
therefore any damage or destruction to these would significantly harm its
multimedia broadcasting business. The Company’s systems are also subject to
human error, security breaches, power losses, computer viruses, break-ins,
“denial of service” attacks, sabotage, intentional acts of vandalism and
tampering designed to disrupt its computer systems, Websites and network
communications. This could lead to slower response times or system
failures.




The
Company’s operations also depend on receipt of timely feeds from its content
providers, and any failure or delay in the transmission or receipt of such feeds
could disrupt its operations.  The Company also depends on Web
browsers, ISPs and online service providers to provide access over the Internet
to its product and service offerings. Many of these providers have experienced
significant outages or interruptions in the past, and could experience outages,
delays and other difficulties due to system failures unrelated to its systems.
These types of interruptions could continue or increase in the
future.




The
Company’s digital distribution activities are managed by sophisticated software
and computer systems.  The Company must continually develop and update
these systems over time as its business and business needs grow and change;
these systems may not adequately reflect the current needs of its
business.  The Company may encounter delays in developing these
systems, and the systems may contain undetected errors that could cause system
failures. Any system error or failure that causes interruption in availability
of products or content or an increase in response time could result in a loss of
potential or existing business services, customers, users, advertisers or
content providers. If the Company suffers sustained or repeated interruptions,
its products, services and Websites could be less attractive to such entities or
individuals and its business could be harmed.




Significant
portions of its business are dependent on providing customers with efficient and
reliable services to enable customers to broadcast content to large audiences on
a live or on-demand basis.  The Company operations are dependent in
part upon transmission capacity provided by third-party telecommunications
network providers. Any failure of such network providers to provide the capacity
it requires may result in a reduction in, or interruption of, service to its
customers. If the Company does not have access to third-party transmission
capacity, it could lose customers and, if the Company is unable to obtain such
capacity on terms commercially acceptable, its business and operating results
could suffer.




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The
Company’s computer and communications infrastructure is located at a single
leased facility in Atlanta, Georgia.  The Company does not have fully
redundant systems, and it may not have adequate business interruption insurance
to compensate it for losses that may occur from a system outage. Despite its
efforts, the Company’s network infrastructure and systems could be subject to
service interruptions or damage and any resulting interruption of services could
harm its business, operating results and reputation.




Government
regulation could adversely affect the Company’s business prospects.




The
Company does not know with certainty how existing laws governing issues such as
property ownership, copyright and other intellectual property issues, taxation,
illegal or obscene content, and retransmission of media, personal privacy and
data protection will apply to the Internet or to the distribution of multimedia
and other proprietary content over the Internet. Most of these laws were adopted
before the advent of the Internet and related technologies and therefore do not
address the unique issues associated with the Internet and related technologies.
Depending on how these laws are developed and are interpreted by the judicial
system, they could have the effect of:




·
            increasing
      the Company’s costs due to new or changes in tax
    legislation;




·
            limiting
      the growth of the Internet;




·
            creating
      uncertainty in the marketplace that could reduce demand for its products
      and services;




·
            limiting
      its access to new markets which may include countries and technology
      platforms;




·
            increasing
      its cost of doing business;




·
            exposing
      the Company to significant liabilities associated with content distributed
      or accessed through its products or services;
or




·
            leading
      to increased product and applications development costs, or otherwise
      harming its business.




Specifically
with respect to one aspect of copyright law, on October 28, 1998, the Digital
Millennium Copyright Act (or “DMCA”) was enacted. The DMCA includes statutory
licenses for the performance of sound recordings and for the making of
recordings to facilitate transmissions. Under these statutory licenses,
depending on the Company’s future business activities, the Company and its
customers may be required to pay licensing fees in connection with digital sound
recordings it delivers or its customers provide on their Website and through
retransmissions of radio broadcasts and/or other audio content.




Because
of this rapidly evolving and uncertain regulatory environment, both domestically
and internationally, the Company cannot predict how existing or proposed laws
and regulations might affect its business. In addition, these uncertainties make
it difficult to ensure compliance with the laws and regulations governing
digital music. These laws and regulations could harm the Company by subjecting
it to liability or forcing it to change its business.




The
Company’s stock price has been and continues to be volatile.




The
market price for the Company’s common stock could fluctuate due to various
factors. These factors include:




·
            announcements
      regarding developments in its business, acquisitions and financing
      transactions;




·
            announcements
      by the Company or its competitors of new contracts, technological
      innovations or new products;




·
            changes
      in government regulations;




·
            fluctuations
      in its quarterly and annual operating results;
  and




·
            general
      market conditions.




In
addition, the stock markets have, in recent years, experienced significant price
fluctuations. These fluctuations often have been unrelated to the operating
performance of the specific companies whose stock is traded. Market
fluctuations, as well as economic conditions, have adversely affected, and may
continue to adversely affect, the market price of the Company’s common
stock.




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The
Company needs to raise additional capital in the future, and if it is unable to
secure adequate funds on terms acceptable to the Company, it will be unable to
execute its business plan and current stockholders may experience significant
dilution.




As of
December 31, 2007, the Company had approximately $1,078,000 in cash.  The
Company’s anticipates, based upon its proposed plans and assumptions relating to
operations that the net proceeds of approximately $2 million from the
closing of its most recent financing in December 2007, together with revenues
generated from operations, will not be sufficient to meet its cash requirements
for working capital and capital expenditures beyond the second quarter of 2008.
There can be no assurance that the Company will be able to obtain additional
financing on acceptable terms, or at all. If adequate funds are not available or
are not available on acceptable terms, the Company may not be able to pursue its
business objectives or remain in operation. This could seriously harm its
business, results of operations and financial condition.




If the
Company does not secure substantial additional funding to meet its capital needs
through the incurrence of debt, it may have to issue additional shares of common
stock or other securities convertible into shares of its common stock. If
additional funds are raised through the issuance of equity or convertible debt
securities, the percentage ownership of its current stockholders will be reduced
and these securities may have rights and preferences superior to that of its
current stockholders. If the Company raises capital through debt financing, it
may be forced to accept restrictions affecting its liquidity, including
restrictions on its ability to incur additional indebtedness or pay
dividends.





Item1B.
            Unresolved
      Staff Comments





Not
applicable.




Item2.
            Properties





The
Company currently subleases approximately 4,500 square feet of office space at
2160 Satellite Boulevard, Suite 130, Duluth, GA 30097. The office space
currently serves as its corporate headquarters located in Duluth, Georgia. The
Company pays monthly rent of approximately $6,528 per month on a sub-lease which
terminates on December 31, 2009.





Item3.
            Legal
      Proceedings





From
time-to-time, the Company is a party to claims and legal proceedings arising in
the ordinary course of business. The Company's management evaluates the exposure
to these claims and proceedings individually and in the aggregate and allocates
additional monies for potential losses on such litigation if it is possible to
estimate the amount of loss and determine if the loss is probable.





On or
about April 6, 2004, Rene Hamouth filed a Writ of Summons in the Supreme
Court of British Columbia (Case No. SO41955) against the Company, its former
chief executive officer and director, Richard E. Bennett, Jr. and its former
securities counsel, Edwards & Angell, LLP, a predecessor to Edwards Angell
Palmer & Dodge LLP, seeking an unspecified amount of damages and costs for
alleged libel of Mr. Hamouth resulting from two letters to his stockbroker,
First Associates Investments, Inc. The Company and the other defendants have
made an appearance in the court through respective legal counsel. On June 29,
2004, Mr. Hamouth filed an Amended Statement of Claim with the court. On
November 19, 2004, the Court of Appeal for British Columbia granted Edwards
Angell Palmer & Dodge LLP the right to appeal a chambers judge's decision
that the alleged libelous correspondence in question is covered by absolute
privilege and granted a stay of the proceeding pending the outcome of the
appeal. The appeal was heard in February 2005. On March 30, 2005, the court
granted the appeal and dismissed the claim against Edwards Angell Palmer &
Dodge LLP. Since the court's entry of judgment in the appeal and to the
Company’s knowledge, Mr. Hamouth has taken no further steps to pursue his
claims against the Company or Mr. Bennett.  On July 16, 2007, the
Company entered into a General Release and Settlement Agreement with the Hamouth
Family Trust and Rene Hamouth.  (See October 20, 2006
Hamouth litigation paragraph below describing the settlement
agreement.)




On March
9, 2005, SmartVideo Europe, Ltd., or SVEL, which is not an affiliate of
uVuMobile, Inc., announced its intention to bring legal action in the form of a
mediation/arbitration against the Company in regard to its alleged repudiation
and breach of a distribution agreement between the parties, dated April 2, 2004,
which involved certain rights to distribute certain of its products. The dispute
includes claims of SVEL that the Company had anticipatorily breached its
agreement with SVEL, thus allegedly inhibiting the development of SVEL's
business utilizing the Company’s technology on an exclusive basis in 25
countries throughout the European Union. The Company contends that it had the
right to terminate the agreement because of breaches by SVEL. On or about
December 13, 2006, SVEL filed its Statement of Claim with the American
Arbitration Association. The Company filed its response to the Statement of
Claim on or about January 22, 2007. The parties have now agreed to mediate the
matter prior to proceeding with arbitration. The mediation, which was set for
October 23, 2007, has been postponed indefinitely.





On or
about July 18, 2006, Manhattan Investments, Inc. (“Manhattan”) filed a Complaint
against the Company in the United States District Court, Northern District of
California (Case No. C-06-4379), alleging that the Company has wrongfully
refused to remove the restrictive legend on a stock certificate representing
49,795 shares. The Complaint includes claims for breach of fiduciary and
statutory duties, conversion and fraud, and seeks injunctive relief, as well as
monetary damages. On October 2, 2006, the Company filed a Motion to Transfer for
Improper Venue. The Motion was granted by the Court on November 13,
2006.  On July 23, 2007 (the “Effective Date”) the Company entered
into a Settlement Agreement and Mutual Release (the “Agreement”) with
Manhattan.  Pursuant to the Agreement, the parties agreed, among other
things, that the Company will issue 850,000 shares of the Company’s common
stock, par value $0.001 to Manhattan within seven business days following a
determination by the Court that the issuance of such common stock is fair,
reasonable, and adequate to Manhattan (the “Judicial
Determination”).  The 850,000 shares of the Company’s common stock
will be issued in reliance on the exemption from the registration requirements
of the Securities Act of 1933, as amended (the “Act”), provided by Section
3(a)(10) of the Act.  The Agreement also requires the Company to pay
$35,000 to Manhattan within 15 days after the closing of an equity financing
transaction, provided that the Company completes such transaction.  In
addition, the agreement requires the Company to cause 49,795 shares of the
Company’s common stock currently owned by Manhattan to be re-issued without
restrictive legends within seven business days of the Effective
Date.  In exchange for the payments and actions described above, the
Agreement provides for a release of the Company and each of the owners,
stockholders, predecessors, successors, directors, officers, employees,
representatives, attorneys, subsidiaries, and affiliates of the Company from all
charges, claims, liabilities, agreements, damages, causes of action, suits,
costs, losses, debts and expenses of any nature by Manhattan.  The
Agreement further provides for a release of Manhattan and each of the trustees,
representatives, attorneys and affiliates of Manhattan, and all persons acting
by, through, under or in concert with them from any and all charges, claims,
liabilities, agreements, damages, causes of action, suits, costs, losses, debts
and expenses of any nature by the Company.  On July 24, 2007, the
United States District Court entered an Order making the above-referenced
Judicial Determination. At September 30, 2007, based on the settlement date
of July 23, 2007, the Company accrued a settlement liability and related expense
of $332,500 based on the quoted closing trading price of $0.35 per share for the
underlying 850,000 common shares in addition to the $35,000 in cash
payments.




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On or
about October 20, 2006, Hamouth Family Trust (“Hamouth”) filed a Complaint
against the Company in the Court of Chancery of the State of Delaware, in which
Hamouth seeks declaratory and injunctive relief, as well as damages in an
unspecified amount, related to the Company's alleged wrongful refusal to issue
new stock certificates without restrictive legends for 800,000 shares of stock
owned by Hamouth.  On July 16, 2007 (the “Effective Date”), the
Company entered into a General Release and Settlement Agreement (the
“Agreement”) with the Hamouth Family Trust and Rene Hamouth (the “Claimant
Parties”) related to the Company's alleged wrongful refusal to issue new stock
certificates without restrictive legends for 800,000 shares of stock owned by
the Hamouth Family Trust and a judgment against Rene Hamouth in favor of the
Company in the amount of $172,325.  Pursuant to the Agreement, the
parties agreed, among other things, that the Company will issue 3,000,000 shares
of the Company’s common stock, par value $0.001 (the “Settlement Shares”) to the
Hamouth Family Trust within six business days following a determination by the
Chancery Court that the issuance of such common stock is fair, reasonable, and
adequate to the Hamouth Family Trust (the “Judicial
Determination”).  The 3,000,000 shares of the Company’s common stock
will be issued in reliance on the exemption from the registration requirements
of the Securities Act of 1933, as amended (the “Act”), provided by Section
3(a)(10) of the Act.  In the event the Chancery Court declines to make
the Judicial Determination, the Hamouth Family Trust has certain specified
registration rights relating to the Settlement Shares.  The Agreement
also requires (i) the Company to pay $50,000 to the Hamouth Family Trust on the
Effective Date, (ii) the Company to pay $50,000 to the Hamouth Family Trust on
the 30th day following the Effective Date, (iii) the Company to pay $300,000 to
the Hamouth Family Trust within 30 days after the closing of an equity financing
transaction, provided that the Company completes such transaction within 120
days of the Effective Date.  In addition, the agreement requires the
Company to: (a) cause 800,000 shares of the Company’s common stock currently
owned by the Hamouth Family Trust to be re-issued without restrictive legends
within six business days of receipt of the certificates representing such shares
of common stock and (b) release a judgment in the amount of $172,325 it holds
against Rene Hamouth.  In exchange for the payments and actions
described above, the Agreement provides for a release of the Company and each of
the owners, stockholders, predecessors, successors, directors, officers,
employees, representatives, attorneys, subsidiaries, and affiliates of the
Company from all charges, claims, liabilities, agreements, damages, causes of
action, suits, costs, losses, debts and expenses of any nature by the Claimant
Parties.  The Agreement further provides for a release of the Claimant
Parties and each of the trustees, representatives, attorneys and affiliates of
the Claimant Parties, and all persons acting by, through, under or in concert
with them from any and all charges, claims, liabilities, agreements, damages,
causes of action, suits, costs, losses, debts and expenses of any nature by the
Company.  The Agreement also provides that neither the Company nor the
Claimant Parties will file or pursue certain specified claims, grievances,
complaints, lawsuits, or arbitrations.  On July 18, 2007, the Chancery
Court entered an Order making the above-referenced Judicial
Determination. The Company accrued a settlement liability and related
expense of $955,000 based on the quoted trading price of $0.185 per share for
the 3,000,000 underlying common shares in addition to the $400,000 in cash
payments. During 2007, the Company made cash payments totaling $100,000 to
Mr. Hamouth pursuant to the Settlement Agreement dated July 16,
2007.  On February 25, 2008, the Company entered into a General
Release and Settlement Agreement (the “Agreement”) with Mr. Hamouth for the
third and final payment of $300,000.  Pursuant to the Agreement dated
February 25, 2008, in lieu of cash the Company agreed to issue 4,687,000 shares
of the Company’s common stock in full and complete satisfaction of any and all
obligations of the Company concerning the third payment of
$300,000.





On
September 9, 2006 and February 14, 2007, respectively, the Company received
correspondence from Epsom Investment Services, N.V. (“Epsom”) demanding
repayment of an alleged outstanding Demand Loan made in 2002 from Epsom to
Sharps Eliminations Technologies, Inc. (“Sharps”) in the amount of $50,000
bearing interest at 5%. Epsom claims that the Company agreed to repay this loan
on behalf of Sharps. The Company currently does not believe any such amounts are
due and owing to Epsom.





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On
November 6, 2007, the Company filed a demand for arbitration against Jeremy
DeBonet (“DeBonet”) and Skyward Mobile, LLC (“Skyward”) alleging breach of
contract, misappropriation of trade secrets, conversion and deceptive trade
practices and unfair competition under the statutory and common law of the State
of Delaware arising, in part, out of DeBonet/Skyward’s failure to perform their
obligations under a technology development agreement between the Company and
DeBonet/Skyward.  More specifically, despite repeated demands by the
Company that DeBonet/Skyward turn over intellectual property for which the
Company has paid over $500,000, DeBonet/Skyward have refused to do so. 
Furthermore, the Company believes that DeBonet/Skyward have converted the
intellectual property at issue through the wrongful exercise of dominion or
right of ownership over the Company’s intellectual property in denial of, or
inconsistent with the Company’s right as owner.  The Company is asking
for:  (a) judgment that DeBonet/Skyward have materially breached the
technology development agreement; (b) an order requiring DeBonet/Skyward to
perform their obligations under the technology development agreement, and to
produce all technology developed under the agreement, or in the alternative, a
judgment that the Company is entitled to an award of monetary damages; (c)
certain other monetary and declaratory relief.





Except as
set forth above, the Company believes that there are no material litigation
matters at the current time. The results of such litigation matters and claims
cannot be predicted with certainty, and an adverse outcome in one or more of
such matters and claims could have a material adverse impact on the Company’s
financial position, liquidity, or results of operations.





Item4.
            Submission
      of Matters to a Vote of Security
Holders





No
matters were submitted to a vote of the Company’s security holders during the
fourth quarter of the fiscal year ended December 31, 2007.





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PART
II





Item5.
            Market
      For The Registrant's Common Equity, Related Stockholder Matters And Issuer
      Purchases Of Equity Securities





Trading
History




The
Company’s common stock has been listed for trading on the National Association
of Securities Dealers, Inc. Over-the-Counter Bulletin Board, or the OTC Bulletin
Board, under the symbol “UVUM.OB” since June 4, 2006. The following is a summary
of the high and low closing prices of its common stock on the OTC Bulletin Board
during the periods presented. Such prices represent inter-dealer prices, without
retail mark-up, mark down or commissions, and may not necessarily represent
actual transactions. Trading in the Company’s common stock has not been
extensive and such trades should not be characterized as constituting an active
trading market.




Closing Sale
      PriceHigh
            
            
            LowYear
      Ending December 31, 2007First
      Quarter
            
            $
            1.14
            
            
            $
            0.27Second
      Quarter
            
            $
            0.40
            
            
            $
            0.11Third
      Quarter
            
            $
            0.41
            
            
            $
            0.04Fourth
      Quarter
            
            $
            0.15
            
            
            $
            0.07Year
      Ending December 31, 2006First
      Quarter
            
            $
            5.80
            
            
            $
            1.80Second
      Quarter
            
            $
            2.40
            
            
            $
            0.93Third
      Quarter
            
            $
            1.62
            
            
            $
            0.88Fourth
      Quarter
            
            $
            1.45
            
            
            $
            0.79





As of
March 7, 2008, there were approximately 226 stockholders of record of the common
stock (not including the number of persons or entities holding stock in nominee
or street name through various brokerage firms).





Dividends




Since
inception, the Company has not declared or paid any dividend on its common
stock. The Company does not anticipate that any dividends will be declared or
paid in the future on its common stock.  The rights of holders of its
common stock to receive dividends are subject to certain preferential rights of
holders of its outstanding Series A-1 Preferred Stock and Series B Preferred
Stock to receive dividends.





Equity
Compensation Plan Information




The
following table provides information, as of December 31, 2007, with respect to
options outstanding and available under the Company’s 2004 and 2005 Stock
Incentive Plans, which are its only outstanding equity compensation plans other
than an employee benefit plan meeting the qualification requirements of Section
401(a) of the Internal Revenue Code.  Both of the Company’s equity
compensation plans were approved by its stockholders.





Number
      of Securities to be Issued Upon Exercise of Outstanding Options, Warrants
      and Rights
            
            
            Weighted-Average
      Exercise Price of Outstanding Options, Warrants and Rights
            
            
            Number
      of Securities Remaining Available for Future Issuance Under Equity
      Compensation Plans (excluding securities reflected in Column
      a)(a)
            
            
            (b)
            
            
            (c)Plan
      CategoryEquity
      compensation plans approved by security holders
            
            
            11,385,000
            
            
            $
            1.80
            
            
            
            3,615,000Equity
      compensation plans not approved by security holders
            
            
            –
            
            
            
            –
            
            
            
            –TOTAL
            
            
            11,385,000
            
            
            $
            1.80
            
            
            
            3,615,000





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Sales
Of Unregistered Securities





During
March 2005, the Company reached an agreement with two shareholders who were
originally holders of its 10% Convertible Promissory Notes. Under the terms of
the agreement, the shareholders were issued a total of 50,000 shares as
additional consideration related to rights associated with such promissory
notes. These securities have been issued as restricted securities exempt from
registration under Section 4 (2) of the Securities Act.




Effective
March 1, 2005, the Company entered into a short-term consulting agreement with
Forté, whose designee , Michael P. Walsh, was to serve as its Chief Financial
Officer. The consulting agreement provides for a warrant to purchase 150,000
shares of common stock at an exercise price of $3.50 per share. The warrant
includes certain cashless exercise provisions and piggyback registration rights.
These securities have been issued as restricted securities exempt from
registration under Section 4 (2) of the Securities Act.




Effective
March 1, 2005, the Company entered into a consulting agreement with Trilogy
Capital Partners, Inc. for the development and implementation of a marketing
program. The consulting agreement provides for warrants to purchase an aggregate
of 1,250,000 shares of common stock at exercise prices ranging from $4.30 to
$6.50 per share. The warrants have a three (3) year term and include certain
cashless exercise provisions and piggyback registration rights. These securities
have been issued as restricted securities exempt from registration under Section
4 (2) of the Securities Act.




On March
29, 2005, the Company completed a private placement in which it issued 1,761,235
shares of common stock at $2.25 per share and warrants to purchase up to an
additional 880,620 shares of common stock at an exercise price of $3.50 per
share, resulting in gross proceeds of approximately $3,962,750. The warrants
have a five (5) year term. In connection with this private placement, we paid a
finders fee of $238,725 in cash and issued warrants to purchase up to 139,000
shares of common stock at $2.25 per share to Forté, the finder in the
transaction. Further, the finder has agreed to purchase an additional $740,000
of the securities issued in the transaction, consisting of 328,889 shares of
common stock and warrants to purchase up to an additional 164,445 shares of
common stock at a purchase price of $3.50 per share, no fewer than 3 days prior
to the registration statement going effective, or in the case that the
registration does not go effective, by November 1, 2005. The Company agreed to
file a registration statement with respect to the securities issued in this
March 2005 private placement. These securities were issued as restricted shares
to an aggregate of 31 accredited investors in a private placement pursuant to an
exemption from registration provided by Section 4(2) of the Securities Act and
Rule 506 of Regulation D promulgated thereunder.




On
September 26 and October 19, 2005, Michael E. Criden and Glenn H. Singer and GHS
Holdings Limited Partnership, a company controlled by Mr. Singer, loaned the
Company a total of $600,000. In exchange for the loans, the Company issued
convertible promissory notes and warrants to each of Messrs. Criden and Singer
and GHS Holdings Limited Partnership. The notes were payable one year from the
date of each loan. Interest accrued on the outstanding principal amount of each
note at the rate of 8% per annum. Since the Company completed a financing
of at least $2.5 million from the sale of equity securities prior to the
maturity date of each of the notes, the principal amount of each note converted
into shares or units of the equity securities sold in such financing at a per
share sale price or unit price equal to the per share sale price or unit price
of the financing. In addition to receiving the convertible notes, Messrs. Singer
and Criden each received five (5) year warrants to purchase a total of 100,000
shares of the Company’s common stock at an exercise price of $2.00 per share.
They were also granted certain piggy-back registration rights with respect to
the shares of common stock underlying the warrants. These securities were issued
as restricted securities pursuant to an exemption from registration provided
under Section 4 (2) of the Securities Act and Rule 506 of Regulation D
promulgated thereunder.




On
November 21, 2005, the Company sold to 64 accredited investors, for an aggregate
purchase price of $4 million, 5,333,333 shares of the Preferred Stock, warrants
exercisable at $1.75 per share to purchase up to 5,333,333 shares of common
stock and warrants exercisable at $2.00 per share to purchase up to 1,333,333
shares of common stock. The warrants have a five (5) year term.  These
securities were issued as restricted shares to an aggregate of 64
accredited investors in a private placement pursuant to an exemption from
registration provided by Section 4(2) of the Securities Act and Rule 506 of
Regulation D promulgated thereunder.





On
December 2, 2005, the Company sold to the same 64 accredited investors, for an
aggregate purchase price of $4 million, 5,333,333 shares of the Preferred Stock,
warrants exercisable at $1.75 per share to purchase up to 5,333,333 shares of
common stock and warrants exercisable at $2.00 per share to purchase up to
1,333,333 shares of common stock. The warrants have a five (5) year
term.  These securities were issued as restricted shares to an
aggregate of 64 accredited investors in a private placement pursuant to an
exemption from registration provided by Section 4(2) of the Securities Act and
Rule 506 of Regulation D promulgated thereunder.





On
December 15, 2005, the Company received a letter on behalf of Enable Growth
Partners, L.P. (“Enable”) demanding that the Company pay cash damages of
$1,757,567 within five business days thereafter. Enable alleged that it sold
295,001 shares of the Company’s common stock in the public markets during
November and December 2005 in reliance on the Company’s Registration Statement
on Form SB-2 that was declared effective on July 1, 2005. The Company was unable
to issue unlegended shares to cover Enable’s alleged sale of 295,001 shares
because such registration statement did not contain current information
regarding the Company. As a result, Enable alleged that it was required to
purchase shares of the Company’s common stock in the open market to satisfy its
sale of such securities.  These securities have been issued as
restricted securities exempt from registration under Section 4 (2) of the
Securities Act and Rule 506 of Regulation D promulgated thereunder.




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On
January 30, 2006, the Company and OVT entered into a settlement agreement (“KC
Settlement Agreement”) with Mr. Richard Seifert and KC Ventures, Inc. Pursuant
to the terms of the KC Settlement Agreement, the Company agreed to issue 800,000
shares of the Preferred Stock to Mr. Seifert and 200,000 shares of the Preferred
Stock to his attorneys, Frank, Rosen, Snyder & Moss, L.L.P., in exchange for
Mr. Seifert and KC Ventures agreeing to dismiss the pending arbitration with
prejudice and to exchange mutual releases of claims. The Company also granted
certain piggy-back registration rights with respect to the shares of common
stock underlying the Preferred Stock.  These securities have been
issued as restricted securities exempt from registration under Section 4 (2) of
the Securities Act and Rule 506 of Regulation D promulgated
thereunder.




On June
8, 2006, the Company entered into a settlement and release agreement
(“settlement agreement”) with Enable Growth Partners, L.P. Pursuant to the terms
of the settlement agreement, the Company agreed to issue 450,000 shares of the
Company’s common stock to Enable, in exchange for Enable agreeing to release the
Company and its directors, officers, shareholders, employees and agents from all
suits, claims, charges, liabilities and causes of action arising out of,
relating to, or in connection with Enable’s allegation. These securities have
been issued as restricted securities exempt from registration under Section 4
(2) of the Securities Act and Rule 506 of Regulation D promulgated
thereunder.




On
February 16, 2006, the Company entered into a software license and services
agreement with INSYSTCOM, Inc. Pursuant to the terms of the software license and
services agreement, the Company agreed to issue 100,000 shares of the Company’s
common stock to INSYSTCOM, Inc. as partial payment for services rendered to the
Company. The closing price of the Company’s common stock on February 16, 2006
was $3.18 per share. These securities have been issued as restricted securities
exempt from registration under Section 4 (2) of the Securities Act and Rule 506
of Regulation D promulgated thereunder.





On July
17, 2006, the Company completed an equity financing pursuant to a securities
purchase agreement dated as of July 7, 2006 among the Company and 74 accredited
investors. Under the terms of the agreement, the Company received gross proceeds
of $9,000,000 and issued to the investors a total of 7,200,000 shares of common
stock and five (5) year warrants exercisable at $2.50 per share to purchase up
to 7,200,000 shares of common stock. These securities were issued as restricted
shares to an aggregate of 31 accredited investors in a private placement
pursuant to an exemption from registration provided by Section 4(2) of the
Securities Act and Rule 506 of Regulation D promulgated thereunder.





On
December 17, 2007, the Company entered into a definitive agreement (the
“Securities Purchase Agreement”) to sell $2,033,423 of its 8% Secured
Convertible Debentures (the “Debentures”) to institutional and private investors
(collectively, the “Investors” or “Holders”).  The Debentures bear
interest at the rate of 8% per annum and mature on December 17, 2009 (the
“Maturity Date”).  The Company shall pay interest to the holders of
the Debentures quarterly on each of January 1, April 1, July 1, and October 1 of
each year prior to the Maturity Date of the Debentures.  The
Debentures are also convertible into shares of the Company’s common stock at a
conversion price of $0.064 per share, subject to adjustment in accordance with
terms of the Debentures.  Any voluntary conversion by the Investors of
the Debentures is subject to a Beneficial Ownership Limitation (as defined in
the Debentures).  In addition, the Debentures are subject to a forced
conversion (the “Forced Conversion”) in all or in part by the Company in the
event that the daily volume weighted average stock price of the Company’s common
stock for any twenty (20) consecutive trading days exceeds
$0.256.  The Debentures are secured by all of the assets of the
Company pursuant to a Security Agreement.  In connection with the
Debentures, the Company issued warrants to certain investors that have
substantially the same terms and conditions and give the respective Holders the
right to purchase a total of 12,500,000 and 7,500,000 shares of the Company’s
common stock, respectively, at an exercise price of $0.15 per share for a period
of five (5) years.  The Company also issued 664,063 shares, 1,614,062
shares and 1,614,063 shares of its Series B Convertible Preferred Stock,
respectively, to William J. Loughman, its Chief Executive Officer, and Michael
Criden and Glenn Singer, former directors of the Company, in consideration for
the cancellation of debt owed by the Company to each of these individuals. 
In connection with the issuance of these shares of Convertible Preferred Stock,
the Company also issued warrants to purchase 531,250; 1,291,250; and 1,291,250
shares of the Company's common stock, respectively, to each of Messrs. Loughman,
Criden and Singer. These warrants have an exercise price of $0.15 per share
and are exercisable for a period of five (5) years. The Company is obligated to
file a registration statement with the Securities and Exchange Commission within
45 days of December 17, 2007, which registration statement will include the
common stock underlying the Debentures.  The registration statement
must be declared effective within 120 days from December 17,
2007.  The securities offered in the private placement have not been
registered under the Securities Act of 1933, as amended and may not be offered
or sold in the United States absent registration or an applicable exemption from
registration requirements. The Company is obligated to register the resale
of the shares of common stock issuable upon conversion of the Debentures and
exercise of the Warrants.  These securities were issued as restricted
shares to an aggregate of 31 accredited investors in a private placement
pursuant to an exemption from registration provided by Section 4(2) of the
Securities Act and Rule 506 of Regulation D promulgated thereunder.




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Issuer
Repurchases Of Securities





The
Company did not repurchase any of its securities during the fourth quarter of
2007.




Item6.
            Selected
      Financial Data





The
selected historical financial information presented below is derived from our
audited consolidated financial statements for the years ended December 31, 2003,
2004, 2005, 2006 and 2007.





The
acquisition of all of the outstanding capital stock of OVT, Inc. on November 26,
2002, was treated for accounting purposes as a reverse acquisition, and the
transaction has been accounted for as a recapitalization. The Company accounted
for the acquisition using the purchase method of accounting. Therefore, the
historical financial statements of the predecessor entity are reflected as its
historical financial statements.





The data
set forth below should be read in conjunction with the financial statements and
accompanying notes incorporated by reference.




Selected
Historical Financial Data




2003
            
            
            2004
            
            
            2005
            
            
            2006
            
            
            2007Income
      Statement Data:Total
      revenue
            
            $
            63,451
            
            
            $
            118,733
            
            
            $
            197,257
            
            
            $
            800,231
            
            
            $
            952,671Total
      operating expenses
            
            
            3,242,754
            
            
            
            6,839,685
            
            
            
            19,021,511
            
            
            
            25,454,391
            
            
            
            9,227,513Loss
      from operations
            
            
            (3,179,303
            )
            
            
            (6,720,952
            )
            
            
            (18,824,254
            )
            
            
            (24,748,990
            )
            
            
            (8,751,342
            )Net
      loss
            
            
            (3,859,141
            )
            
            
            (6,792,930
            )
            
            
            (19,740,274
            )
            
            
            (24,488,876
            )
            
            
            (8,841,345
            )Loss
      per share
            
            
            (0.51
            )
            
            
            (0.35
            )
            
            
            (0.76
            )
            
            
            (0.61
            )
            
            
            (0.15
            )Weighted
      average common shares used to compute basic and diluted net loss per
      share
            
            
            7,540,849
            
            
            
            19,208,345
            
            
            
            26,093,554
            
            
            
            40,285,528
            
            
            
            60,887,327Other
      Financial Data:Net
      cash used in operating activities
            
            
            (1,530,148
            )
            
            
            (2,631,337
            )
            
            
            (5,363,245
            )
            
            
            (11,077,782
            )
            
            
            (5,216,961
            )Net
      cash used in investing activities
            
            
            (102,981
            )
            
            
            (189,191
            )
            
            
            (764,479
            )
            
            
            (1,472,439
            )
            
            
            (256,652
            )Net
      cash provided by financing activities
            
            
            1,925,385
            
            
            
            2,844,816
            
            
            
            11,521,236
            
            
            
            10,454,236
            
            
            
            2,855,087Balance
      Sheet Data:Total
      Assets
            
            $
            452,309
            
            
            $
            719,551
            
            
            $
            11,920,674
            
            
            $
            6,691,645
            
            
            $
            2,982,129







Item7.
            Management's
      Discussion And Analysis Of Financial Condition And Results Of
      Operations




This
discussion presents management’s analysis of the Company’s results of operations
and financial condition as of and for each of the years ended December 31, 2007,
2006, and 2005, respectively. The discussion should be read in conjunction with
its audited consolidated financial statements and the notes related thereto
which appear elsewhere in this report.




Overview




uVuMobile,
Inc. (hereinafter sometimes referred to as “uVuMobileTM”,” the “Company,” “we,”
“us,” or “our”) is a provider of video content distribution services and
technology.





Incorporated
in 1984, the Company acquired OVT, Inc., d/b/a SmartVideo, in November 2002,
subsequently changing its name to SmartVideo Technologies, Inc., and in
June 2007, the Company changed its name to uVuMobile, Inc.  Although
the core business of the Company has remained constant, the Company has changed
its focus from distributing business-to-business services to the distribution of
video content to consumers.




Since
2002, the Company has been a provider of technology engaged in the aggregation
and distribution of streaming video content to consumers connected to the public
Internet. The Company has been in the business of purchasing the rights to video
and television content and delivering that content to subscribers for a fee.
Additionally, the Company also provides managed services for Internet
network operators (carriers) and for major producers, owners and distributors of
content. The Company intends to continue expanding its market opportunities by
delivering video services to all forms of devices capable of receiving an
Internet Protocol (IP) data stream and rendering that data stream into visible
images on displays.





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In
January 2005, the Company launched its direct-to-consumer mobile video service
providing its customers with access to high-quality video programming that is
transmitted directly to SmartPhone cellular handsets and to Wi-Fi enabled PDA
devices. In addition, the Company has developed Real Time Streaming Protocol
(RTSP) and Java 2 Platform, Micro Edition (J2ME) compatibility.





During
the fourth quarter of 2006, the Company expanded its product offerings to
include a new suite of mobile technology and content solutions, bringing
together a myriad of implementation choices, business models and marketing
plans. The Company believes these new products will aid our customers seeking to
capitalize on mobile technology opportunities. These new media services combine
TV, radio, and other media platforms with user-friendly personalization,
interactivity and targeted advertising.





Recent
Developments




On
February 13, 2008, the Company received the consent of a majority of the
outstanding holders of record of its common stock, par value $0.001 per share,
the Company’s Series A-1 Convertible Preferred Stock, par value $0.001 per
share, and the Company’s Series B Convertible Preferred Stock, par value $0.001
per share, to amend the Company’s Certificate of Incorporation to increase the
number of authorized shares of Common Stock from 150,000,000 shares to
300,000,000 shares.  The amendment to the Certificate of Incorporation
became effective on February 13, 2008, upon the filing of the Certificate of
Amendment to the Certificate of Incorporation with the Secretary of State of the
State of Delaware.





Critical
Accounting Policies And Estimates




The
Company relies on the use of estimates and makes assumptions that impact its
financial condition and results. These estimates and assumptions are based on
historical results and trends as well as the Company’s forecasts as to how
results and trends might change in the future. While the Company believes that
the estimates it uses are reasonable, actual results could differ from those
estimates.




The
Company believes that the accounting policies described below are critical to
understanding its business, results of operations and financial condition
because they involve more significant judgments and estimates used in the
preparation of its consolidated financial statements. An accounting policy is
deemed to be critical if it requires an accounting estimate to be made based on
assumptions about matters that are highly uncertain at the time the estimate is
made, and any changes in the different estimates that could have been used in
the accounting estimates that are reasonably likely to occur periodically could
materially impact its consolidated financial statements. The Company has
discussed the development, selection and application of its critical accounting
policies with the Audit Committee of its Board of Directors, and its Audit
Committee has reviewed its disclosure relating to its critical accounting
policies in this “Management’s Discussion and Analysis.”





The
Company’s most critical accounting policies and estimates that may materially
impact the Company’s results of operations include:




Revenue
Recognition





The
accounting related to revenue recognition in the digital media and multimedia
broadcast industry is complex and affected by interpretations of the rules and
an understanding of various industry practices, both of which are dynamic in
nature and subject to change. As a result, revenue recognition accounting rules
require the Company to make significant judgments.




The
Company typically provides services to its business-to-business customers under
volume-based usage arrangements of its digital media and multimedia broadcast
products and services. Revenues for direct-to-consumer and custom applications
are recognized as earned upon the delivery of service to its subscription-based
customers. This typically occurs when a digital media or multimedia broadcast is
viewed. Many of its subscription-based customers access its programming through
the purchase of a monthly, semi-annual, or daily subscription fee for its mobile
entertainment services.  Revenue from mobile advertising is recognized
when the related services are performed.  See Note 2(H) (Going
Concern, Significant Accounting Policies and Risks and Uncertainties) to the
consolidated financial statements included elsewhere in this
report.





Valuation
And Recoverability Of Long-Lived Assets




See Note
2(M) (Going Concern, Significant Accounting Policies and Risks and
Uncertainties) to the consolidated financial statements for the years ended
December 31, 2007, 2006, and 2005 for a description of the valuation and
recoverability of long-lived assets.





Income
Taxes




Income
taxes are accounted for using the liability method in accordance with Statement
of Financial Accounting Standards  No. 109, “Accounting for Income
Taxes”(SFAS 109).
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operation loss and tax credit carry forwards.  Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled.  The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.  The Company continues to record a
valuation allowance for the full amount of deferred income taxes, which would
otherwise be recorded for tax benefits related to operating loss carry forwards,
as realization of such deferred tax assets cannot be determined to be more
likely than not likely.





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Accounting
For Stock-Based Compensation




In
December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No.
123(R), “Share-Based Payment,” which replaces SFAS No. 123 and supersedes APB
Opinion No. 25. Under SFAS No. 123(R), companies are required to measure the
compensation costs of share-based compensation arrangements based on the
grant-date fair value and recognize the costs in the financial statements over
the period during which employees are required to provide services. Share-based
compensation arrangements include stock options, restricted share plans,
performance-based awards, share appreciation rights and employee share purchase
plans. In March 2005, the SEC issued Staff Accounting Bulletin No. 107, or “SAB
107”. SAB 107 expresses views of the staff regarding the interaction between
SFAS No. 123(R) and certain SEC rules and regulations and provides the staff's
views regarding the valuation of share-based payment arrangements for public
companies. SFAS No. 123(R) permits public companies to adopt its requirements
using one of two methods. On April 14, 2005, the SEC adopted a new rule
amending the compliance dates for SFAS No. 123R. Companies may elect to apply
this statement either prospectively, or on a modified version of retrospective
application under which financial statements for prior periods are adjusted on a
basis consistent with the pro forma disclosures required for those periods under
SFAS No. 123. Effective January 1, 2006, the Company adopted SFAS No. 123(R)
using the prospective method.   See Note
2(T) (Going Concern, Significant Accounting Policies and Risks and
Uncertainties) to the consolidated financial statements included elsewhere in
this report.





Recent
Accounting Pronouncements




See Note
2(W) to the consolidated financial statements for the years ended December 31,
2007, 2006, and 2005 for a description of the new accounting pronouncements and
their impact on the Company.





Results
Of Operations





Year
Ended December 31, 2007 Compared To Year Ended December 31, 2006





Revenues




Revenues
for the year ended December 31, 2007, consisted primarily of proceeds from
custom applications and direct-to-consumer services.  The Company’s
revenues increased by approximately $152,000 or 19% for the year ended December
31, 2007 as compared to the same period in 2006.  This increase is
primarily attributable to the Company’s decision in 2006 to change its focus
from direct-to-consumer services to multiple service offerings including custom
application and hosting services.





Cost
Of Goods Sold





For the
year ended December 31, 2007, Costs of Goods Sold increased to approximately
$477,000 as compared to $95,000 for the same period in 2006.  This
increase is primarily attributable to the Company’s exit from its
direct-to-consumer business.





Broadcast
Rights




Broadcast
right expenses for the year ended December 31, 2007 was approximately $194,000
as compared to $2,025,000 for the same period in 2006. This decrease is
attributable to the Company’s decision to change its focus from a subscription
based model to custom applications and hosting services.





Compensation
And Benefits





The
Company’s compensation and benefits expenses decreased by approximately $856,000
or 31% for the year ended December 31, 2007 as compared to the same period in
2006.  The decrease is primarily attributable to staff reductions
during 2007.





Consulting
And Professional Fees




The
Company’s consulting and professional fees decreased by approximately $2,688,000
or 66%for the
year ended December 31, 2007, as compared to the same period in
2006.  The decrease is primarily attributable to the reduction in
legal fees.





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Data
Center




The
Company’s data center expenses consist primarily of those items related to the
maintenance of certain facilities and equipment at a third-party data center.
The decrease in data center expenses of approximately $198,000 or 20% for the
year ended December 31, 2007, when compared to 2006 is primarily attributable to
cost reductions due to the Company’s exit from its direct-to-consumer business
in the third quarter of 2007.





Settlement
Expense





Settlement
expense for the year ended December 31, 2007, decreased to approximately
$1,426,000, from $4,936,000 in 2006, a decrease of 71%.





Stock-Based
Compensation




For the
year ended December 31, 2007, the Company recorded approximately $3,306,000, as
compared to $5,039,000 for the year ended December 31, 2006, in non-cash,
stock-based compensation. The compensation expense has been determined using the
Black-Scholes fair value method. The remainder of the non-cash, stock-based
compensation is related to the amortization of the deferred portion of previous
warrant grants. In the year ended December 31, 2007, the expense reflects the
grant of stock options under SFAS 123(R).  The decrease in stock-based
compensation expense was primarily attributable to a reduction in the number of
options issued and the exercise price of the options granted.





Depreciation
And Amortization




Depreciation
and amortization expense for the year ended December 31, 2007, increased by
approximately $486,000 when compared to the same period in 2006. This increase
is primarily attributable to the development of additional software and the
amortization of intangible assets during 2007.





Selling,
General And Administrative Expenses




Selling,
general and administrative expenses consist primarily of travel expenses related
to the marketing of the Company’s products and services, lease payments related
to the use of the Company’s corporate facilities, trade shows, and other general
and administrative expenses. The Company’s selling, general and administrative
costs decreased approximately $1,240,000 or 45% for the year ended December 31,
2007 when compared to the same period in 2006.  This decrease is
attributable to a reduction in staffing, travel related expenses, marketing and
advertising costs as well as a decrease in Directors’ compensation.





Interest
Income( Expense)




Interest
income for the year ended December 31, 2007, was approximately
$38,000.  Interest income for the year ended December 31, 2006, was
approximately $260,000 which included a reversal of a previously recorded
interest expense in the amount of $53,000.  For the year ended
December 31, 2007, interest expense was approximately $128,000.





Year
Ended December 31, 2006 Compared To Year Ended December 31, 2005





Revenues




Revenues
for the year ended December 31, 2006, consisted primarily of a subscription
based service delivering live and on-demand mobile entertainment services
directly to consumers. The Company’s revenues increased by approximately
$600,000 for the year ended December 31, 2006 as compared to the same period in
2005. This increase is primarily attributable to the Company’s decision in 2005
to change its focus to a subscription-based, direct-to-consumer model delivering
mobile entertainment services along with mobile advertising revenue and the
implementation of custom applications.





Broadcast
Rights




Broadcast
right expenses for the year ended December 31, 2006 were approximately
$4,355,000 as compared to approximately $2,002,000 for the same period in 2005,
an increase of 117%. This increase is attributable to the Company’s decision to
change its focus to a subscription based model delivering mobile,
direct-to-consumer entertainment services. This amount also reflects the costs
associated with acquiring the rights to deliver its mobile entertainment
services.  Additionally, the year ended December 31, 2006 includes an
impairment charge of approximately $2,330,000.





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Compensation
And Benefits




The
Company’s compensation and benefits expenses increased by approximately $966,000
or 55% for the year ended December 31, 2006 as compared to the same period in
2005. As the industry and Company continue to grow and develop, the Company will
fill key positions as needed that will enable it to leverage its future
prospects and growth and rely less on the use of consultants for discrete
projects.





Consulting
And Professional Fees




The
Company’s consulting and professional fees increased by approximately
$2,209,000for the
year ended December 31, 2006 as compared to the same period in 2005. This
increase in consulting fees for the year ended December 31, 2006 is primarily
attributable to the consulting agreement with Growth Consultants, LLC, who
provided the Company with consulting services.





Data
Center




The
Company’s data center expenses consist primarily of those items related to the
maintenance of certain facilities and equipment at a third-party data center.
The increase in data center expenses of approximately $219,000 or 28% for the
year ended December 31, 2006 when compared to 2005 is primarily due to an
increase in the utilization of bandwidth and additional services provided by the
Company’s third-party data center.





Settlement
Expense





Settlement
expense for the year ended December 31, 2006 decreased to approximately
$4,936,000, from $5,541,000 in 2005, a decrease of 11%.





Stock-Based
Compensation




For the
year ended December 31, 2006, the Company recorded approximately $5,039,000, as
compared to $4,326,000 for the year ended December 31, 2005 in non-cash,
stock-based compensation. The compensation expense has been determined using the
Black-Scholes fair value method.  The remainder of the non-cash,
stock-based compensation is related to the amortization of the deferred portion
of previous warrant grants. In the year ended December 31, 2006 the expense
reflects the grant of stock options under SFAS 123(R).





Depreciation
And Amortization




Depreciation
and amortization expense for the year ended December 31, 2006 increased by
approximately $322,000 when compared to the same period in 2006. This increase
is primarily attributable to the deployment of additional equipment in the
process of increasing the overall capacity and quality of the Company’s
services.





Selling,
General And Administrative Expenses




Selling,
general and administrative expenses consist primarily of travel expenses related
to the marketing of the Company’s products and services, lease payments related
to the use of its corporate facilities, trade shows, and other general and
administrative expenses. The Company’s selling, general and administrative costs
increased approximately $256,000 or 10% for the year ended December 31, 2006
when compared to the same period in 2005.  This increase is
attributable to additional staffing, call center costs, and SEC compliance
costs.





Interest
Income (Expense)




Interest
income for the year ended December 31, 2006 was approximately 260,000 included a
reversal of a previously recorded interest expense in the amount of
$53,000.  Interest expense for the year ended December 31, 2005 was
approximately $916,000.  A substantial portion of the interest expense
in 2005 was attributed to the issuance of additional shares of commons stock as
additional consideration related to the rights of certain convertible debt
holders in 2005.




Liquidity And Capital Resources And
Going Concern





The
Company has incurred recurring losses and negative cash flows since inception.
As of and for the year ended December 31, 2007, the Company had an accumulated
deficit of $73,533,077, a consolidated net loss of $8,841,345and
consolidated net cash flows used in operations of $5,216,961. As a result, the
Company’s operations are not an adequate source of cash to fund future
operations and these matters raise substantial doubt about its ability to
continue as a going concern. To fund its cash requirements, the Company has
relied on private placements of equity and loans from stockholders and other
related entities. Although the Company closed on a $2.0 million debt financing
on December 17, 2007, its ability to continue its operations is contingent upon
obtaining additional financing and attaining profitable operations.





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Cash
flows generated from operating activities during the year ended December
31, 2007 were not sufficient to offset its operating expenditures. Based on
information available regarding its proposed plans and assumptions relating to
operations, the Company anticipates that the net proceeds from its last
financing in 2007, together with projected cash flow from operations, will not
be sufficient to meet its cash requirements for working capital and capital
expenditures beyond second quarter of 2008. As a result, it will be necessary
for the Company to secure additional financing to support its operations. There
can be no assurance that the Company will be able to obtain such financing on
acceptable terms, or at all. If adequate funds are not available or not
available on acceptable terms, the Company will be unable to continue as a going
concern. The Company currently has no firm commitments for any additional
capital.





Contractual
Obligations And Commercial Commitments




For
      the Years Ended December 31, 2008-2011Contractual
      Obligations
            
            Total
            
            
            Less
      Than 1 Year
            
            
            1
      - 3 Years
            
            
            3
      - 5 years
            
            
            More
      Than 5 YearsOperating
      Lease Obligations
            
            $
            143,718
            
            
            $
            71,859
            
            
            $
            71,859
            
            
            $
            –
            
            
            $
            –Total
            
            $
            143,718
            
            
            $
            71,859
            
            
            $
            71,859
            
            
            $
            –
            
            
            $
            –





Item7A.
            Quantitative
      And Qualitative Disclosures About Market
Risk




The
Company does not believe that inflation or foreign currency fluctuations
significantly affected its financial position and results of operations as of
and for the fiscal year ended December 31, 2007. In addition, The Company is not
party to any material market risk sensitive instruments.




Item8.
            Financial
      Statements And Supplementary Data




Selected
      Quarterly Financial Data (Unaudited)First
      Quarter
            
            
            Second
      Quarter
            
            
            Third
      Quarter
            
            
            Fourth
      Quarter
            
            
            TotalYear
      ended December 31, 2007:Total
      revenue
            
            $
            334,732
            
            
            $
            278,169
            
            
            $
            202,886
            
            
            $
            136,884
            
            
            $
            952,671Loss
      from operations
            
            
            (3,819,499
            )
            
            
            (3,127,870
            )
            
            
            (1,398,895
            )
            
            
            (405,078
            )
            
            
            (8,751,342
            )Net
      loss
            
            $
            (3,801,569
            )
            
            $
            (3,123,104
            )
            
            $
            (1,411,720
            )
            
            $
            (504,952
            )
            
            $
            (8,841,345
            )Year
      ended December 31, 2006:Total
      revenue
            
            $
            112,966
            
            
            $
            166,432
            
            
            $
            197,302
            
            
            $
            323,531
            
            
            $
            800,231Loss
      from operations
            
            
            (3,431,211
            )
            
            
            (6,241,956
            )
            
            
            (4,284,023
            )
            
            
            (10,791,800
            )
            
            
            (24,748,990
            )Net
      loss
            
            $
            (3,386,404
            )
            
            $
            (6,210,697
            )
            
            $
            (4,147,894
            )
            
            $
            (10,743,881
            )
            
            $
            (24,488,876
            )







See pages
F-1 through F-32 appearing at the end of this report.




Item9.
            Changes
      In And Disagreements With Accountants On Accounting And Financial
      Disclosure




Not
applicable




Item9A.
            Controls
      And Procedures




The
Company’s chief executive officer and chief financial officer (the “Certifying
Officers”) are responsible for establishing and maintaining disclosure controls
and procedures for the Company and its subsidiary. Such officers have concluded
(based upon their evaluation of these controls and procedures as of the end of
the period covered by this report) that its disclosure controls and procedures
are effective to ensure that information required to be disclosed by the Company
in reports it files and submits under the Exchange Act is recorded, processed,
summarized and reported as and when required. In addition, the Certifying
Officers have concluded that the Company’s disclosure controls and procedures
have been designed to ensure that information required to be disclosed in
reports filed by the Company under the Exchange Act is accumulated and
communicated to management, including its principal executive officers as
appropriate, in a manner to allow timely decisions regarding the required
disclosure.




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There
were no changes in the Company’s internal control over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) identified in
connection with the foregoing evaluation that occurred during the quarter ended
December 31, 2007, that have materially affected, or are reasonably likely to
materially affect, its internal control over financial reporting.




The
Company’s management, including the Certifying Officers, does not expect that
its disclosure controls or its internal controls will prevent all error and all
fraud. A control system, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the control
system are met. In addition, the design of a control system must reflect the
fact that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within a company have been
detected. These inherent limitations include the realities that judgments in
decision making can be faulty, and that breakdowns can occur because of a simple
error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people or by management’s
override of the control. The design of any systems of controls also is based in
part upon certain assumptions about the likelihood of future events, and there
can be no assurance that any design will succeed in achieving its stated goals
under all potential future conditions. Because of these inherent limitations in
a cost-effective control system, misstatements due to error or fraud may occur
and not be detected.




Item9B.
            Other
      Information




Not
applicable.





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Part
III





Item10.
            Directors,
      Executive Officers And Corporate
Governance





Directors
and Executive Officers





The
following sets forth certain biographical information concerning the Company’s
current directors and executive officers:





Name
            
            Position
            
            AgeWilliam
      J. Loughman
            
            Director,
      President, Chief Executive Officer and Chief Financial
    Officer
            
            52Richard
      Seifert
            
            Director
            
            57Daniel
      McKelvey
            
            Director,
      Member of the Compensation Committee, Member of the Nominating
      Committee
            
            41William
      Scigliano
            
            Director,
      Member of the Audit Committee
            
            47Scott
      Hughes
            
            Chief
      Technology Officer
            
            38Tony
      Novia
            
            Sr.
      VP Content and Development
            
            48







William J. Loughman, 52,
joined the Company in March 2006 as Vice President of Finance and became Chief
Financial Officer in August 2006.  In August 2007, he assumed the
additional position as President and Chief Executive Officer.  Prior
to joining the Company, he was with AirGate PCS as Vice President and Chief
Financial Officer from July 2004 to March 2005.  From April 1998 to
December 2003, he was with o2wireless Solutions where he held various positions
including President and Chief Executive Officer, Chief Operating Officer and
Chief Financial Officer.  Mr. Loughman also currently serves as a
director of Peachtree Media Group, LLC. He previously served as a director of
several telecommunications companies, including Omnitel Ltd. in Lithuania,
Jordan Mobile Telephone Company in Jordan, St. Petersburg Telecom in Russia, and
Pakistan Mobile Communications Ltd. in Pakistan.




Richard Seifert, 57, is a
seasoned professional, having worked as an advisor and an executive for over 25
years, and in the Internet technology field since 1992.  His focus has
been primarily on the delivery of media content over the
Internet.  Approximately ten years ago, he was one of a small group of
pioneers working on the delivery of rich media content to cellular
telephones.  During this entire period he has made considerable
contacts and gained significant insight into the wireless world, having worked
in this area for as long as carriers have been trying to sell data
usage.  Mr. Seifert worked with the Company as an advisor in strategic
partnering, business planning, sales/marketing and early stage funding from
February of 2003 through March of 2005




Daniel McKelvey, 41, is a
co-founder and Managing Partner of Forté Partners, LLC.  Mr. McKelvey
is also a member of the Board of Directors of Wherify Wireless and several
private companies.  Mr. McKelvey is an active entrepreneur,
co-founding Forté Capital LLC, a New York based public money management firm
with over $550 million in assets under management.




William (Bill) Scigliano, 47,
has many years of experience as a C-level executive and technology
innovator.  Prior to joining Forté Partners, Mr. Scigliano was the
Chairman of Wherify Wireless, Inc. a developer of assisted GPS location products
and services embedded in cell phones.  Mr. Scigliano was formerly the
CEO and Chairman of IQ Biometrix, Inc., a leading provider of facial
identification technology and security.  In addition, Mr. Scigliano
serves as a Director on the boards of Acies, Inc. and Critical
Reach.




Scott Hughes, 38, joined the
Company in March 2001 and is responsible for product design, scope, and
development of the Company’s services, including the development of multiple new
video and rich media communications services and supporting architecture. From
1996 to 2001, Mr. Hughes was Director of Network and Security Consulting
Services at Redmond Technology Partners, a Seattle-based consulting group, whose
clients included Microsoft, Infospace, VoiceStream and Western Wireless. Mr.
Hughes has held various management and technology positions with Comnet
Cellular/Verizon, BellSouth and Turner Entertainment Group’s Worldwide
Information Technology Services.




Tony Novia, 48, joined the
Company in June 2006 as Senior Vice President — Content & Distribution.
Prior to joining uVuMobile, Mr. Novia served as the International Vice President
at Universal Motown Records Group from 2003. Mr. Novia was the Senior Vice
President at Radio & Records from 1993 to 2003.




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Key
Employees




Ronald A. Warren joined the
Company in December 2003 as Vice President of Investor Relations and Corporate
Communications and was elected as Secretary of the Corporation in September
2004. Mr. Warren is a senior level communications professional with a broad
background in financial, technical and regulatory issues. His experience
includes communications for high growth publicly held companies, national and
multicultural audiences. Prior to joining uVuMobile, from 2002 to 2003, Mr.
Warren was Director of Investor Relations and Corporate Communications at Beazer
Homes USA, Inc. From 1994 to 2002, Mr. Warren was Director of Investor
Relations, Corporate Communications and Assistant Secretary of Theragenics
Corporation. Mr. Warren is an active member of the National Investor Relations
Institute (NIRI) and served as the Atlanta Chapter President from 2002 to
2003.




Section
16(a) Beneficial Ownership Compliance




Section
16(a) of the Exchange Act requires the Company's executive officers, directors
and 10% stockholders to file reports regarding initial ownership and changes in
ownership with the Securities and Exchange Commission and any exchange upon
which the Company’s securities are listed. Executive officers, directors and 10%
stockholders are required by Securities and Exchange Commission regulations to
furnish the Company with copies of all Section 16(a) forms they file. The
Company's information regarding compliance with Section 16(a) is based solely on
a review of the copies of such reports furnished to the Company by the Company's
executive officers, directors and 10% stockholders. The Company believes that,
during the fiscal year ending December 31, 2007, all of its executive officers,
directors and 10% stockholders complied with all applicable Section 16(a) filing
requirements.




Code
Of Ethics




The Board
has approved and it has adopted a Code of Business Conduct and Ethics
within the meaning of Item 406 of Regulation S-K of the Securities Exchange Act
of 1934, applicable to all of its directors, officers and employees. This Code
is available on the Company’s Website, www.uvumobile.com. The Board, or a
committee, is responsible for reviewing and approving or rejecting all requested
waivers to the Code, as such waivers may apply to any of its executive officers
or directors. Any waivers will be disclosed on the Company’s
Website.




Board
Committees




The Board
currently has, and appoints members to, three standing committees: the Audit
Committee, the Compensation Committee and the Nominating Committee. The current
members of the committees are identified below:




Director
            
            Audit
            
            Compensation
            
            NominatingWilliam
      J. LoughmanRichard
      SeifertDaniel
      McKelvey
            
            
            
            X
            
            XWilliam
      Scigliano
            
            X




The Board
of Directors has determined that Mr. Scigliano is an "Audit Committee financial
expert" under applicable SEC rules and that all members of the Audit Committee
qualify as "independent" as defined under applicable SEC rules.




Item11.
            Executive
      Compensation




REPORT
OF COMPENSATION COMMITTEE




The
Compensation Committee is responsible for discharging the responsibilities of
the Board with respect to the compensation of the Company’s executive officers.
The Compensation Committee sets performance goals and objectives for the Chief
Executive Officer and the other executive officers, evaluates their performance
with respect to those goals and sets their compensation based upon the
evaluation of their performance. In evaluating executive officer pay, the
Compensation Committee may retain the services of a compensation consultant and
consider recommendations from the Chief Executive Officer and President with
respect to goals and compensation of the other executive officers. The
Compensation Committee assesses the information it receives in accordance with
its business judgment. The Compensation Committee also periodically reviews
director compensation. All decisions with respect to executive and director
compensation are approved by the Compensation Committee and recommended to the
full Board for ratification.  The Compensation Committee is responsible for
administering all of the Company’s equity-based plans.





The
Company has reviewed and discussed with management the Compensation Discussion
and Analysis to be included in the Company’s 2007 Annual Report on Form 10-K for
the fiscal year ended December 31, 2007, to be filed pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934.  Based on the reviews
and discussions referred to above, the Company recommended to the Board of
Directors that the Compensation Discussion and Analysis referred to above be
included in the Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2007.




By the
Compensation Committee of the Board of Directors:






/s/
      Daniel
      McKelveyDaniel
      McKelvey




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COMPENSATION
DISCUSSION AND ANALYSIS





The
Company’s compensation process and policy is overseen by the Compensation
Committee of the Board of Directors as more fully discussed below.





Objectives
Of Compensation Program




This
section discusses the principles underlying the Company’s executive compensation
policies and decisions and the most important factors relevant to an analysis of
these policies and decisions.  It provides qualitative information
regarding the manner and context in which compensation is awarded to and earned
by its executive officers and places in perspective the data presented in the
tables and narrative that follow.




The
Company’s compensation program for executive officers is designed to attract, as
needed, individuals with the skills necessary for it to achieve its business
plan, to motivate those individuals, to reward those individuals fairly over
time, and to retain those individuals who continue to perform at or above the
levels that it expects.  It is also designed to reinforce a sense of
ownership, urgency and overall entrepreneurial spirit and to link rewards to
measurable corporate and individual performance.




Elements
Of Compensation




There are
three main components to the Company’s compensation package: base salaries,
annual cash bonuses, and stock based compensation.  A fourth, less
significant component is other benefits and perquisites.  The
Company’s compensation program is designed to be competitive with other
employment opportunities and to align the interests of all employees, including
its executive officers, with the long-term interests of its
stockholders.




The
Company fixes executive officer base compensation at a level it believes enables
it to hire and retain individuals in a competitive environment and to reward
satisfactory individual performance and a satisfactory level of contribution to
its overall business goals.  The Company also takes into account the
base compensation that is payable by companies that it believes to be its
competitors and by other private and public companies with which it believes it
generally competes for executives.  The Company has accessed a number
of executive compensation surveys and other databases and reviews them when
making crucial executive officer hiring decisions and annually when it reviews
executive compensation.  The Company designed its executive cash
bonuses to focus its executives on achieving key corporate financial objectives,
to motivate certain desired individual behaviors and to reward substantial
achievement of these company financial objectives and individual
goals.  The Company utilizes these cash bonuses to reward performance
achievements with a time horizon of one-year or less, and it utilizes salary as
the base amount necessary to match its competitors for executive
talent.  The Company utilizes stock options and restricted stock to
reward long-term performance, with excellent corporate performance and extended
officer tenure producing potentially significant value for the
officer.




The
Company views these components of compensation as related but distinct. Although
its Compensation Committee does review total compensation, it does not believe
that significant compensation derived from one component of compensation should
negate or reduce compensation from other components.  The Company
determines the appropriate level for each compensation component based in part,
but not exclusively, on the analysis of the Compensation Committee and the Board
of Directors consistent with its recruiting and retention goals, its view of
internal equity and consistency, and other considerations it deems relevant,
such as rewarding extraordinary performance.  In prior years uVuMobile
has previously engaged compensation consultants to assist with this analysis,
but currently the Company is not utilizing such consultants.




The
Company believes that, as is common in the technology sector, stock option
awards and restricted stock are the primary compensation-related motivators in
attracting and retaining executives and that salary and bonus levels are
secondary considerations.  Except as described below, its compensation
committee has not adopted any formal or informal policies or guidelines for
allocating compensation between long-term and currently paid-out compensation,
between cash and non-cash compensation, or among different forms of non-cash
compensation.  However, its compensation committee’s philosophy is to
make a greater percentage of an employee’s compensation performance-based as he
or she becomes more senior and to keep cash compensation to the minimum
competitive level while providing the opportunity to be well rewarded through
equity if the Company performs well over time.




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The Company’s compensation committee’s
current intent is to perform at least annually a strategic review of the
Company’s executive officers’ compensation levels to determine whether they
provide adequate incentives and motivation to its executive officers and whether
they adequately compensate its executive officers relative to comparable
officers in other companies with which it competes for
executives.  These companies may or may not be public companies, but
typically are within the cable, telecommunications and media industries, which
the Company believes face similar issues to it.  The Company’s
compensation committee’s most recent review occurred in the first quarter of
2007.  Compensation committee meetings typically have included, for
all or a portion of each meeting, not only the committee members, but also its
chief executive officer.  For compensation decisions, including
decisions regarding the grant of equity compensation, relating to executive
officers, its compensation committee typically considers recommendations from
the chief executive officer as one factor in its analysis.




Since
January 1, 2006, the Company accounts for equity compensation paid to its
employees under the rules of SFAS No. 123R, which requires it to estimate
and record an expense over the service period of the
award.  Accounting rules also require it to record cash compensation
as an expense at the time the obligation is accrued.  Unless and until
the Company achieves sustained profitability, the availability to the Company of
a tax deduction for compensation expense will not be material to its financial
position.  The Company structures cash bonus compensation so that it
is taxable to its executives at the time it becomes available to
them.  The Company currently intends that all cash compensation paid
will be tax deductible for the Company.  However, with respect to
equity compensation awards, while any gain recognized by employees from
nonqualified options should be deductible, to the extent that an option
constitutes an incentive stock option gain recognized by the optionee will not
be deductible if there is no disqualifying disposition by the
optionee.  In addition, if the Company grants restricted stock or
restricted stock unit awards that are not subject to performance vesting, they
may not be fully deductible by the Company at the time the award is otherwise
taxable to the employee.




Factors
Unique To 2007




The
Company had two separate chief executive officers during 2007.  On
August 23, 2007, its then Interim Chief Executive Officer, David Ross, resigned
from that position at uVuMobile.  Mr. Ross was not paid any severance
amounts pursuant to his employment agreement with uVuMobile.  The
Company’s Board of Directors performed a search for a candidate with experience
in its areas of business.  As a result of the search, the Board of
Directors of uVuMobile hired William Loughman as its new Chief Executive Officer
effective August 23, 2007.




Base
Salaries




The
Company provides its executive officers with a level of cash compensation that
facilitates an appropriate lifestyle and provides a reasonable minimum
compensation.  The Company makes this determination based on a variety
of factors including professional accomplishments, level of education, past
experience and scope of responsibilities. The actual amount of base salary paid
to each executive officer is set forth in the “Summary Compensation Table”
included later in this annual report on Form 10-K.




The
salary level for Mr. Ross as Interim Chief Executive Officer was set at a rate
of $275,000 per year beginning in August of 2006 and remained at that level
until his resignation.  When Mr. Loughman became the Chief Executive
Officer in August 2007, his annualized salary was set at the rate of
$180,000.  The salary level for Mr. Hughes, the Company’s Chief
Technology Officer, was set at a rate of $180,000 per year beginning in August
2007.  The salary level for Mr. Novia, the Company’s Senior
Vice-President of Content, was set at a rate of $162,000 per year beginning in
August 2007.  The base salary amounts for all three executive
officers, Messrs. Loughman, Hughes and Novia remain at their 2007
levels.




Bonuses




The
Company currently has no established cash bonus or non-equity incentive
plan.  As set forth in their respective employment agreements with
uVuMobile, Messrs. Loughman, Hughes and Novia are each eligible for cash bonuses
upon the achievement of goals set by the Board of Directors.  No
bonuses have ever been paid to any of the above referenced executive officers
under this provision of their employment agreements since uVuMobile has not
achieved the goals set by the Board of Directors for the granting of these
bonuses.  The compensation committee felt that these bonuses should be
based on the Company’s executive officers’ success as a team, as well as
individually.  No goals for the possible achievement of cash bonuses
by Messrs. Loughman, Hughes and Novia have been set for the 2008 fiscal
year.  The compensation committee of the Board of Directors also has
the power to award discretionary cash bonuses to each of Messrs. Loughman,
Hughes, and Novia; however, no such bonuses have ever been granted.




Stock
Based Compensation




All of
the Company’s employees participate in its stock based compensation plans and
receive awards of non-qualified stock options or restricted
stock.  The Company uses non-qualified options because of the
favorable tax treatment to it and the near universal expectation by employees in
its industry that they will receive stock options.  The overwhelming
majority of these awards are time-based options which vest over a period of two
years while the employees are in the employ of uVuMobile.  The
Company’s current executive officers have received stock options and restricted
stock as part of their compensation.  The value of the shares subject
to option grants and grants of restricted stock to executive officers are
reflected in the “Summary Compensation Table” table below and further
information about these grants is reflected in the “uVuMobile Grants of
Plan-Based Awards Table below.




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The
Company does not have any program, plan or obligation that requires it to grant
equity compensation on specified dates.  The Company has not made
equity grants in connection with the release or withholding of material
non-public information.  It is possible that it will establish
programs or policies of this sort in the future. Authority to make equity grants
to executive officers rests with its Compensation Committee; however, as noted
above, the Compensation Committee does consider the recommendations of its Chief
Executive Officer.




In
general, the Company’s philosophy is to set common goals for all executive
officers for all performance-based option grants and grants of restricted
stock.  The Company expects that in normal circumstances, future
option grants and grants of restricted stock that are performance-based will be
based on common goals for all executive officers.




At the
present time, the Company has no formal policy related to stock ownership for
executive officers, and in establishing grant levels, we generally do not
consider the equity ownership levels of the executive officers or the existence
of fully vested prior awards.




Timing
Of Option Grants




The
Company does not have a formal written policy related to the timing of option
grants or grants of restricted stock; however it does have certain time periods
when options are normally granted.  At the present time, the Company
does not have many analysts that follow its common stock and the release of its
quarterly financial reports normally has little or no impact on the price of its
common stock.  There are two normal situations where options are
granted.  The first is when a new employee, including an executive
officer, is hired.  If a new employee receives options as part of
starting employment, those options are granted either at, or shortly after, the
employment start date.  All options to employees that have been
granted to date, including those to the executive officers, are time-based
awards.




For
executive officers, the Compensation Committee also meets annually to establish
compensation levels, including salary, bonus, options and restricted stock, for
the year.  This meeting normally occurs in the first quarter of each
year.  In 2008, the Compensation Committee is expected to complete
this activity in the second quarter of 2008.




All
option grants for all employees are approved by the Compensation Committee of
the Board of Directors. The Compensation Committee does not delegate any of its
powers for granting options to others.




Other
Benefits And Perquisites




Since the
Company has not yet reached profitability, it takes a relatively minimal
approach to benefits for all employees, including its executive
officers.  There are no benefit plans available to its executive
officers that are not available to all employees.  These benefits
include health and dental insurance, group term life insurance, and disability
insurance.  There are no special benefits or perquisites provided to
any executive officer. The Company has no company funded retirement plans or
deferred compensation plans.  We also do not provide any of the
perquisites common at larger companies.




Severance
And Change Of Control Provisions




Each of
the Company’s current executive officers, Messrs. Loughman, Hughes and Novia,
currently do not have employment agreements with uVuMobile. The Company has
agreed to pay Messrs. Loughman, Hughes and Novia each an amount equal to 33% of
their annual salary if they are terminated without cause before November
2008. Mr. Ross, the Company's former Chief Executive Officer, had an
employment agreement which contained certain provisions for the acceleration of
option grants and grants of restricted stock and severance payments if his
employment was terminated without cause or under other
circumstances.




Mr. Ross
resigned as the company’s Chief Executive Officer effective August 23, 2007, but
he did not receive any severance payments or the acceleration of any stock
options or restricted stock.




Compensation
Approval Process




The
Compensation Committee of the Company’s Board of Directors approves all
compensation and awards to all executive officers.  Regarding most
compensation matters, including executive compensation, the Chief Executive
Officer provides recommendations to the Compensation
Committee.  However, the Compensation Committee does not delegate any
of its functions to others in setting compensation.  To this point,
the Company has made formal use of compensation consultants in the past in
determining executive compensation levels for many of its executive officers,
but it does not currently have any such consultants engaged.  The
Company does, however, intend to undergo a thorough review of its executive
compensation practices in 2008 to insure that its current compensation practices
are reasonable and appropriate for its circumstances.  The Company
anticipates that this review will include benchmarking against other
companies.  This review may or may not include an independent analysis
by compensation consultants.




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As
previously discussed, The Company hired a new Chief Executive Officer during
2007.  In the case of Mr. Loughman, the Company did not use a search
firm.  In the course of that search, the Compensation Committee
discussed the compensation of Mr. Ross, its exiting Chief Executive Officer, as
well as a range of possible compensation for a new Chief Executive
Officer.  The Compensation Committee feels that the compensation of
Mr. Loughman as Chief Executive Officer falls within the reasonable
range.  The Company did not do a specific analysis, nor did it receive
any written report or specific recommendations as to the compensation for Mr.
Loughman as Chief Executive Officer.  The Company believed that its
proposal for Mr. Loughman’s compensation was reasonable, and Mr. Loughman
accepted the proposal.




SUMMARY
COMPENSATION TABLE




Name
      / Position
            Year
            
            Salary(1)
            
            
            Bonus(2)
            
            
            Option
      Awards
            
            
            All
      Other Compensation
            
            
            TotalDavid
      Ross, CEO (a)(b)
            2007
            
            $
            171,875
            
            
            $
            –
            
            
            $
            385,820
            
            
            $
            –
            
            
            $
            557,6952006
            
            $
            179,237
            
            
            $
            –
            
            
            $
            835,578
            
            
            $
            –
            
            
            $
            1,014,815William
      J. Loughman, CEO, CFO (c)(d)
            2007
            
            $
            215,684
            
            
            $
            –
            
            
            $
            22,348
            
            
            $
            –
            
            
            $
            238,0322006
            
            $
            171,839
            
            
            $
            –
            
            
            $
            116,592
            
            
            $
            –
            
            
            $
            288,431Scott
      Hughes, CTO (e)(f)
            2007
            
            $
            170,000
            
            
            $
            –
            
            
            $
            48,862
            
            
            $
            25,000
            
            
            $
            243,8622006
            
            $
            143,750
            
            
            $
            –
            
            
            $
            921,518
            
            
            $
            –
            
            
            $
            1,065,268Tony
      Novia, SVP (g)(h)
            2007
            
            $
            161,709
            
            
            $
            –
            
            
            $
            217,262
            
            
            $
            25,000
            
            
            $
            403,9712006
            
            $
            77,575
            
            
            $
            25,000
            
            
            $
            93,608
            
            
            $
            –
            
            
            $
            196,183





(1)
            
            Messrs.
      Ross, Loughman, and Novia all joined the Company at different times in
      2006.  Therefore, the salaries reflected here are pro-rated for
      the year.(2)
            
            Mr.
      Novia received a Signing Bonus per his Employment
    Agreement.(a)
            
            Mr.
      Ross resigned as CEO on August 23, 2007.(b)
            
            Mr.
      Ross was named Interim CEO in September 2006.  Based on his new
      duties and responsibilities, Mr. Ross was given a raise in the amount of
      $75,000, which brought his annual salary to $275,000.  Mr. Ross
      received a grant of 1,000,000 stock options under his Employment Agreement
      and two additional grants of 150,000 stock options in July and October
      2006.  The October 2006 options were granted based on the
      Executive Stock Option Incentive Plan.  In each case, the
      exercise price of the stock options is based on the closing stock price on
      the date of grant.(c)
            
            Mr.
      Loughman was named CEO and President on August 23, 2007.  In
      November of 2007, Mr. Loughman's base salary became
      $180,000.  In addition, Mr. Loughman was granted a total of
      1,350,000 stock options in 2007.  In each case, the exercise
      price of all options is based on the closing stock price on the date of
      grant.(d)
            
            Mr.
      Loughman received a base salary of $240,000 annually less FICA and a grant
      of 80,000 stock options under his Employment Agreement.  In
      addition, Mr. Loughman received a grant of 25,000 stock options under the
      Executive Stock Option Incentive Plan.  In each case the
      exercise price of the options is based on the closing stock price on the
      date of grant.(e)
            
            Mr.
      Hughes' August 2006 Employment Agreement was terminated on July 31,
      2007.  However, upon signing a new agreement in November 2007,
      Mr. Hughes' salary became $180,000 and he received a lump-sum payment of
      $25,000 upon signing a Settlement Agreement for his terminated 2006
      Employment Agreement.  In addition, Mr. Hughes was granted a
      total of 1,100,000 stock options.  The exercise price of all
      options is based on the closing stock price on the date of the
      grant.(f)
            
            Mr.
      Hughes received a salary increase in August 2006 to raise his salary from
      $130,000 (the amount in his Employment Agreement) to
      $160,000.  In addition, Mr. Hughes was granted 30,000 stock
      options in October 2006 under the Executive Stock Option Incentive
      Plan.  The exercise price of the stock options is based on the
      closing stock price on the date of grant.(g)
            
            Mr.
      Novia's June 2006 Employment Agreement was terminated on July 31,
      2007.  Upon signing a new Employment Agreement, Mr. Novia
      received a base salary of $162,000.  He also received a lump-sum
      payment of $25,000 as stated in a Settlement Agreement regarding his June
      2006 Employment Agreement.  In addition, Mr. Novia was granted a
      total of 600,000 stock options in 2007.  The exercise price of
      all options is based on the closing stock price on the date of the
      grant.(h)
            
            Mr.
      Novia received an annual base salary of $160,000 under his Employment
      Agreement.  Under the Employment Agreement, Mr. Novia also
      received a grant of 250,000 stock options.  In addition, Mr.
      Novia received a grant of 50,000 stock options in July 2006 and a grant of
      100,000 stock options in October 2006.  The October 2006 options
      were granted based on the Executive Stock Option Incentive
      Plan.  In each case, the exercise price of the options is based
      on the closing stock price on the date of the
  grant.




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uVuMobile
      Grants of Plan-Based Awards TableAll
      Other Option Awards:Name
            Grant
      Date
            
            Number
      of Securities Underlying Options
            
            
            Exercise
      of Base Price of Option Awards
            
            
            Grant
      Date Fair Value of Stock and Options AwardsDavid
      Ross, CEO (a)
            4/27/2007
            
            
            200,000
            
            
            $
            0.30
            
            
            $
            43,000William
      Loughman, CEO, CFO (b)
            4/27/2007
            
            
            100,000
            
            
            $
            0.30
            
            
            $
            21,5009/12/2007
            
            
            250,000
            
            
            $
            0.15
            
            
            $
            30,82511/2/2007
            
            
            1,000,000
            
            
            $
            0.13
            
            
            $
            114,900Scott
      Hughes, CTO (c)
            4/27/2007
            
            
            100,000
            
            
            $
            0.30
            
            
            $
            21,50011/2/2007
            
            
            1,000,000
            
            
            $
            0.13
            
            
            $
            114,900Tony
      Novia, SVP - Content (d)
            4/27/2007
            
            
            100,000
            
            
            $
            0.30
            
            
            $
            21,50011/2/2007
            
            
            500,000
            
            
            $
            0.13
            
            
            $
            57,450








(a)
            
            Mr.
      Ross received 200,000 options granted under the Executive Stock Option
      Incentive Plan. The exercise price of these options is $0.30 and is based
      on the closing stock price on the date of grant. These options vest
      quarterly over a two-year period from the date of grant.  Mr.
      Ross resigned as CEO on August 23, 2007.(b)
            
            Mr.
      Loughman received an additional 350,000 options under the Executive Stock
      Option Incentive Plan. The exercise price of these options range between
      $0.15 and $0.30; based on the closing stock price on the date of grant.
      These options vest quarterly over a two-year period from the date of
      grant.  In addition, Mr. Loughman received 1,000,000 options
      granted under a Settlement Agreement and General Release.  The
      exercise price of these options is $0.13 and is based on the closing stock
      price on the date of the grant.  These options vest quarterly
      over a two-year period from the date of grant.(c)
            
            Mr.
      Hughes received 100,000 options under the Executive Stock Option Incentive
      Plan. The exercise price of these options is $0.30 based on the closing
      stock price on the date of grant. These options vest quarterly over a
      two-year period from the date of grant.  In addition, Mr. Hughes
      received 1,000,000 options granted under a Settlement Agreement and
      General Release.  The exercise price of these options is $0.13
      and is based on the closing stock price on the date of the
      grant.  500,000 of these options vest immediately and the
      remaining 500,000 shall vest quarterly over a one-year period from the
      date of grant.(d)
            
            Mr.
      Novia was granted 100,000 options under the Executive Stock Option
      Incentive Plan. The exercise price of these options is $0.30 and is based
      on the closing stock price on the date of grant. These options also vest
      quarterly over a two-year period from the date of grant.  In
      addition, Mr. Novia received 500,000 options granted under a Settlement
      Agreement and General Release.  The exercise price of these
      options is $0.13 and is based on the closing stock price on the date of
      the grant.  These options vest quarterly over a two-year period
      from the date of grant.







OUTSTANDING
EQUITY AWARDS VALUE AT FISCAL YEAR-END TABLE




The
following table gives information regarding all unexercised options previously
awarded to the Executive Officers named above for fiscal year ended December 31,
2007.  The number of options held at December 31, 2007 includes options
granted under the 2004 Stock Option Plan and the 2005 Stock Option Plan.




Outstanding
      Equity Awards at Fiscal Year-EndOption
      AwardsName
            
            Number
      of Securities Underlying Unexercised Options (#)
    Exercisable
            
            
            Number
      of Securities Underlying Unexercised Options (#)
    Unexercisable
            
            
            Option
      Exercise Price ($)
            
            Option
      Expiration DateDavid
      Ross, CEO (a)
            
            
            50,000
            
            
            
            150,000
            
            
            $
            0.30
            
            4/27/2017William
      J. Loughman, CEO, CFO (b)
            
            
            50,000
            
            
            
            50,000
            
            
            $
            0.30
            
            4/27/2017125,500
            
            
            
            125,500
            
            
            $
            0.15
            
            9/12/2017375,000
            
            
            
            625,000
            
            
            $
            0.13
            
            11/2/2017Scott
      Hughes, CTO (c)
            
            
            37,500
            
            
            
            62,500
            
            
            $
            0.30
            
            4/27/2017750,000
            
            
            
            250,000
            
            
            $
            0.13
            
            11/2/2017Tony
      Novia, SVP - Content (d)
            
            
            50,000
            
            
            
            50,000
            
            
            $
            0.30
            
            4/27/2017125,000
            
            
            
            375,000
            
            
            $
            0.13
            
            11/2/2017





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(a)
            Mr.
      Ross received 200,000 options with an exercise price of $0.30 under the
      Executive Incentive Bonus Plan.  The options vest quarterly over
      two years and the exercise price is based on the closing stock price on
      the date of grant.(b)
            Mr.
      Loughman received 100,000 options on April 27, 2007 under the Executive
      Incentive Bonus Plan.  The options vest quarterly over two years
      and the exercise price of $0.15 is based on the closing stock price on the
      date of grant.  Mr. Loughman also received 250,000 options on
      Sept. 12, 2007, upon his appointment to the Board of
      Directors.  The options vest over one-year and the exercise
      price is based on the closing stock price on the date of
      grant.  On November 2, 2007, Mr. Loughman received 1,000,000
      options.  The options vest quarterly over two years and the
      exercise price of $0.13 is based on the closing stock price on the date of
      grant.(c)
            Mr.
      Hughes received 100,000 options in April 2007 under the Executive
      Incentive Bonus Plan.  The options vest quarterly over a two
      years and the exercise price of $0.30 is based on the closing stock price
      on date of grant.  On November 2, 2007, Mr. Hughes received
      1,000,000 options.  The options vest as
      follows:  500,000 immediately upon signing and the remaining
      500,000 over a 12-month period.  The exercise price of $0.13 is
      based on the closing stock price on the date of grant.(d)
            Mr.
      Novia received 100,000 options under the Executive Bonus
      Plan.  The exercise price of $0.30 is based upon the closing
      stock price on the date of the grant.  Mr. Novia also received
      an additional 500,000 options with an exercise price of $0.13 on November
      2, 2007.  All of the options vest quarterly over two years and
      the price is based on the closing stock price on the date of the
      grant.







OPTION
EXERCISES AND STOCK VESTED





No
options were exercised by the President and Chief Executive Officer or any other
Executive Officer listed in the Summary Compensation Table in the fiscal year
ended December 31, 2007.





NON-QUALIFIED
DEFERRED COMPENSATION





At this
time the Company does not have a non-qualified deferred compensation
plan.





SEVERANCE
BENEFITS





The
Company believes that it should provide reasonable severance benefits to
executives under appropriate circumstances. In that regard, certain Company
executives have severance benefits, the terms of which are set forth in their
employment contracts negotiated and agreed upon between the executives and the
Company. The Company views the severance benefits as a valuable retention tool
and believes the terms of all such severance benefits reflect the value of the
executive's services to the Company.





In
general, the employment contracts provide that the severance benefits for
termination by the Company without Cause (in general “Cause” is defined as
conviction of a crime, stealing from the Company, violation of the
Non-Compete/Non-Disclosure agreement, failure to perform job duties as directed
by the Board, or gross negligence) or by the employee with Good Reason (in
general “Good Reason” is defined as a required relocation, position change,
change in responsibilities or decrease in compensation) are to be paid including
earned but unpaid salary and expenses, continued provision of benefits during
the severance period, and a pro rated bonus payment. Certain of the employment
contracts also require the Company to pay the employee's salary past the date he
or she is terminated by the Company without Cause or by the employee for Good
Reason. In addition, unvested stock options will vest immediately if he or she
is terminated by the Company without Cause or by the employee for Good
Reason.





Further,
in general, the employment contracts provide that the executive will not receive
any severance benefits if the individual is terminated by the Company for Cause
as defined above or if the executive terminates his or her employment without
Good Reason (as defined above). Rather, the executive would generally only be
entitled to earned but unpaid salary, expenses and vested stock
options.




SEVERANCE
BENEFITS TABLE


Name
            
            Lump
      Sum Payment
            
            
            Insurance
      Benefits PaidWilliam
      Loughman, CEO, CFO (a)
            
            $
            59,400
            
            
            $
            –Scott
      Hughes, CTO (b)
            
            $
            59,400
            
            
            $
            –Tony
      Novia, SVP - Content (c)
            
            $
            53,460
            
            
            $
            6,388







(a)
            
            Mr.
      Loughman signed a new Employment Agreement in November
      2007.  Under the terms of the Agreement, if the Agreement is
      terminated within the first year by the Company, Mr. Loughman receives a
      lump sum payment equal to 33% of his annual salary.(b)
            
            Mr.
      Hughes signed a new Employment Agreement in November
      2007.  Under the terms of the Agreement, if the Agreement is
      terminated within the first year by the Company, Mr. Hughes receives a
      lump sum payment equal to 33% of his annual salary.(c)
            
            Mr.
      Novia signed a new Employment Agreement in November 2007.  Under
      the terms of the Agreement, if the Agreement is terminated within the
      first year by the Company, Mr. Novia receives a lump sum payment equal to
      33% of his annual salary.  In addition, Mr. Novia receives
      health and dental benefits paid four months after the termination
      date.





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Change
In Control




In the
event of a Change in Control (as defined in each employment contract) any
unvested stock options will immediately vest. Per some employment contracts,
certain executives will also receive base salary for a stated period of time
(generally one year or less) as set forth above.





DIRECTOR COMPENSATION TABLE





The
following table provides the compensation information for the one-year period
ended December 31, 2007 for each member of the Board of Directors.





Name
            
            Fees
      Earned or Paid in Cash1
            
            
            Option
      Awards2
            
            
            TotalWilliam
      J. Loughman Director (a)
            
            $
            –
            
            
            $
            –
            
            
            $
            –Daniel
      McKelvey Director (b)
            
            $
            500
            
            
            $
            –
            
            
            $
            500William
      J. Scigliano Director (c )
            
            $
            500
            
            
            $
            –
            
            
            $
            500Richard
      Seifert Director (d)
            
            $
            6,000
            
            
            $
            –
            
            
            $
            6,000







(1)
            
            Board
      members receive $1,500 for attendance at face-to-face Board meetings and
      $500 for telephonic Board meetings.(2)
            
            In
      addition to an initial grant of 250,000 options, upon becoming a Board
      member, each member is granted 25,000 stock options per committee they are
      members of and 10,000 stock options per committee chair they
      hold.(a)
            
            Mr.
      Loughman received no cash payments as a director of the
      Company.(b)
            
            Mr.
      McKelvey joined the Board in December 2007 and receives cash payments
      based on Board meeting attendance.  He also received a grant of
      250,000 stock options for becoming a member of the Board and 50,000 stock
      options for his membership on the Compensation and Nominating
      Committees.  All stock options vest quarterly over one-year from
      the date of grant and the exercise price is based on the closing stock
      price on the date of the grant.(c)
            
            Mr.
      Scigliano joined the Board in December 2007 and receives cash payments
      based on Board Meeting attendance.  He received a grant of
      250,000 stock options for becoming a member of the Board and 25,000 stock
      options for membership on the Audit Committee.  All stock
      options vest quarterly over one-year from the date of grant and the
      exercise price is based on the closing stock price on the date of the
      grant.(d)
            
            Mr.
      Seifert joined the Board in August 2007 and receives cash payments based
      on Board Meeting attendance.  He received 250,000 stock options
      for joining the Board of Directors.  These options vest
      quarterly over one-year from the date of grant and the exercise price is
      based on the closing stock price on the date of the
  grant.







Compensation
Committee Interlocks And Insider Participation





No member
of the Board's Compensation Committee has served as one of the Company’s
officers or employees at any time. None of its Executive Officers serves as a
member of the Compensation Committee of any other company that has an executive
officer serving as a member of its Board of Directors. None of its executive
officers serve as a member of the Board of Directors of any other company that
has an executive officer serving as a member of its Board's Compensation
Committee.





Item12.
            Security
      Ownership Of Certain Beneficial Owners And Management and Related
      Stockholder Matters




The
following table sets forth, as of March 7, 2008,certain information known to
the Company with respect to the beneficial ownership of its Capital Stock, by
(i) each person known by the Company to be the beneficial owner of more than 5%
of the Company's outstanding Capital Stock, (ii) each executive officer named in
the summary compensation table included elsewhere in this Annual Report on Form
10-K and director of the Company, and (iii) all directors and executive
officers as a group. Except as otherwise indicated, the Company believes that
the beneficial owners of the Capital Stock listed below, based on information
furnished by such owners, have sole investment and voting power with respect to
their shares.




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Name
      and Address of Beneficial Owner
            
            Number
      of Shares Beneficially Owned (1)
            
            
            Percentage
      Shares Beneficially OwnedEnable
      (2) One Ferry Building, Suite 255, San Francisco, CA 94111
            
            
            28,125,000
            
            
            
            33.40
            %Forte
      Partners LLC (3) (10) 250 Montgomery St., Suite 1200, San Francisco, CA
      94104
            
            
            20,052,223
            
            
            
            24.4
            %Michael
      Criden (4) 2160 Satellite Blvd. Suite 130, Duluth, GA
30097
            
            
            4,976,978
            
            
            
            6.8
            %Glenn
      Singer (5) 2160 Satellite Blvd. Suite 130, Duluth, GA
30097
            
            
            5,775,313
            
            
            
            7.8
            %William
      J. Loughman (6) 2160 Satellite Blvd. Suite 130, Duluth, GA
      30097
            
            
            2,049,063
            
            
            
            2.8
            %Scott
      Hughes (7) 2160 Satellite Blvd. Suite 130, Duluth, GA
30097
            
            
            2,410,000
            
            
            
            3.3
            %Tony
      Novia (8) 2160 Satellite Blvd. Suite 130, Duluth, GA 30097
            
            
            543,750
            
            
            
            *Richard
      Seifert (9) 2160 Satellite Blvd. Suite 130, Duluth, GA
    30097
            
            
            187,500
            
            
            
            *Daniel
      McKelvey (10) (2) 2160 Satellite Blvd. Suite 130, Duluth, GA
      30097
            
            
            150,000
            
            
            
            *William
      Scigliano (11) 2160 Satellite Blvd. Suite 130, Duluth, GA
      30097
            
            
            137,500
            
            
            
            *All
      directors and executive officers as a group (6 persons)
            
            
            5,786,563
            
            
            
            8.1
            %





* Less
than 1%




(1)
            
            Beneficial
      ownership is determined in accordance with the rules of the SEC. Shares of
      common stock (a) subject to options or warrants currently exercisable or
      exercisable within 60 days of March 7, 2008 or (b) into which shares of
      the Company’s Series A-1 Preferred Stock, Series B Preferred Stock and 8%
      Convertible Debentures are convertible within 60 days of March 7, 2008,
      are deemed outstanding for computing the percentage ownership of the
      stockholder holding the options, warrants, Series A-1 Preferred Stock,
      Series B Preferred Stock or 8% Convertible Debentures, as applicable, but
      are not deemed outstanding for computing the percentage ownership of any
      other stockholder.  Unless otherwise indicated in the footnotes
      to this table, we believe that stockholders named in the table have sole
      voting and sole investment power with respect to the shares set forth
      opposite such stockholder’s name. Unless otherwise indicated, the
      officers, directors and stockholders can be reached at our principal
      offices. As of March 7, 2008, the Company had 67,645,299 shares of
      common stock outstanding, 133,333 shares of Series A-1 Preferred Stock and
      4,017,188 shares of Series B Preferred Stock currently convertible into
      one share of common stock each, respectively.(2)
            
            Represents
      15,625,000 shares of common stock into which Enable's 8% Convertible
      Debentures are convertible and two warrants to purchase an aggregate of
      12,500,000 shares of common stock at an exercise price of
  $0.15.(3)
            
            Represents
      9,375,000 shares of common stock into which Forté’s 8% Convertible
      Debentures are convertible; a warrant to purchase an aggregate of
      7,500,000 shares of common stock at an exercise price of $0.15, per share;
      and a warrant to purchase 3,177,223 shares of common stock at an exercise
      price of $0.064, per share.  Mr. McKelvey is a principal
      with Forte Partners LLC.(4)
            
            Represents
      1,441,666 shares of common stock, 1,614,062 shares of common stock into
      which Mr. Criden’s shares of Series B Preferred Stock are convertible, a
      warrant to purchase an aggregate of 1,291,250 shares of Common Stock at an
      exercise price of $0.15 per share, and options to purchase 630,000 shares
      of common stock at exercise prices ranging from $0.13 to $1.91 per share;
      of which options to purchase 630,000 shares of common stock are
      exercisable within 60 days of March 7, 2008.  Mr. Criden is
      a former Director of the Company.(5)
            
            Represents
      2,120,000 shares of common stock, 15,000 shares of common stock held in a
      custodial account for his children, 1,614,063 shares of common stock into
      which Mr. Singer’s shares of the Series B Preferred Stock are convertible,
      a warrant to purchase an aggregate of 1,291,250 shares of common stock at
      exercise price of $0.15 per share, and options to purchase 735,000 shares
      of common stock at exercise prices ranging from $0.13 per share to $1.91
      per share; of which options to purchase 735,000 shares of common stock are
      exercisable within 60 days of March 7, 2008. The warrants were issued in
      the name of GHS Holdings Limited Partnership, a company that
      Mr. Singer controls.  Mr. Singer is a former Director
      of the Company.(6)
            
            Represents
      80,000 shares of common stock held by Mr. Loughman, 664,063 shares of
      common stock into which Mr. Loughman’s shares of Series B Preferred Stock
      are convertible, warrants to purchase an aggregate of 531,250 shares of
      common stock at an exercise price of $0.15 per share, and options to
      purchase 1,455,000 shares of common stock at exercise prices ranging from
      $0.14 per share to $1.95 per share; of which options to purchase 648,750
      shares of common stock are exercisable within 60 days of March 7,
      2008.(7)
            
            Represents
      options to purchase 2,730,000 shares of common stock at exercise prices
      ranging from $0.13 per share to $1.55 per share; of which options to
      purchase 2,410,750 shares of common stock are exercisable within 60 days
      of March 7, 2008.(8)
            
            Represents
      options to purchase 1,000,000 shares of common stock at exercise prices
      ranging from $0.13 per share to $1.48, of which options to purchase
      543,750 shares of common stock are exercisable within 60 days of March 7,
      2008.(9)
            
            Represents
      175,700 shares of common stock registered in his wife’s name and options
      to purchase 250,000 shares of common stock at an exercise price of $0.14,
      of which options to purchase 187,500 shares of common stock are
      exercisable within 60 days of March 7, 2008.(10)
            
            Represents
      options to purchase 300,000 shares of common stock at an exercise price of
      $0.09, of which options to purchase 150,000 shares of common stock are
      exercisable within 60 days of March 7, 2008. Mr. McKelvey is a
      principal with Forte Partners LLC.(11)
            
            Represents
      options to purchase 275,000 shares of common stock at an exercise price of
      $0.09, of which options to purchase 137,500 shares of common stock are
      exercisable within 60 days of March 7,
2008.





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Item13.
            Certain
      Relationships And Related Transactions, And Director
      Independence





On
December 17, 2007, uVuMobile, Inc. (the “Company”) entered into a definitive
agreement (the “Securities Purchase Agreement”) to sell $2,033,423 of its 8%
Secured Convertible Debentures (the “Debentures”) to institutional and private
investors (collectively, the “Investors” or “Holders”).




The
Debentures bear interest at the rate of 8% per annum and mature on December 17,
2009 (the “Maturity Date”).  The Company shall pay interest to the
holders of the Debentures quarterly on each of January 1, April 1, July 1, and
October 1 of each year prior to the Maturity Date of the
Debentures.  The Debentures are also convertible into shares of the
Company’s common stock at a conversion price of $0.064 per share, subject to
adjustment in accordance with terms of the Debentures.  Any voluntary
conversion by the Investors of the Debentures is subject to a Beneficial
Ownership Limitation (as defined in the Debentures).  In addition, the
Debentures are subject to a forced conversion (the “Forced Conversion”) in all
or in part by the Company in the event that the daily volume weighted average
stock price of the Company’s common stock for any twenty (20) consecutive
trading days exceeds $0.256.  The Debentures are secured by all of the
assets of the Company pursuant to a security agreement.




In
connection with the Debentures, the Company issued to certain investors warrants
that have substantially the same terms and conditions and give the respective
Holders the right to purchase a total of 12,500,000 and 7,500,000 shares of the
Company’s common stock, respectively, at an exercise price of $0.15 per share
for a period of five (5) years.  Of which, 3,177,223 shares are
issuable upon exercise of warrants, exercisable for a period of five (5) years
at a price of $0.064 per share in connection with the Debenture issued to the
finder of the Debenture, Forte Partners LLC (“Forte”), as a finders
fee.  In addition, Forte Partners LLC received a finder’s fee of
$203,342.  Mr. McKelvey, one of the Company’s Directors, is a
principal of Forte Partners LLC.




The
Company also issued 664,063 shares, 1,614,062 shares and 1,614,063 shares of its
Series B Convertible Preferred Stock, respectively, to William J. Loughman, its
Chief Executive Officer, and two of the Company’s former Directors, Michael
Criden and Glenn Singer, in consideration for the cancellation of debt owed by
the Company to each of these individuals.  In connection with the issuance
of these shares of Series B Convertible Preferred Stock, the Company also issued
warrants to purchase 531,250; 1,291,250; and 1,291,250 shares of the Company's
common stock, respectively, to each of Messrs. Loughman, Criden and
Singer. These warrants have an exercise price of $0.15 per share and are
exercisable for a period of five (5) years.




The
Company’s Audit Committee is charged with monitoring and reviewing issues
involving potential conflicts of interest, and reviewing and approving all
related party transactions.





The
Company’s Board




The
Company’s Board consists of four directors. See Part III. Item
10.  The Board has determined that Messrs. Seifert and Scigliano
qualify as “independent” as defined by applicable NASDAQ and SEC rules. In
making this determination, the Board has concluded that none of these members
has a relationship which, in the opinion of the Board, would interfere with the
exercise of independent judgment in carrying out the responsibilities of a
director.




Item14.
            Principal
      Accountant Fees And Services




The
following table represents fees for professional services rendered by Sherb
& Co., LLP billed to the Company for the audit of its annual financial
statements for the years ended December 31, 2007 and 2006, respectively, and
fees for other services during those periods.




Type
      of Fees
            
            2007
            
            
            2006Audit
      Fees
            
            $
            45,000
            
            
            $
            40,000Audit-Related
      Fees
            
            
            15,000
            
            
            
            13,500Tax
      Fees
            
            
            –
            
            
            
            –All
      Other Fees
            
            
            3,250
            
            
            
            2,250Total
            
            $
            63,250
            
            
            $
            55,750







Audit
Fees




The
Company incurred the following fees to Sherb & Co., LLP, its independent
auditors, for services rendered for the years ended December 31, 2007 and 2006,
a total of (i) $60,000 incurred in fiscal 2007 for the audit of its financial
statements for fiscal 2007 and the reviews of the financial statements included
in each of its Quarterly Reports on Form 10-Q for the year ended December 31,
2007, (ii) $53,500 incurred in fiscal 2006 was paid to Sherb & Co., LLP. for
the audit of the Company’s financial statements for fiscal 2006 and the reviews
of the financial statements included in each of its Quarterly Reports on Form
10-Q for the year ended December 31, 2006.




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Audit
Related Fees




There
were no additional fees for 2007 and 2006 billed to the Company by Sherb &
Co., LLP for assurance and related services that are reasonably related to the
performance of the audit and review of the Company’s financial statements that
are not already reported in the paragraph immediately above.




Tax
Fees




There
were no additional fees for 2007 and 2006 billed to the Company by Sherb &
Co., LLP for tax services.




All
Other Fees




There
were no additional fees for 2007 and 2006 billed to the Company by Sherb &
Co., LLP for products and services rendered, other than as described
above.




Auditor
Pre-Approval Policies




The Audit
Committee is responsible for pre-approving every engagement of the independent
auditor to perform audit or non-audit services for the Company. The Audit
Committee's pre-approval policy provides as follows:




1.
            First,
      once a year when the base audit engagement is reviewed and approved,
      management will identify all other services (including fee ranges) for
      which management knows it will engage the independent auditor for the next
      12 months. Those services typically include quarterly reviews, specified
      tax matters, certifications to lenders as may be required by financing
      documents, consultation on new accounting and disclosure standards and, in
      future years, reporting on management's internal controls
      assessment.




2.
            Second,
      if any new "unlisted" services are proposed during the year, the Audit
      Committee will review each proposed individual engagement. From and after
      the effective date of the Commission's rule requiring Audit Committee
      pre-approval of all audit and permissible non-audit services provided by
      independent auditors, the Audit Committee had pre-approved all audit and
      permissible non-audit services provided by Sherb & Co., LLP,
      since its engagement as the Company’s principal independent accountants.
      The Audit Committee gives due consideration to the potential effect of
      non-audit services on maintaining Sherb & Co., LLP’s audit
      independence.





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PART
IV





Item15.
            Exhibits
      And Financial Statement Schedules





(a)
            Documents
      filed as part of this report





(1)
            Consolidated
      Financial Statements.





The
following consolidated financial statements of uVuMobile are filed as part of
this report:





Report of
Independent Registered Accounting Firm




Consolidated
Balance Sheets - December 31, 2007 and 2006




Consolidated
Statements of Operations - Years ended December 31, 2007, 2006 and
2005




Consolidated
Statements of Changes in Stockholders' Deficit - Years ended December 31, 2007,
2006 and 2005




Consolidated
Statements of Cash Flow - Years ended December 31, 2007, 2006 and
2005




Notes to
Consolidated Financial Statements





(2)
            Consolidated
      Financial Statement Schedule





All
schedules required by applicable SEC regulations are either not required under
the related instructions, are inapplicable, or the required information has been
included in the Consolidated Financial Statements and therefore such schedules
have been omitted.





(3)
            Exhibits.





Exhibit
              Number
            
            Exhibit3.1*
            
            Certificate
      of Incorporation, as amended, incorporated by reference from Exhibit 3.1
      to the Registrant’s Current Report on Form 8-K filed on January 2,
      2001.3.2*
            
            Bylaws,
      as amended, of the Company, incorporated by reference from Exhibit 3.2 to
      the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended
      December 31, 2003.3.3*
            
            Series
      A-1 Convertible Preferred Stock Certificate of Designation as filed with
      the Secretary of State of the State of Delaware, incorporated by reference
      from Exhibit 3.1 to the Registrant’s Form 8-K filed with the SEC on
      November 4, 2005 (the “November 2005 Form 8-K”)3.4*
            
            Certificate
      of Amendment to Certificate of Incorporation, incorporated by reference to
      Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on
      February 24, 2006.3.5*
            
            Amended
      and Restated Certificate of Incorporation of uVuMobile, Inc., incorporated
      by reference from Exhibit 3.1 to the May 14, 2007 Form
  8-K.3.6*
            
            Certificate
      of Amendment to the Amended and Restated Certificate of Incorporation,
      incorporated by reference to Exhibit 3.1 to the February 14, 2008 Current
      Report on Form 8-K.4.1*
            
            Form
      of Securities Purchase Agreement, dated as of March 29, 2005, incorporated
      by reference from Exhibit 10.7 to the Registrant’s Annual Report on Form
      10-KSB for the fiscal year ended December 31, 2004.4.2*
            
            Form
      of Subscription Agreement, dated as of December 31, 2004, incorporated by
      reference from Exhibit 10.8 to the Registrant’s Annual Report on Form
      10-KSB for the fiscal year ended December 31, 2004.4.3*
            
            Form
      of Registration Rights Agreement, dated as of March 29, 2005, incorporated
      by reference from Exhibit 10.9 to the Registrant’s Annual Report on Form
      10-KSB for the fiscal year ended December 31, 2004.4.4*
            
            Form
      of Registration Rights Agreement, dated as of December 31, 2004,
      incorporated by reference from Exhibit 10.10 to the Registrant’s Annual
      Report on Form 10-KSB for the fiscal year ended December 31,
      2004.4.5*
            
            Registration
      Rights Agreement, dated as of November 29, 2004, between SmartVideo
      Technologies, Inc. and Interim CFO Solutions LLC, incorporated by
      reference from Exhibit 10.11 to the Registrant’s Annual Report on Form
      10-KSB for the fiscal year ended December 31, 2004.4.6*
            
            Form
      of Registration Rights Agreement, incorporated by reference from Exhibit
      10.7 to the Registrant’s Annual Report on Form 10-KSB for the fiscal year
      ended December 31, 2003.




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4.7*
            
            Amendment
      No. 1 dated March 29, 2005 to Securities Purchase Agreement, between
      SmartVideo Technologies, Inc. and Forte Capital Partners, LLC,
      incorporated by reference from Exhibit 4.7 to the Registrant’s May 2005
      Registration Statement on Form SB-2.4.8*
            
            Form
      of warrant issued to each purchaser in the March 2005 private placement,
      incorporated by reference from Exhibit 4.1 to the Registrant’s Annual
      Report on Form 10-KSB for the fiscal year ended December 31,
      2004.4.9*
            
            Form
      of warrant issued to each purchaser in the December 2004 private
      placement, incorporated by reference from Exhibit 4.2 to the Registrant’s
      Annual Report on Form 10-KSB for the fiscal year ended December 31,
      2004.4.10*
            
            Warrant
      issued to Interim CFO Solutions LLC to purchase 100,000 shares of common
      stock at $1.50 per share, incorporated by reference from Exhibit 4.3 to
      the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended
      December 31, 2004.4.11*
            
            Warrant
      issued to Interim CFO Solutions LLC to purchase 100,000 shares of common
      stock at $2.00 per share, incorporated by reference from Exhibit 4.4 to
      the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended
      December 31, 2004.4.12*
            
            Warrant
      issued to Interim CFO Solutions LLC to purchase 1,739,130 units,
      incorporated by reference from Exhibit 4.5 to the Registrant’s Annual
      Report on Form 10-KSB for the fiscal year ended December 31,
      2004.4.13*
            
            Form
      of Warrant issued to Interim CFO Solutions LLC to purchase 434,783 shares
      of common stock at $1.50 per share, incorporated by reference from Exhibit
      4.6 to the Registrant’s Annual Report on Form 10-KSB for the fiscal year
      ended December 31, 2004.4.14*
            
            Form
      of Warrant issued to Interim CFO Solutions LLC to purchase 434,783 shares
      of common stock at $2.00 per share, incorporated by reference from Exhibit
      4.7 to the Registrant’s Annual Report on Form 10-KSB for the fiscal year
      ended December 31, 2004.4.15*
            
            Warrant
      issued to Trilogy Capital Partners, Inc. to purchase 150,000 shares of
      common stock at $4.30, incorporated by reference from Exhibit 4.15 to the
      Registrant’s May 2005 Registration Statement on Form
  SB-2.4.16*
            
            Warrant
      issued to Trilogy Capital Partners, Inc. to purchase 275,000 shares of
      common stock at $5.00, incorporated by reference from Exhibit 4.16 to the
      Registrant’s May 2005 Registration Statement on Form
  SB-2.4.17*
            
            Warrant
      issued to Trilogy Capital Partners, Inc. to purchase 375,000 shares of
      common stock at $5.50, incorporated by reference from Exhibit 4.17 to the
      Registrant’s May 2005 Registration Statement on Form
  SB-2.4.18*
            
            Warrant
      issued to Trilogy Capital Partners, Inc. to purchase 450,000 shares of
      common stock at $6.50, incorporated by reference from Exhibit 4.18 to the
      Registrant’s May 2005 Registration Statement on Form
  SB-2.4.19*
            
            Securities
      Purchase Agreement dated as of October 31, 2005 among the Registrant and
      the investors listed on the Schedule of Buyers, incorporated by reference
      from Exhibit 10.1 of the November 2005 Form 8-K.4.20*
            
            Registration
      Rights Agreement entered into as of October 31, 2005 among the Registrant
      and the investor signatory thereto, incorporated by reference from Exhibit
      10.2 to the November 2005 Form 8-K.4.21*
            
            Form
      of $1.75 warrant issued to each purchaser in the October 2005 private
      placement, incorporated by reference from Exhibit 4.2 of the November 2005
      Form 8-K.4.22*
            
            Form
      of $2.00 warrant issued to each purchaser in the October 2005 private
      placement, incorporated by reference from Exhibit 4.1 of the November 2005
      Form 8-K.4.23*
            
            Form
      of Warrant, incorporated by reference from Exhibit 4.1 to the July 21,
      2006 Form 8-K.4.24*
            
            Form
      of Anti-Dilution Warrant, incorporated by reference from the November 4,
      2005 Form 8-K.4.25*
            
            Securities
      Purchase Agreement dated July 7, 2006 between the Company and the investor
      party thereto, incorporated by reference from Exhibit 10.1 to the July 21,
      2006 Form 8-K.4.26*
            
            Registration
      Rights Agreement dated July 7, 2006 between the Company and the investors
      party thereto, incorporated by reference from Exhibit 10.2 to the July 21,
      2006 Form 8-K.4.27*
            
            Form
      of Securities Purchase Agreement executed in connection with the issuance
      of the Company’s 8% Secured Convertible Debentures, incorporated by
      reference from Exhibit 4.1 to the December 17, 2007 Form
    8-K.4.28*
            
            Form
      of 8% Secured Convertible Debentures, incorporated by reference from
      Exhibit 4.2 to the December 17, 2007 Form
8-K.




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4.29*
            
            Form
      of Registration Rights Agreement executed in connection with the issuance
      of the Company’s 8% Secured Convertible Debentures, incorporated by
      reference from Exhibit 4.3 to the December 17, 2007 Form
    8-K.4.30*
            
            Form
      of Enable Purchaser Warrants to purchase shares of the Company’s Common
      Stock issuable in connection with the Company’s 8% secured Convertible
      Debentures, incorporated by reference from Exhibit 4.4 to the December 17,
      2007 Form 8-K.4.31*
            
            Form
      of Forte Purchaser Warrants to purchase shares of the Company’s Common
      Stock issuable in connection with the Company’s 8% secured Convertible
      Debentures, incorporated by reference from Exhibit 4.5 to the December 17,
      2007 Form 8-K.4.32*
            
            Form
      of Security Agreement executed by the Company in connection with the
      Company’s issuance of the 8% Secured Convertible Debentures, incorporated
      by reference from Exhibit 4.7 to the December 17, 2007 Form
      8-K.4.33*
            
            Form
      of Subsidiary Guarantee executed by the Company in connection with the
      Company’s issuance of the 8% Secured Convertible Debentures, incorporated
      by reference from Exhibit 4.8 to the December 17, 2007 Form
      8-K.10.1*
            
            Convertible
      Promissory Note dated September 26, 2005 issued to Glenn Singer,
      incorporated by reference from Exhibit 10.4 to the November 2005 Form
      8-K.10.2*
            
            Waiver
      of Second Closing Conditions under the Securities Purchase Agreement,
      incorporated by reference from Exhibit 10.1 to the December 2005 Form
      8-K.10.3*
            
            Settlement
      Agreement, dated January 30, 2006, among KC Ventures, Inc., Richard
      Seifert, SmartVideo Technologies, Inc. and OVT, Inc., incorporated by
      reference from Exhibit 10.1 to the January 31, 2006 Form
    8-K.10.4*
            
            Agreement
      dated as of April 14, 2006, among the Company, OVT, Inc., Richard E.
      Bennett, Jr., Robert J. Walters and William R. Dunavant, incorporated by
      reference to Exhibit 10.13 to Post Effective Amendment No. 3 to the
      Company's Registration Statement on Form S-1 filed with the SEC on April
      19, 2006.10.5*
            
            Settlement
      and Release Agreement dated June 8, 2006 among the Registrant and Enable
      Growth Partners, LP, incorporated by reference to Exhibit 10.1 to the June
      13, 2006 Form 8-K.10.6*
            
            Interim
      Executive Services Agreement dated March 20, 2006 between the Company and
      Tatum, LLC, incorporated by reference to Exhibit 10.15 of the Company’s
      Registration Statement on Form S-1, filed on June 30, 2006 (SEC
      Registration No. 333-135532).10.7*
            
            Securities
      Purchase Agreement dated July 17, 2006 among the Registrant and the
      investors listed on the Schedule of Buyers, incorporated by reference from
      Exhibit 10.1 to the Registrant's Form 8-K filed with the SEC on July 21,
      2006 (“July 21, 2006 Form 8-K”).10.8*
            
            Registration
      Rights Agreement entered into as of July 17, 2006 among the Registrant and
      the investor signatory thereto, incorporated by reference from Exhibit
      10.2 to the July 21, 2006 Form 8-K.10.9*
            
            Form
      of $1.25 warrant issued to each purchaser in the July 17, 2006 private
      placement, incorporated by reference from Exhibit 4.1 of the July 21, 2006
      Form 8-K.10.10**
            
            Redeemable
      Warrant issued to Skyward Mobile, LLC, incorporated by reference from
      Exhibit 10.24 to the Registrant’s Form S-1/A filed on September 27,
      2006.10.11**
            
            Letter
      Agreement dated August 22, 2006, between Joseph S. Johnson and the
      Company, incorporated by reference from Exhibit 10.25 to the Registrant’s
      Form S-1/A filed on September 27, 2006.10.12**
            
            Redeemable
      Warrant issued to James Morrison, incorporated by reference from
      Exhibit 10.26 to the Registrant’s Form S-1/A filed on September 27,
      2006.10.13*
            
            SmartVideo
      Technologies, Inc. 2004 Equity Incentive Plan, incorporated by reference
      from the Company's proxy statement on Schedule 14A filed with the SEC on
      July 21, 2004.10.14*
            
            SmartVideo
      Technologies, Inc. 2005 Stock Incentive Plan, incorporated by
      reference from the Company's proxy statement on Scheduled 14A filed with
      the SEC on January 19, 2006.10.15*
            
            Form
      of Non-Qualified Stock Option, incorporated by reference from Exhibit
      10.45 to the Registrant’s Form S-1/A filed on September 27,
      2006.10.16*
            
            Form
      of Non-Qualified Stock Option, incorporated by reference from Exhibit
      10.46 to the Registrant’s Form S-1/A filed on September 27,
      2006.




- 39
-
 Table of Contents




10.17*
            
            Form
      of Incentive Stock Option, incorporated by reference from Exhibit 10.47 to
      the Registrant’s Form S-1/A filed on September 27,
2006.10.18*
            
            Form
      of Incentive Stock Option, incorporated by reference from Exhibit 10.48 to
      the Registrant’s Form S-1/A filed on September 27,
2006.10.19*
            
            General
      Release and Settlement Agreement dated January 11, 2007 by and between
      SmartVideo Technologies, Inc. d/b/a uVuMobile and the claimant parties
      signatory thereto, incorporated by reference from Exhibit 10.1 to the
      January 17, 2006 Form 8-K.10.20*
            
            Registration
      Rights Agreement dated January 11, 2007 by and between SmartVideo
      Technologies, Inc. d/b/a uVuMobile and the investors signatory thereto,
      incorporated by reference from Exhibit 10.2 to the January 17, 2006 Form
      8-K.10.21*
            
            Redeemable
      Warrant to Purchase 150,000 Shares of the Common Stock of SmartVideo
      Technologies, Inc. for $2.50 per share issued to William B. Bandy and
      dated November 12, 2003, incorporated by reference from Exhibit (d)(76) to
      the Registrants Schedule TO-I filed on March 9, 2007.10.22*
            
            Redeemable
      Warrant to Purchase 350,000 Shares of the Common Stock of SmartVideo
      Technologies, Inc. for $2.10 per share issued to Dale Financial Consulting
      Services, Attn: Dick Newburg and dated February 28, 2006, incorporated by
      reference from Exhibit (d)(79) to the Registrants Schedule TO-I filed on
      March 9, 2007.10.23*
            
            Registration
      Rights Agreement dated February 28, 2006 between SmartVideo Technologies,
      Inc. and Dale Financial Consulting Services, incorporated by reference
      from Exhibit (d)(80) to the Registrants Schedule TO-I filed on March 9,
      2007.10.24*
            
            Redeemable
      Warrant to Purchase 20,000 Shares of the Common Stock of SmartVideo
      Technologies, Inc. for $2.10 per share issued to Al Mahesh and dated
      February 28, 2006, incorporated by reference from Exhibit (d)(81) to the
      Registrants Schedule TO-I filed on March 9, 2007.10.25*
            
            Registration
      Rights Agreement dated February 28, 2006 between SmartVideo Technologies,
      Inc. and Al Mahesh, incorporated by reference from Exhibit (d)(82) to the
      Registrants Schedule TO-I filed on March 9, 2007.10.26*
            
            General
      Release and Settlement Agreement dated January 11, 2007 by and between
      SmartVideo Technologies, Inc. d/b/a uVuMobile and the claimant parties
      signatory thereto, incorporated by reference from Exhibit 10.1 to the
      January 11, 2007 Form 8-K.10.27*
            
            Registration
      Rights agreement dated January 11, 2007 by and between SmartVideo
      Technologies, Inc. d/b/a uVuMobile and the investors signatory thereto,
      incorporated by reference from Exhibit 10.2 to the January 11, 2007 Form
      8-K.10.28*
            
            General
      Release and Settlement Agreement dated as of April 27, 2007 and effective
      April 30, 2007, by and between the Company and Richard Bennett, Jr.,
      incorporated by reference from Exhibit 10.1 to the April 27, 2007 Form
      8-K.10.29*
            
            General
      Release and Settlement Agreement dated July 16, 2007, by and between the
      Company, the Hamouth Family and Rene Hamouth, incorporated by reference
      from Exhibit 10.1 to the July 16, 2007 Form 8-K.10.30*
            
            Form
      of 8.25% Non-Secured Promissory Note, incorporated by reference from
      Exhibit 10.1 to the July 20, 2007 Form 8-K.10.31*
            
            Promissory
      Note with Warrants issued by the Company to Mr. Jerry Bratton,
      incorporated by reference from Exhibit 10.1 to the September 20, 2007 Form
      8-K.10.32*
            
            Promissory
      Note with Warrants issued by the Company to Mr. Ray Jones, incorporated by
      reference from Exhibit 10.2 to the September 20, 2007 Form
      8-K.10.33*
            
            Promissory
      Note with Warrants issued by the Company to Mr. Drew Arnold, incorporated
      by reference from Exhibit 10.3 to the September 20, 2007 Form
      8-K.10.34*
            
            Promissory
      Note with Warrants issued by the Company to Mr. Chris Carson, incorporated
      by reference from Exhibit 10.4 to the September 20, 2007 Form
      8-K.10.35*
            
            Promissory
      Note with Warrants issued by the Company to Mr. Jerry Bratton,
      incorporated by reference from Exhibit 10.5 to the September 20, 2007 Form
      8-K.10.36*
            
            Promissory
      Note with Warrants issued by the Company to Mr. Joseph Fitzpatrick,
      incorporated by reference from Exhibit 10.5 to the September 20, 2007 Form
      8-K.10.37*
            
            Promissory
      Note with Warrants issued by the Company to KLC Ventures LP , incorporated
      by reference from Exhibit 10.6 to the September 20, 2007 Form
      8-K.




- 40
-
 Table of Contents




10.38*
            
            Form
      of Promissory Note with Warrants issued by the Company to Lenders,
      incorporated by reference from Exhibit 10.7 to the September 20, 2007 Form
      8-K.10.39*
            
            Form
      of Security Agreement between the Company and Lenders, incorporated by
      reference from Exhibit 10.8 to the September 20, 2007 Form
      8-K.10.40*
            
            Employment
      Agreement of Mr. William J. Loughman, incorporated by reference from
      Exhibit 10.1 to the November 2, 2007 Form 8-K.10.41*
            
            Employment
      Agreement of Mr. Tony Novia, incorporated by reference from Exhibit 10.2
      to the November 2, 2007 Form 8-K.10.42*
            
            Employment
      Agreement of Mr. Scott Hughes incorporated by reference from Exhibit 10.3
      to the November 2, 2007 Form 8-K.10.43*
            
            Settlement
      Agreement and General Release of Mr. William J. Loughman, incorporated by
      reference from Exhibit 10.4 to the November 2, 2007 Form
    8-K.10.44*
            
            Settlement
      Agreement and General Release of Mr. Tony Novia, incorporated by reference
      from Exhibit 10.5 to the November 2, 2007 Form 8-K.10.45*
            
            Settlement
      Agreement and General Release of Mr. Scott Hughes, incorporated by
      reference from Exhibit 10.6 to the November 2, 2007 Form
    8-K.21#
            
            Subsidiary
      of uVuMobile, Inc.31.1#
            
            Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.32.1#
            
            Certification
      of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002.





*
              Incorporated
      by reference.





**
            Certain
      confidential information contained in the document filed herewith has been
      omitted and filed separately with the Securities and Exchange Commission
      pursuant to Rule 406 of the Securities Act of 1933, as
      amended.





#
              Filed
      herewith.





(b)
            Item
      601 Exhibits





The
exhibits required by Item 601 of Regulation S-K are set forth in (a) (3)
above.





(c)
            Financial
      Statement Schedules





The
financial statement schedules required by Regulation S-K are set forth in (a)
(2) above.




- 41
-
 Table of Contents





SIGNATURES





Pursuant
to the requirements of Section 13 of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.







UVUMOBILE,
      INC.March
      10, 2008
            
            By:
            /s/ William J. LoughmanWilliam
      J. Loughman, President andChief
      Executive Officer







Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities indicated on March 10, 2008.








Signature
            
            Title
            
            Date/s/ William J. LoughmanWilliam
      J. Loughman
            
            Chief
      Executive Officer and President
            
            March
      7, 2008/s/ William J. LoughmanWilliam
      J. Loughman
            
            Chief
      Financial Officer
            
            March
      7, 2008/s/ Daniel McKelveyDaniel
      McKelvey
            
            Director
            
            March
      7, 2008/s/ Richard SeifertRichard
      Seifert
            
            Director
            
            March
      7, 2008/s/ William SciglianoWilliam
      Scigliano
            
            Director
            
            March
      7, 2008




- 42
-
 Table of Contents





FINANCIAL
STATEMENTS




Index
to Financial Statements





Report
      of Independent Registered Public Accounting Firm
            
            F-2Consolidated
      Balance Sheet
            
            F-3Consolidated
      Statements of Operations
            
            F-4Consolidated
      Statements of Changes in Stockholders’ Deficit
            
            F-5Consolidated
      Statements of Cash Flows
            
            F-6Notes
      to Consolidated Financial Statements
            
            F-7




F-1
 Table of Contents




REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 To the
Board of Directors and Shareholders
 uVuMobile,
Inc.
 
 
 We have
audited the accompanying consolidated balance sheet of uVuMobile, Inc. and
Subsidiary as of December 31, 2007 and 2006 and the related consolidated
statements of operations, changes in shareholders’ deficit and cash flows for
the years ended December 31, 2007, 2006 and 2005. These consolidated financial
statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
 
  We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
  
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of uVuMobile, Inc. and
Subsidiary as of December 31, 2007 and 2006 and the results of their
operations and their cash flows for the years ended December 31, 2007, 2006 and
2005 in conformity with accounting principles generally accepted in the United
States of America.
 
 The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses from operations
and has a net working capital deficiency that raises substantial doubt about its
ability to continue as agoing concern. Management’s plan in regard
to these matters is also described in Note 2. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
 
 
 /s/SHERB
      & CO., LLPCertified
      Public Accountants
 
 Boca
Raton, Florida
 March 7,
2008


F-2
 Table of Contents





UVUMOBILE, INC. AND SUBSIDIARY


Consolidated
Balance Sheets


December
31, 2007 and 2006





December
      31,
            
            
            December
      31,2007
            
            
            2006AssetsCurrent
      AssetsCash
            
            $
            1,078,055
            
            
            $
            3,696,581Certificate
      of deposit
            
            
            –
            
            
            
            201,447Accounts
      receivable - net of allowance for doubtful accounts of $22,000 and
      $0
            
            
            275,402
            
            
            
            162,795Broadcast
      rights - net of accumulated amortization of $0 and
    $2,273,192
            
            
            –
            
            
            
            301,281Prepaid
      expenses
            
            
            32,306
            
            
            
            125,189Total
      Current Assets
            
            
            1,385,763
            
            
            
            4,487,293Property
      and Equipment, net of accumulated depreciation of $1,793,926 and
      $936,614
            
            
            940,729
            
            
            
            1,541,390Other
      AssetsBroadcast
      rights, net of current portion
            
            
            –
            
            
            
            310,384Deferred
      finance costs
            
            
            549,795
            
            
            
            –Intangible
      assets - net of accumulated amortization of $244,060 and
      $14,725
            
            
            69,732
            
            
            
            250,317Other
            
            
            36,110
            
            
            
            102,261Total
      Other Assets
            
            
            655,637
            
            
            
            662,962Total
      Assets
            
            $
            2,982,129
            
            
            $
            6,691,645Liabilities and
      Stockholders' DeficitCurrent
      LiabilitiesAccounts
      payable and accrued expenses
            
            $
            2,967,281
            
            
            $
            2,048,129Contracts
      payable - broadcast rights
            
            
            –
            
            
            
            2,454,725Capital
      lease obligations - current
            
            
            –
            
            
            
            33,255Deferred
      revenues
            
            
            7,840
            
            
            
            20,248Due
      to related parties
            
            
            –
            
            
            
            5,022,000Loans
      payable and related accrued interest
            
            
            95,255
            
            
            
            63,042Total
      Current Liabilities
            
            
            3,070,376
            
            
            
            9,641,399Long-term
      LiabilitiesContracts
      payable - broadcast rights - net of current portion
            
            
            –
            
            
            
            979,851Capital
      lease obligations - net of current portion
            
            
            –
            
            
            
            161,089Total
      Long-Term Liabilities
            
            
            –
            
            
            
            1,140,940Total
      Liabilities
            
            
            3,070,376
            
            
            
            10,782,339Commitments
      and ContingenciesStockholders'
      DeficitPreferred
      stock, Series A-1, Convertible, $.001 par value, 50,000,000 shares
      authorized, 11,666,666 shares issued and 133,333 outstanding as of
      December 31, 2007,11,666,666 shares issued and 2,633,333 outstanding as of
      December 31, 2006
            
            
            134
            
            
            
            2,634Preferred
      stock, Series B, Convertible, $.001 par value, 50,000,000 shares
      authorized, 4,017,188 shares issued and 4,017,188 outstanding as of
      December 31, 2007,0 shares issued and 0 outstanding as of December 31,
      2006
            
            
            4,017
            
            
            
            –Common
      stock, $.001 par value, 150,000,000 shares authorized, 67,245,299 shares
      issued and outstanding as of December 31, 2007, 47,292,284 shares issued
      and outstanding as of December 31, 2006
            
            
            67,645
            
            
            
            47,288Additional
      paid-in capital
            
            
            73,375,786
            
            
            
            61,179,644Less:
      Deferred consulting fees
            
            
            (2,752
            )
            
            
            (877,628
            )Accumulated
      deficit
            
            
            (73,533,077
            )
            
            
            (64,442,632
            )Total
      Stockholders' Deficit
            
            
            (88,247
            )
            
            
            (4,090,694
            )Total
      Liabilities and Stockholders' Deficit
            
            $
            2,982,129
            
            
            $
            6,691,645





See
accompanying notes to consolidated financial statements





F-3
 Table of Contents




UVUMOBILE, INC. AND SUBSIDIARY


Consolidated
Statements of Operations





For
      the Years EndedDecember
      31,2007
            
            
            2006
            
            
            2005RevenuesRevenue
            
            $
            952,671
            
            
            $
            800,231
            
            
            $
            197,257Total
      Revenues
            
            
            952,671
            
            
            
            800,231
            
            
            
            197,257Cost
      of Goods SoldCost
      of goods sold
            
            
            476,500
            
            
            
            94,830
            
            
            
            –Total
      Cost of Goods Sold
            
            
            476,500
            
            
            
            94,830
            
            
            
            –Gross
      Profit
            
            
            476,171
            
            
            
            705,401
            
            
            
            197,257Operating
      ExpensesBroadcast
      rights
            
            
            193,909
            
            
            
            2,024,549
            
            
            
            2,001,584Impairment
      of broadcast rights
            
            
            (2,328,722
            )
            
            
            2,330,000
            
            
            
            –Compensation
      and benefits
            
            
            1,867,502
            
            
            
            2,723,307
            
            
            
            1,757,088Consulting
      and professional fees
            
            
            1,372,592
            
            
            
            4,060,773
            
            
            
            1,851,781Data
      center
            
            
            792,598
            
            
            
            990,163
            
            
            
            770,702Depreciation
      and amortization
            
            
            1,086,644
            
            
            
            600,698
            
            
            
            278,328Settlement
      expense
            
            
            1,425,677
            
            
            
            4,935,756
            
            
            
            5,541,244Selling,
      general and administrative including stock-based compensation of
      $3,306,279, $5,038,519 and $4,325,680
            
            
            4,817,313
            
            
            
            7,789,145
            
            
            
            6,820,784Total
      Operating Expenses
            
            
            9,227,513
            
            
            
            25,454,391
            
            
            
            19,021,511Loss
      From Operations
            
            
            (8,751,342
            )
            
            
            (24,748,990
            )
            
            
            (18,824,254
            )Other
      Income (Expense)Interest
      income (expense)
            
            
            37,920
            
            
            
            260,114
            
            
            
            (916,020
            )Interest
      expense
            
            
            (127,923
            )
            
            
            –
            
            
            
            –Total
      Other Income (Expense), Net
            
            
            (90,003
            )
            
            
            260,114
            
            
            
            (916,020
            )Net
      Loss
            
            
            (8,841,345
            )
            
            
            (24,488,876
            )
            
            
            (19,740,274
            )Preferred
      stock dividend
            
            
            249,100
            
            
            
            –
            
            
            
            8,000,000Net
      Loss to Common Shareholders
            
            $
            (9,090,445
            )
            
            $
            (24,488,876
            )
            
            $
            (27,740,274
            )Net
      loss per share - basic and diluted
            
            $
            (0.15
            )
            
            $
            (0.61
            )
            
            $
            (0.76
            )Weighted
      average common shares outstanding during the period
            
            
            60,887,327
            
            
            
            40,285,528
            
            
            
            26,093,554





See
accompanying notes to consolidated financial statements





F-4
 Table of Contents





UVUMOBILE, INC. AND SUBSIDIARY


Consolidated
Statements of Changes in Stockholders’ Deficit


For
the Period December 31, 2007, 2006 and 2005





Series
      B, Convertible
            
            
            Series
      A-1, Convertible
            
            
            
            
            
            
            
            
            Additional
            
            
            DeferredPreferred
      Stock
            
            
            Preferred
      Stock
            
            
            Common
      Stock
            
            
            Paid-in
            
            
            Consulting
            
            
            AccumulatedShares
            
            
            Par
      Value
            
            
            Shares
            
            
            Par
      Value
            
            
            Shares
            
            
            Par
      Value
            
            
            Capital
            
            
            Fees
            
            
            Deficit
            
            
            TotalBalance,
      December 31, 2004
            
            
            –
            
            
            $
            –
            
            
            
            –
            
            
            $
            –
            
            
            
            24,187,834
            
            
            $
            24,188
            
            
            $
            14,259,142
            
            
            $
            (3,135,063
            )
            
            $
            (12,213,482
            )
            
            $
            (1,065,215
            )Issuance
      of convertible preferred stock for cash
            
            
            –
            
            
            
            –
            
            
            
            8,919,999
            
            
            
            8,920
            
            
            
            –
            
            
            
            –
            
            
            
            6,681,080
            
            
            
            –
            
            
            
            –
            
            
            
            6,690,000Issuance
      of convertible preferred stock in connection with conversion of
      convertible debt
            
            
            –
            
            
            
            –
            
            
            
            1,746,667
            
            
            
            1,747
            
            
            
            –
            
            
            
            –
            
            
            
            1,308,253
            
            
            
            –
            
            
            
            –
            
            
            
            1,310,000Dividend
      recorded on convertible preferred stock issuance
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            8,000,000
            
            
            
            –
            
            
            
            (8,000,000
            )
            
            
            –Issuance
      of common stock for cash
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            1,761,345
            
            
            
            1,761
            
            
            
            3,961,239
            
            
            
            –
            
            
            
            –
            
            
            
            3,963,000Cash
      paid as direct offering cost
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            (233,125
            )
            
            
            –
            
            
            
            –
            
            
            
            (233,125
            )Issuance
      of common stock in connection with cash based warrant
      exercises
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            527,779
            
            
            
            528
            
            
            
            722,807
            
            
            
            –
            
            
            
            –
            
            
            
            723,335Issuance
      of common stock in connection with cashless based warrant
      exercises
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            1,338,623
            
            
            
            1,339
            
            
            
            (1,339
            )
            
            
            –
            
            
            
            –
            
            
            
            –Issuance
      of common stock as compensation to investors
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            50,000
            
            
            
            50
            
            
            
            197,450
            
            
            
            –
            
            
            
            –
            
            
            
            197,500Issuance
      of stock for services
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            750,000
            
            
            
            750
            
            
            
            711,750
            
            
            
            –
            
            
            
            –
            
            
            
            712,500Issuance
      of common stock for settlement of vendor payables
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            72,882
            
            
            
            73
            
            
            
            82,777
            
            
            
            –
            
            
            
            –
            
            
            
            82,850Issuance
      of warrants for services
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            2,624,450
            
            
            
            –
            
            
            
            –
            
            
            
            2,624,450Amortization
      of beneficial conversion feature on convertible debt
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            713,134
            
            
            
            –
            
            
            
            –
            
            
            
            713,134Amortization
      of stock based compensation
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            1,701,230
            
            
            
            –
            
            
            
            1,701,230Net
      Loss
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            (19,740,274
            )
            
            
            (19,740,274
            )Balance,
      December 31, 2005
            
            
            –
            
            
            
            –
            
            
            
            10,666,666
            
            
            
            10,667
            
            
            
            28,688,463
            
            
            
            28,689
            
            
            
            39,027,618
            
            
            
            (1,433,833
            )
            
            
            (39,953,756
            )
            
            
            (2,320,615
            )Amortization
      of stock based compensation
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            (271,563
            )
            
            
            2,372,017
            
            
            
            –
            
            
            
            2,100,454Fair
      market value of options granted
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            1,815,812
            
            
            
            (1,815,812
            )
            
            
            –
            
            
            
            –Exercise
      of warrants
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            807,607
            
            
            
            806
            
            
            
            943,169
            
            
            
            –
            
            
            
            –
            
            
            
            943,975Issuance
      of common stock for settlement of vendor payables
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            434,916
            
            
            
            435
            
            
            
            501,502
            
            
            
            –
            
            
            
            –
            
            
            
            501,937Issuance
      of common stock due to anti-dilution
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,121,856
            
            
            
            1,122
            
            
            
            (1,122
            )
            
            
            –
            
            
            
            –
            
            
            
            –Issuance
      of convertible preferred stock
            
            
            –
            
            
            
            –
            
            
            
            1,000,000
            
            
            
            1,000
            
            
            
            –
            
            
            
            –
            
            
            
            4,749,000
            
            
            
            –
            
            
            
            –
            
            
            
            4,750,000Conversion
      of Series A-1 convertible preferred
            
            
            –
            
            
            
            –
            
            
            
            (9,033,333
            )
            
            
            (9,033
            )
            
            
            9,033,333
            
            
            
            9,033
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –Issuance
      of warrants for services
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            1,557,690
            
            
            
            –
            
            
            
            –
            
            
            
            1,557,690FAS
      123(R) amortization
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            3,287,405
            
            
            
            –
            
            
            
            –
            
            
            
            3,287,405Issuance
      of common stock for cash
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            7,206,109
            
            
            
            7,203
            
            
            
            9,640,800
            
            
            
            –
            
            
            
            –
            
            
            
            9,648,003Redemption
      of warrants
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            (70,667
            )
            
            
            –
            
            
            
            –
            
            
            
            (70,667
            )Net
      Loss
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            
            
            
            
            –
            
            
            
            (24,488,876
            )
            
            
            (24,488,876
            )Balance,
      December 31, 2006
            
            
            –
            
            
            
            –
            
            
            
            2,633,333
            
            
            
            2,634
            
            
            
            47,292,284
            
            
            
            47,288
            
            
            
            61,179,644
            
            
            
            (877,628
            )
            
            
            (64,442,632
            )
            
            
            (4,090,694
            )Issuance
      of convertible preferred stock in connection with conversion of
      convertible debt
            
            
            3,892,188
            
            
            
            3,892
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            245,208
            
            
            
            –
            
            
            
            –
            
            
            
            249,100Issuance
      of convertible preferred stock in connection with settlement of vendor
      payables
            
            
            125,000
            
            
            
            125
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            11,121
            
            
            
            –
            
            
            
            –
            
            
            
            11,246Issuance
      of common stock  in connection with legal
      settlements
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            9,725,000
            
            
            
            9,725
            
            
            
            5,738,775
            
            
            
            –
            
            
            
            –
            
            
            
            5,748,500Amortization
      of stock based compensation
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            874,876
            
            
            
            –
            
            
            
            874,876Fair
      market value of warrants granted
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            350,536
            
            
            
            –
            
            
            
            –
            
            
            
            350,536Exercise
      of warrants
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            8,128,015
            
            
            
            8,132
            
            
            
            730,093
            
            
            
            –
            
            
            
            –
            
            
            
            738,225Conversion
      of Series A-1 convertible preferred
            
            
            
            
            
            
            –
            
            
            
            (2,500,000
            )
            
            
            (2,500
            )
            
            
            2,500,000
            
            
            
            2,500
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –FAS
      123(R) amortization
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            2,540,774
            
            
            
            –
            
            
            
            –
            
            
            
            2,540,774Forgiveness
      of loans to related parties
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            300,000
            
            
            
            –
            
            
            
            –
            
            
            
            300,000Amortization
      of beneficial conversion feature on convertible debt
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            2,033,423
            
            
            
            –
            
            
            
            –
            
            
            
            2,033,423Redemption
      of warrants
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            (2,888
            )
            
            
            –
            
            
            
            –
            
            
            
            (2,888
            )Dividend
      recorded on convertible preferred stock issuance
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            249,100
            
            
            
            –
            
            
            
            (249,100
            )
            
            
            –Net
      Loss
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            (8,841,345
            )
            
            
            (8,841,345
            )Balance,
      December 31, 2007
            
            
            4,017,188
            
            
            $
            4,017
            
            
            
            133,333
            
            
            $
            134
            
            
            
            67,645,299
            
            
            $
            67,645
            
            
            $
            73,375,786
            
            
            $
            (2,752
            )
            
            $
            (73,533,077
            )
            
            $
            (88,247
            )




See
accompanying notes to consolidated financial statements





F-5
 Table of Contents





UVUMOBILE, INC. AND SUBSIDIARY


Consolidated
Statements of Cash Flows


For
the Years Ended December 31, 2007, 2006 and 2005





For
      the Years EndedDecember
      31,2007
                  
                  
                  2006
                  
                  
                  2005Cash
      Flows from Operating ActivitiesNet
      loss
                  
                  $
                  (8,841,345
                  )
                  
                  $
                  (24,488,876
                  )
                  
                  $
                  (19,740,274
                  )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Amortization
      of stock-based compensation
                  
                  
                  874,876
                  
                  
                  
                  2,100,454
                  
                  
                  
                  –Amortization
      of broadcast rights
                  
                  
                  –
                  
                  
                  
                  2,024,549
                  
                  
                  
                  1,740,552Impairment
      of broadcast rights
                  
                  
                  (2,328,722
                  )
                  
                  
                  2,330,000
                  
                  
                  
                  –Adjustment
      to broadcast right contracts
                  
                  
                  –
                  
                  
                  
                  407,310
                  
                  
                  
                  –Amortization
      of intangible assets
                  
                  
                  229,335
                  
                  
                  
                  14,725
                  
                  
                  
                  –Value
      of warrants issued for interest expense
                  
                  
                  62,124Amortization
      of deferred finance costs
                  
                  
                  7,049Bad
      debt
                  
                  
                  22,000
                  
                  
                  
                  60,078
                  
                  
                  
                  77,937Depreciation
                  
                  
                  857,312
                  
                  
                  
                  585,973
                  
                  
                  
                  278,328Issuance
      of common stock as compensation for services
                  
                  
                  –
                  
                  
                  
                  –
                  
                  
                  
                  712,500Issuance
      of warrants as compensation for services
                  
                  
                  –
                  
                  
                  
                  1,557,690
                  
                  
                  
                  2,624,450Issuance
      of common stock for legal settlement
                  
                  
                  –
                  
                  
                  
                  –
                  
                  
                  
                  –Amortization
      of beneficial conversion
                  
                  
                  25,418
                  
                  
                  
                  –
                  
                  
                  
                  713,134Non-cash
      stock-based compensation
                  
                  
                  2,540,774
                  
                  
                  
                  3,287,405
                  
                  
                  
                  1,701,230Valuation
      adjustment related to non-cash compensation due to advisor
                  
                  
                  –
                  
                  
                  
                  –
                  
                  
                  
                  –Additional
      consideration related to rights of convertible promissory
      notes
                  
                  
                  –
                  
                  
                  
                  –
                  
                  
                  
                  197,500Changes
      in operating assets and liabilities:(Increase)
      Decrease in:Accounts
      receivable
                  
                  
                  (134,607
                  )
                  
                  
                  (222,873
                  )
                  
                  
                  (76,937
                  )Prepaid
      expenses
                  
                  
                  92,883
                  
                  
                  
                  (125,189
                  )
                  
                  
                  90,687Deposits
                  
                  
                  66,150
                  
                  
                  
                  –
                  
                  
                  
                  –Intangable
      assets
                  
                  
                  (48,750
                  )
                  
                  
                  –
                  
                  
                  
                  –Other
      assets
                  
                  
                  201,447
                  
                  
                  
                  19,900
                  
                  
                  
                  (112,161
                  )Increase
      (Decrease) in:Accounts
      payable and accrued expenses
                  
                  
                  409,628
                  
                  
                  
                  (646,432
                  )
                  
                  
                  1,633,565Deferred
      revenues
                  
                  
                  (12,408
                  )
                  
                  
                  20,248
                  
                  
                  
                  –Contract
      rights payable
                  
                  
                  (301,625
                  )
                  
                  
                  (2,233,500
                  )
                  
                  
                  (520,000
                  )Accrued
      settlement expenses
                  
                  
                  1,061,500
                  
                  
                  
                  4,230,756
                  
                  
                  
                  5,316,244Net
      Cash Used in Operating Activities
                  
                  
                  (5,216,961
                  )
                  
                  
                  (11,077,782
                  )
                  
                  
                  (5,363,245
                  )Cash
      Flows from Investing ActivitiesPurchase
      of certificate of deposit
                  
                  
                  –
                  
                  
                  
                  (201,447
                  )
                  
                  
                  –Purchase
      of equipment
                  
                  
                  (256,652
                  )
                  
                  
                  (1,005,950
                  )
                  
                  
                  (764,479
                  )Purchase
      of intangible assets
                  
                  
                  –
                  
                  
                  
                  (265,042
                  )
                  
                  
                  –Net
      Cash Used in Investing Activities
                  
                  
                  (256,652
                  )
                  
                  
                  (1,472,439
                  )
                  
                  
                  (764,479
                  )Cash
      Flows from Financing ActivitiesRedemption
      of warrants
                  
                  
                  (2,888
                  )
                  
                  
                  (70,667
                  )
                  
                  
                  –Loans
      from related parties
                  
                  
                  300,000
                  
                  
                  
                  –
                  
                  
                  
                  –Convertible
      debt
                  
                  
                  249,100
                  
                  
                  
                  –
                  
                  
                  
                  –Issuance
      of convertible preferred stock for cash
                  
                  
                  –
                  
                  
                  
                  –
                  
                  
                  
                  6,690,000Issuance
      of common stock for cash
                  
                  
                  –
                  
                  
                  
                  9,648,003
                  
                  
                  
                  3,963,000Cash
      paid as direct offering cost for common stock issuance
                  
                  
                  –
                  
                  
                  
                  –
                  
                  
                  
                  (233,125
                  )Proceeds
      from warrant exercises
                  
                  
                  738,225
                  
                  
                  
                  943,975
                  
                  
                  
                  723,335Loans
      Payable
                  
                  
                  2,033,423
                  
                  
                  
                  –
                  
                  
                  
                  –Deferred
      finance cost
                  
                  
                  (268,432
                  )
                  
                  
                  –
                  
                  
                  
                  –Proceeds
      from issuance of convertible debt
                  
                  
                  –
                  
                  
                  
                  –
                  
                  
                  
                  1,310,000Proceeds
      from related party borrowings
                  
                  
                  –
                  
                  
                  
                  –
                  
                  
                  
                  225,000Repayments
      of related party borrowings
                  
                  
                  –
                  
                  
                  
                  (64,429
                  )
                  
                  
                  (235,000
                  )Repayments
      of capital lease obligations
                  
                  
                  (194,341
                  )
                  
                  
                  (2,646
                  )
                  
                  
                  –Repayments
      on advisor borrowings
                  
                  
                  –
                  
                  
                  
                  –
                  
                  
                  
                  (807,474
                  )Proceeds
      from (Repayments of) PPM funds
                  
                  
                  –
                  
                  
                  
                  –
                  
                  
                  
                  (114,500
                  )Net
      Cash Provided By Financing Activities
                  
                  
                  2,855,087
                  
                  
                  
                  10,454,236
                  
                  
                  
                  11,521,236Net
      increase (decrease) in cash and cash equivalents
                  
                  
                  (2,618,526
                  )
                  
                  
                  (2,095,985
                  )
                  
                  
                  5,393,512Cash  -
      Beginning of year
                  
                  
                  3,696,581
                  
                  
                  
                  5,792,566
                  
                  
                  
                  387,592Cash  -
      End of Year
                  
                  $
                  1,078,055
                  
                  
                  $
                  3,696,581
                  
                  
                  $
                  5,781,104Supplemental
      Disclosure of Cash Flow InformationCash
      paid for:Income
      taxes
                  
                  $
                  –
                  
                  
                  $
                  –
                  
                  
                  $
                  –Interest
                  
                  $
                  –
                  
                  
                  $
                  –
                  
                  
                  $
                  –Supplemental
      Disclosure of Non-Cash Investing and Financing ActivitiesAcquisition
      of broadcast rights
                  
                  $
                  –
                  
                  
                  $
                  84,000
                  
                  
                  $
                  7,705,076Acquisition
      of equipment held under capital leases
                  
                  $
                  –
                  
                  
                  $
                  196,990
                  
                  
                  $
                  –Issuance
      of common stock to acquire software
                  
                  $
                  –
                  
                  
                  $
                  208,000
                  
                  
                  $
                  –Issuance
      of common stock for settlement of accounts payable
                  
                  $
                  11,246
                  
                  
                  $
                  293,937
                  
                  
                  $
                  82,850Issuance
      of common stock for settlement of litigation
                  
                  $
                  5,748,500
                  
                  
                  $
                  4,750,000
                  
                  
                  $
                  –Issuance
      of convertible preferred stock to settle accrued
litigation
                  
                  $
                  –
                  
                  
                  $
                  –
                  
                  
                  $
                  –Issuance
      of common stock pursuant to anti-dilution agreement
                  
                  $
                  –
                  
                  
                  $
                  1,122
                  
                  
                  $
                  –Issuance
      of convertible preferred stock for conversion of debt
                  
                  $
                  245,208
                  
                  
                  $
                  –
                  
                  
                  $
                  –Conversion
      of convertible preferred stock to common stock
                  
                  $
                  2,500
                  
                  
                  $
                  9,033
                  
                  
                  $
                  –Warrants
      issued for debt finance closing
                  
                  $
                  350,536
                  
                  
                  $
                  –
                  
                  
                  $
                  –Beneficial
      conversion feature
                  
                  $
                  2,008,005
                  
                  
                  $
                  –
                  
                  
                  $
                  –Forgiveness
      of debt to related party
                  
                  $
                  300,000
                  
                  
                  $
                  –
                  
                  
                  $
                  –Deemed
      preferred dividend
                  
                  $
                  249,100
                  
                  
                  $
                  –
                  
                  
                  $
                  –Forfeiture
      of stock-based compensation
                  
                  $
                  –
                  
                  
                  $
                  271,563
                  
                  
                  $
                  –Options
      granted for future services
                  
                  $
                  –
                  
                  
                  $
                  1,815,812
                  
                  
                  $
                  –




See
accompanying notes to consolidated financial statements




F-6
 Table of Contents




UVUMOBILE, INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007, 2006 and 2005


Note 1 –
Organization





uVuMobileTM,
Inc. (hereinafter sometimes referred to as  “uVuMobile,” the
“Company,” “we,” “us,” or “our”) is a provider of video content distribution
services and technology.





Incorporated
in 1984, the Company acquired OVT, Inc., d/b/a SmartVideo, in November
2002, subsequently changing its name to SmartVideo Technologies, Inc., and
in June 2007 the Company changed its name to uVuMobile.  Although the
core business of the Company has remained constant, the Company has changed its
focus from distributing business-to-business services to the distribution of
video content to consumers.




Since
2002, the Company has been a provider of technology engaged in the aggregation
and distribution of streaming video content to consumers connected to the public
Internet. The Company has been in the business of purchasing the rights to video
and television content and delivering that content to subscribers for a fee.
Additionally, the Company also provides managed services for Internet
network operators (carriers) and for major producers, owners and distributors of
content. The Company intends to continue expanding its market opportunities
by delivering video services to all forms of devices capable of receiving an
Internet Protocol (IP) data stream and rendering that data stream into visible
images on displays.




In
January 2005, the Company launched its direct-to-consumer mobile video service
providing its customers with access to high-quality video programming that is
transmitted directly to SmartPhone cellular handsets and to Wi-Fi enabled PDA
devices. In addition, the Company has developed Real Time Streaming
Protocol (RTSP) and Java 2 Platform, Micro Edition (J2ME)
compatibility.





During
the fourth quarter of 2006, the Company expanded its product offerings to
include a new suite of mobile technology and content solutions, bringing
together a myriad of implementation choices, business models and marketing
plans. The Company believes these new products will aid its customers that are
seeking to capitalize on mobile technology opportunities. These new media
services combine TV, radio, and other media platforms with user-friendly
personalization, interactivity and targeted advertising.





Note 2 - Going Concern,
Significant Accounting Policies And Risks And Uncertainties




(A)
            Going
      Concern




As
reflected in the accompanying audited consolidated financial statements, the
Company has a net loss of $8,841,345 and net cash used in operations of
$5,216,961 for the year ended December 31, 2007. The Company also has an
accumulated deficit of $73,533,077 at December 31, 2007.





Based on
information currently available regarding its proposed plans and assumptions
relating to operations the Company anticipates that the net proceeds from the
closing of its last financing in 2007, together with revenues generated from
operations, will not be sufficient to meet its cash requirements for working
capital and capital expenditures beyond the second quarter of 2008. There can be
no assurance that the Company will be able to secure additional financing on
acceptable terms at or prior to the depletion of existing funds, or at all. If
adequate funds are not available or not available on acceptable terms, the
Company will be unable to continue as a going concern.  The Company
has no firm commitment for any additional capital.





(B)
            Basis
      Of Presentation





The
consolidated financial statements of uVuMobile include the accounts of its
wholly owned subsidiary, OVT, Inc. All significant transactions and balances
between the Company and its subsidiaries have been eliminated in
consolidation.





(C)
            Use
      Of Estimates





In
preparing financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and revenues and expenses during the periods presented. Actual
results may differ from these estimates.





Significant
estimates during 2007, 2006 and 2005 include depreciable lives on property and
equipment, the valuation of stock options/warrants granted for services, the
value of warrants issued in connection with debt and equity related financings,
valuation and related amortization of intangible broadcast rights pursuant to
Statement of Financial Accounting Standards (“SFAS”) No. 63 and the valuation
allowance for deferred tax assets since the Company had continuing operating
losses.





F-7
 Table of Contents




UVUMOBILE,
INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007, 2006 and 2005


(D)
            Cash
      And Cash Equivalents





For the
purpose of the cash flow statements, the Company considers all highly liquid
investments with original maturities of three months or less at the time of
purchase to be cash equivalents.




The
Company minimizes its credit risk associated with cash by periodically
evaluating the credit quality of its primary financial institution. The balance
at times may exceed federally insured limits. At December 31, 2007 and 2006, the
balance exceeded the federally insured limit by approximately $975,000 and
$3,597,000 respectively. Additionally, at December 31, 2007 and 2006, the
Company had $2,000 maintained under a compensating balance agreement. The $2,000
is retained due to potential credit card chargebacks that are
unforeseen.





(E)
            Accounts
      Receivable





Substantially
all of the Company’s accounts receivable are due from end-users. Collateral is
not required. Credit losses are provided for in the consolidated financial
statements. The Company has a limited history in evaluating such credit
losses.





(F)
            Allowance
      For Doubtful Accounts





Management
estimates the amount of required allowances for potential non-collectibility of
accounts receivable based upon past collection experience and consideration of
other relevant factors. However, past experience may not be indicative of future
collections and therefore additional charges could be incurred in the future to
reflect differences between estimated and actual collections. In January 2005,
the Company launched its direct-to-consumer mobile video service. While the
Company uses many of the features developed for the core technology in
delivering this new service, its focus on a direct-to-consumer model represents
a significant change in direction. The allowance for doubtful accounts at
December 31, 2007 and 2006 was $22,000 and $0 respectively.





(G)
            Equipment





Equipment
is stated at cost, less accumulated depreciation. Expenditures for maintenance
and repairs are charged to expense as incurred. Equipment consists primarily of
computer equipment. Depreciation is computed using the straight-line method over
the estimated useful lives of the assets, which is generally three
years.





(H)
            Revenue
      Recognition





The
Company follows the guidance of the Securities and Exchange Commission’s Staff
Accounting Bulletin No. 104 for revenue recognition.  In general, the
Company records revenue when persuasive evidence of an arrangement exists,
services have been rendered or product delivery has occurred, the sales price to
the customer is fixed or determinable, and collectability is reasonably
assured.




The
Company provides services to its business-to-business customers under
volume-based usage arrangements of its digital media and multimedia broadcast
products and services. Under certain arrangements, the customers are subject to
a base monthly fee or minimum monthly usage requirement in order to maintain a
customer’s preferential negotiated rates.




Revenues
for direct-to-consumer and custom applications are recognized as earned upon the
delivery of services to the Company’s subscription-based customers. This is
typically when a digital media or multimedia broadcast is viewed. Many of the
Company’s subscription-based customers access its programming through the
purchase of a monthly, semi-annual, or annual subscription fee for uVuMobile’s
mobile entertainment services.  Revenue received on annual
subscriptions is deferred and therefore is recognized ratably over the term of
the contract.





(K)
            Product
      Concentration





The
Company derives a substantial portion of its revenues from four types of
products: business-to-business, direct-to-consumer mobile video service, mobile
advertising and custom applications.





F-8
 Table of Contents





UVUMOBILE,
INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007, 2006 and 2005





For
      the Years Ended December 31,Revenues
            
            2007
            
            
            2006
            
            
            2005Business-to-business
            
            $
            26,546
            
            
            
            3
            %
            
            $
            77,002
            
            
            
            9
            %
            
            $
            83,475
            
            
            
            42
            %Direct-to-consumer
            
            
            247,469
            
            
            
            26
            %
            
            
            542,178
            
            
            
            68
            %
            
            
            113,782
            
            
            
            58
            %Mobile
      advertising
            
            
            37,500
            
            
            
            4
            %
            
            
            23,030
            
            
            
            3
            %
            
            
            –
            
            
            
            0
            %Custom
      applications
            
            
            641,156
            
            
            
            67
            %
            
            
            158,021
            
            
            
            20
            %
            
            
            –
            
            
            
            0
            %Total
      Revenue
            
            $
            952,671
            
            
            
            100
            %
            
            $
            800,231
            
            
            
            100
            %
            
            $
            197,257
            
            
            
            100
            %





The
Company could experience declines in demand for products, whether as a result of
general economic conditions, new competitive product releases, price
competition, lack of market acceptance, technological change or other
factors.





(L)
            Customer
      Concentration





For the
years ended December 31, 2007 and 2006, the Company did not have a customer
concentration.  For the year ended December 31, 2005, the Company
derived a substantial portion of its revenues from two customers accounting for
34% of its revenues.





(M)
            Long-Lived
      Assets





The
Company accounts for long-lived assets in accordance with the provisions of SFAS
No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS
No. 144 requires that long-lived assets be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of assets to be held and used is measured
by a comparison of the carrying amount of an asset to future undiscounted net
cash flows expected to be generated by the asset. If such assets are considered
to be impaired, the impairment to be recognized is measured by the amount by
which the carrying amount of the assets exceeds the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying amount or
fair value less costs to sell the asset.




(N)
            Goodwill
      And Intangible Assets





The
Company accounts for goodwill and intangible assets in accordance with the
provisions of SFAS No. 142, “Goodwill and Other Intangible Assets”, which
requires goodwill and intangible assets with indefinite useful lives not be
amortized, but be tested for impairment annually or whenever indicators or
impairments arise.  Intangible assets that have finite lives continue
to be amortized over their estimated useful lives.  Out intangible
assets consist of contract based intangibles.





These
transactions were accounted for as a purchase business combination in accordance
with SFAS No. 141, “Business Combinations”.





As of
December 31, 2007 the Company’s identifiable intangible assets subject to
amortization consisted of the following:





December
      31, 2007
            
            
            December
      31, 2006Intangible
      Assets
            
            
            Accumulated
      Amortization
            
            
            Intangible
      Assets
            
            
            Accumulated
      AmortizationContract
      Based
            
            $
            313,792
            
            
            $
            244,060
            
            
            $
            265,042
            
            
            $
            14,725Total
            
            $
            313,792
            
            
            $
            244,060
            
            
            $
            265,042
            
            
            $
            14,725





Amortization
of these intangible assets, recorded on a straight line basis over an average
finite useful life of 18 months was $229,335 and $14,725 for the years ended
December 31, 2007 and December 31, 2006, respectively.  The remaining
amortization expense of $69,732 will be recognized in 2008.




F-9
 Table of Contents




UVUMOBILE,
INC. AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


December
31, 2007, 2006 and 2005





(O)
            Financing
      Costs





Costs
incurred for the 8% Convertible Debenture notes were deferred and are being
amortized as interest expense over the term of the respective financing
arrangements using the straight-line method.





(P)
            Income
      Taxes




The
Company accounts for income taxes under Financial Accounting Standards (“FAS”)
No. 109 “Accounting for Income Taxes” (“Statement 109”). Under Statement 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under Statement 109, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period, which includes the enactment
date.




(Q)
            Fair
      Value Of Financial Instruments




SFAS No.
107, “Disclosures about Fair Value of Financial Instruments,” requires
disclosures of information about the fair value of certain financial instruments
for which it is practicable to estimate the value. For purpose of this
disclosure, the fair value of a financial instrument is the amount at which the
instrument could be exchanged in a current transaction between willing parties,
other than in a forced sale or liquidation.





The
carrying amounts of the Company’s short-term financial instruments, including
accounts receivable, broadcast rights (asset), accounts payable, broadcast
rights payable, and loans payable/due to related party approximate fair value
due to the relatively short period to maturity for these
instruments.





(R)
            Earnings
      Per Share




In
accordance with SFAS No. 128, “Earnings Per Share” (“EPS”), basic EPS is
computed by dividing the net income (loss) less preferred dividends for the
period by the weighted average number of shares outstanding. Diluted EPS is
computed by dividing net income (loss) less preferred dividends by the weighted
average number of shares outstanding including the effect of share equivalents.
Common share equivalents consist of shares issuable upon the exercise of certain
common stock purchase warrants, stock options, convertible debt, and Convertible
Preferred Stock. The Company has excluded these common share equivalents from
its computation of EPS due to their anti-dilutive effect as the Company has
reflected a net loss at December 31, 2007, 2006 and 2005, respectively.
Accordingly, basic and diluted EPS are the same.




The
following table shows all common stock equivalents outstanding at December 31,
2007, 2006 and 2005, respectively.





December
      31,2007
            
            
            2006
            
            
            2005Common
      stock options
            
            
            11,960,000
            
            
            
            9,030,000
            
            
            
            3,480,000Common
      stock warrants
            
            
            40,062,598
            
            
            
            35,010,149
            
            
            
            24,640,917Common
      stock upon conversion of debt
            
            
            31,772,234
            
            
            
            –
            
            
            
            –Preferred
      stock Series A-1
            
            
            133,333
            
            
            
            2,633,333
            
            
            
            10,666,666Preferred
      stock Series B
            
            
            4,017,188
            
            
            
            –
            
            
            
            –Total
      common stock options and warrants
            
            
            87,945,353
            
            
            
            46,673,482
            
            
            
            38,787,583







During
the year ended December 31, 2007, the Company completed a tender offer for an
aggregate of 27,349,426 warrant shares.  Of the 27,349,426 warrant
shares tendered, 24,712,606 were converted into shares of common stock at
exchange rates ranging from three-for-one to ten-for-one warrant shares for
common shares.  Under the tender offer 2,636,820 warrant shares were
purchased at exercise prices ranging from $0.22 to $0.30.  Upon
completion of the tender offer, the Company received proceeds of $738,221 and
issued 8,128,016 shares of common stock.




F-10
 Table of Contents




UVUMOBILE,
INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007, 2006 and 2005


(S)
            Stock
      Based Compensation





In
December 2004, the FASB issued SFAS No. 123(R), "Share-Based Payment," which
replaces SFAS No. 123 and supersedes Accounting Principles Board (“APB”) Opinion
No. 25. Under SFAS No. 123(R), companies are required to measure the
compensation costs of share-based compensation arrangements based on the grant
date fair value and recognize the costs in the financial statements over the
period during which employees are required to provide services. Share-based
compensation arrangements include stock options, restricted share plans,
performance-based awards, share appreciation rights and employee share purchase
plans. In March 2005 the SEC issued Staff Accounting Bulletin No. 107, or “SAB
107”. SAB 107 expresses views of the staff regarding the interaction between
SFAS No. 123(R) and certain SEC rules and regulations and provides the staff's
views regarding the valuation of share-based payment arrangements for public
companies. SFAS No. 123(R) permits public companies to adopt its requirements
using one of two methods. On April 14, 2005, the U.S. Securities and
Exchange Commission (the “SEC”) adopted a new rule amending the compliance dates
for SFAS 123(R). Companies may elect to apply this statement either
prospectively, or on a modified version of retrospective application under which
financial statements for prior periods are adjusted on a basis consistent with
the pro forma disclosures required for those periods under SFAS No. 123.
Effective January 1, 2006, we have adopted SFAS No. 123(R) under the prospective
method.





(T)
            Broadcast
      Rights




The
Company acquires rights to programming so that it may deliver this programming
to its subscribers. The costs incurred in acquiring programs are capitalized and
amortized over the license period or projected useful life of the programming.
The broadcast rights are accounted for according to SFAS No. 63 “Financial
Reporting by Broadcasters”. Program rights and the related liabilities are
recorded at the gross amount of the liabilities when the license period has
begun, the cost of the program is determinable, and the program is accepted and
available for airing.





(U)
            Derivative
      Liabilities





In June
2005, the Emerging Issues Task Force ("EITF") issued EITF 05-2, “The Meaning of
Conventional Convertible Debt Instrument in Issue No. 00-19". EITF 05-2 retained
the definition of a conventional convertible debt instrument as set forth in
EITF 00-19, and which is used in determining certain exemptions to the
accounting treatments prescribed under SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities". EITF 05-2 also clarified that certain
contingencies related to the exercise of a conversion option would not be
outside the definition of "conventional" and determined that Convertible
Preferred Stock with a mandatory redemption date would also qualify for similar
exemptions if the economic characteristics of the Preferred Stock are more akin
to debt than equity. EITF 05-2 is effective for new instruments entered into and
instruments modified in periods beginning after June 29, 2005. The Company
adopted the provisions of EITF 05-2 on July 1, 2005, which did not have a
material effect on its unaudited consolidated financial position, results of
operations and cash flows.





In July
2005, the FASB issued FASB Staff Position ("FSP") 150-5, "Accounting Under SFAS
150 for Freestanding Warrants and Other Similar Instruments on Redeemable
Shares". FSP 150-5 clarifies that warrants on shares that are redeemable or
puttable immediately upon exercise and warrants on shares that are redeemable or
puttable in the future qualify as liabilities under SFAS 150, regardless of the
redemption feature or redemption price. The FSP is effective for the first
reporting period beginning after June 30, 2005, with resulting changes to prior
period statements reported as the cumulative effect of an accounting change in
accordance with the transition provisions of SFAS 150. We adopted the provisions
of FSP 150-5 on July 1, 2005, which did not have a material effect on our
unaudited consolidated financial position, results of operations and cash
flows.





(V)
            Recent
      Accounting Pronouncements




In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities - Including an amendment of FASB
Statement No. 115.”  This Statement permits entities to choose to
measure many financial instruments and certain other items at fair value. The
objective is to improve financial reporting by providing entities with the
opportunity to mitigate volatility in reported earnings caused by measuring
related assets and liabilities differently without having to apply complex hedge
accounting provisions. This Statement applies to all entities, including
not-for-profit organizations. Most of the provisions of this Statement apply
only to entities that elect the fair value option. However, the amendment to
FASB Statement No. 115, “Accounting for Certain Investments in Debt and Equity
Securities”, applies to all entities with available-for-sale and trading
securities. The fair value option permits all entities to choose to measure
eligible items at fair value at specified election dates. A business entity
shall report unrealized gains and losses on items for which the fair value
option has been elected in earnings (or another performance indicator if the
business entity does not report earnings) at each subsequent reporting date. The
fair value option may be applied instrument-by-instrument (with a few
exceptions); is irrevocable (unless a new election date occurs); and is applied
only to entire instruments and not to portions of instruments.




F-11
 Table of Contents




UVUMOBILE,
INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007, 2006 and 2005


This
Statement is effective as of the beginning of an entity’s first fiscal year that
begins after or before November 15, 2007, provided the entity also elects to
apply the provisions of FASB Statement No. 157, “Fair Value
Measurement.”  The Company does not expect the adoption of FASB 157 to
materially effect the Company’s financial position or results of
operations.




FASB
141 (Revised 2007) – Business Combinations




In
December 2007, the FASB issued FASB Statement No. 141 (revised 2007), “Business
Combinations.”  This Statement replaces FASB Statement No. 141,
“Business Combinations.”  This Statement retains the fundamental
requirements in Statement 141 that the acquisition method of accounting
(which Statement 141 called the purchase method) be used for all business
combinations and for an acquirer to be identified for each business combination.
This Statement defines the acquirer as the entity that obtains control of one or
more businesses in the business combination and establishes the acquisition date
as the date that the acquirer achieves control. This Statement’s scope is
broader than that of Statement 141, which applied only to business combinations
in which control was obtained by transferring consideration. By applying the
same method of accounting -the acquisition method -to all transactions and other
events in which one entity obtains control over one or more other businesses,
this Statement improves the comparability of the information about business
combinations provided in financial reports.




This
Statement requires an acquirer to recognize the assets acquired, the liabilities
assumed, and any noncontrolling interest in the acquiree at the acquisition
date, measured at their fair values as of that date, with limited exceptions
specified in the Statement. That replaces Statement 141’s cost-allocation
process, which required the cost of an acquisition to be allocated to the
individual assets acquired and liabilities assumed based on their estimated fair
values.




This
Statement applies to all transactions or other events in which an entity (the
acquirer) obtains control of one or more businesses (the acquirer), including
those sometimes referred to as “true mergers” or “mergers of equals” and
combinations achieved without the transfer of consideration, for example, by
contract alone or through the lapse of minority veto rights. This Statement
applies to all business entities, including mutual entities that previously used
the pooling-of-interests method of accounting for some business combinations. It
does not apply to: (a) the formation of a joint venture, (b) the acquisition of
an asset or a group of assets that does not constitute a business, (c) a
combination between entities or businesses under common control, (d) a
combination between not-for-profit organizations or the acquisition of a
for-profit business by a not-for-profit organization.




This
Statement applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008 (that is January 1, 2009, for
entities with calendar year-ends). An entity may not apply it before that date.
Management believes this Statement will have no impact on the financial
statements of the Company once adopted.




FASB
160 – Noncontrolling Interests In Consolidated Financial Statements – An
Amendment Of ARB No. 51




In
December 2007, the FASB issued FASB Statement No. 160 – “Noncontrolling
Interests in Consolidated Financial Statements – an amendment of ARB No.
51.”  This Statement applies to all entities that prepare consolidated
financial statements, except not-for-profit organizations, but will affect only
those entities that have an outstanding noncontrolling interest in one or more
subsidiaries or that deconsolidate a subsidiary. Not-for-profit organizations
should continue to apply the guidance in Accounting Research Bulletin No. 51,
“Consolidated Financial Statements” (“ARB 51”), before the amendments made by
this Statement, and any other applicable standards, until the Board issues
interpretative guidance.




This
Statement amends ARB 51 to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an
ownership interest in the consolidated entity that should be reported as equity
in the consolidated financial statements. Before this Statement was issued,
limited guidance existed for reporting noncontrolling interests. As a result,
considerable diversity in practice existed. So-called minority interests were
reported in the consolidated statement of financial position as liabilities or
in the mezzanine section between liabilities and equity. This Statement improves
comparability by eliminating that diversity.




A
noncontrolling interest, sometimes called a minority interest, is the portion of
equity in a subsidiary not attributable, directly or indirectly, to a parent.
The objective of this Statement is to improve the relevance, comparability, and
transparency of the financial information that a reporting entity provides in
its consolidated financial statements by establishing accounting and reporting
standards that require: (a) the ownership interests in subsidiaries held by
parties other than he parent be clearly identified, labeled, and presented in
the consolidated statement  of financial position within equity, but
separate from the parent’s equity, (b)  the  amount of
consolidated net income attributable to the parent and to the noncontrolling
interest be clearly identified and presented on the face of the consolidated
statement of income, (c)  changes in a parent’s ownership interest
while the parent retains its controlling financial interest in its subsidiary be
accounted for consistently. A parent’s ownership interest in a subsidiary
changes if the parent purchases additional ownership interests in its subsidiary
or if the parent sells some of its ownership interests in its subsidiary. It
also changes if the subsidiary reacquires some of its ownership interests or the
subsidiary issues additional ownership interests. All of those transactions are
economically similar, and this Statement requires that they be accounted for
similarly, as equity transactions, (d) when a subsidiary is deconsolidated, any
retained noncontrolling equity investment in the former subsidiary be initially
measured at fair value. The gain or loss on the deconsolidation of the
subsidiary is measured using the fair value of any noncontrolling equity
investment rather than the carrying amount of that retained investment, (e)
entities provide sufficient disclosures that clearly identify and distinguish
between the interests of the parent and the interests of the noncontrolling
owners.




F-12
 Table of Contents





UVUMOBILE,
INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007, 2006 and 2005




This
Statement is effective for fiscal years, and interim periods within those fiscal
years, beginning on or after December 15, 2008 (that is, January 1, 2009, for
entities with calendar year-ends). Earlier adoption is prohibited. This
Statement shall be applied prospectively as of the beginning of the fiscal year
in which this Statement is initially applied, except for the presentation and
disclosure requirements. The presentation and disclosure requirements shall be
applied retrospectively for all periods presented. Management believes this
Statement will have no impact on the financial statements of the Company once
adopted.




Other
accounting standards that have been issued or proposed by the FASB or other
standards-setting bodies that do not require adoption until a future date are
not expected to have a material impact on the financial statements upon
adoption.




(W)
            Reclassifications





Certain
amounts in the years 2005 and 2006 consolidated financial statements have been
reclassified to conform to the year 2007 consolidated presentation. Such
reclassifications had no effect on the financial position, results operations or
cash flows.





Note 3 - Accounts
Receivable





December
      31,2007
            
            
            2006Accounts
      receivable
            
            $
            297,402
            
            
            $
            162,795Allowance
      for doubtful accounts
            
            
            (22,000
            )
            
            
            –Accounts
      receivable - net of allowance for doubtful accounts
            
            $
            275,402
            
            
            $
            162,795





Bad debt
expense for the years ending 2007, 2006 and 2005 was $22,000, $60,078, and
$77,937, respectively. These amounts are included as a component of Selling,
General and Administrative Expenses.





Note 4 - Broadcast
Rights





(A)
            Asset




At
December 31, 2007, amortization expense and impairment of broadcast rights
accounted for $611,666 of the total impairment of broadcast rights expense of
($2,328,722).  The additional $2,940,388 represented expenses paid to
content providers where no long-term commitment exists and recapture of a
capitalized contract that had no future value.  At December 31, 2006,
amortization expense of broadcast rights accounted for $2,206,859 of the total
broadcast rights expense of $4,354,549. At December 31, 2005, amortization
expense of broadcast rights accounted for $1,740,552 of the total broadcast
rights expense of $2,001,584.  The additional $261,032 represented
expenses paid to content providers due to subscriber usage exceeding minimum
monthly guarantees or to content providers where no long term contract
commitment exists.





At
December 31, 2007, Broadcast Rights Assets - net of accumulated amortization was
$0. Broadcast Rights Assets - net of current portion was $0.  At
December 31, 2006, Broadcast Rights Assets - net of accumulated amortization was
$301,281. Broadcast Rights Assets - net of current portion was
$310,384.  At December 31, 2005, Broadcast Rights Assets - net of
accumulated amortization was $2,408,525. Broadcast Rights Assets - net of
current portion was $2,880,999.




F-13
 Table of Contents




UVUMOBILE,
INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007, 2006 and 2005


(B)
            Liability





During
2007 and 2006, the Company paid $0 and $2,233,500, respectively, to content
providers pursuant to the terms of the related contracts.





Contracts
payable – short-term at December 31, 2007 were $0.  Contracts payable
- long-term at December 31, 2007 were $0.  Contracts payable –
short-term at December 31, 2006 were $2,454,725.  Contracts payable -
long-term at December 31, 2006 were $979,851.





Note 5 - Property And
Equipment





Equipment
consisting primarily of computer equipment is stated at cost. Depreciation is
computed using the straight-line method over the estimated useful lives of the
assets, which is generally three years. Depreciation expense is as
follows:





For
      The years EndedDecember
      31,2007
            
            
            2006
            
            
            2005Depreciation
            
            $
            857,312
            
            
            $
            585,973
            
            
            $
            278,328





Equipment
consists of the following:





For
      The years EndedDecember
      31,2007
            
            2006
            
            2005Computer
      equipment
            
            $
            2,655,155
            
            
            $
            2,398,504
            
            
            $
            987,564Proprietary
      software development
            
            
            79,500
            
            
            
            79,500
            
            
            
            79,5002,734,655
            
            
            
            2,478,004
            
            
            
            1,067,064Less
      accumulated depreciation
            
            
            (1,793,926
            )
            
            
            (936,614
            )
            
            
            (350,641
            )Property
      and equipment, net
            
            $
            940,729
            
            
            $
            1,541,390
            
            
            $
            716,423





Note 6 - Convertible
Promissory Notes





On
September 26, 2005 and October 19, 2005, the Company borrowed an aggregate
$600,000 from two different related parties (four separate notes) pursuant to
the terms of a Convertible Promissory Note. Under the terms of the agreement,
the convertible notes bore interest at 8%, were unsecured and due in one-year.
These Convertible Promissory Notes were each issued with five (5) year warrants
to purchase an aggregate 200,000 shares of the Company’s common stock at an
exercise price of $2.00 per share. The warrant holders were also granted certain
piggy-back registration rights with respect to the shares of common stock
underlying the Convertible Promissory Notes and the warrants. Additionally, if
the Company was able to successfully complete a financing of at least $2,500,000
from the sale of its equity securities prior to the maturity date of the
Convertible Promissory Notes, the principal amount of each note would
automatically convert into shares or units of the equity securities sold in such
financing at a per share sale price or unit price of the financing on a
one-for-one ratio. The financing was completed in November 2005, and all related
debt principal was converted into Series A-1 Convertible Preferred Stock. This
$600,000 was converted at $0.75 into 800,000 shares of Series A-1 Convertible
Preferred Stock. At December 31, 2005, outstanding related party accrued
interest was $5,422.





On
November 10, 2005, the Company borrowed $150,000 from a related party pursuant
to the terms of a Convertible Promissory Note. Under the terms of the agreement,
the convertible note bore interest at 15%, was unsecured and due in one-year.
This Convertible Promissory Note was issued with a five (5) year warrant to
purchase 50,000 shares of the Company’s common stock at an exercise price of
$2.00 per share. The warrant holder was also granted certain piggy-back
registration rights with respect to the shares of common stock underlying the
Convertible Promissory Note and the warrants. Additionally, if the Company was
able to successfully complete a financing of at least $2,500,000 from the sale
of its equity securities prior to the maturity date of the Convertible
Promissory Note, the principal amount of the note would automatically convert
into shares or units of the equity securities sold in such financing at a per
share sale price or unit price of the financing on a one-for-one ratio. The
financing was completed in December 2005, and all related debt principal was
converted into Series A-1 Convertible Preferred Stock. This $150,000 was
converted at $0.75 into 200,000 shares of Series A-1 Convertible Preferred
Stock. At December 31, 2005, outstanding related party accrued interest was
$688.





On
November 10, 2005, the Company borrowed an aggregate $560,000 from unrelated
third parties pursuant to the terms of a Convertible Promissory Note. Under the
terms of the agreement, the convertible notes bore interest at 15%, were
unsecured and due in one-year. These Convertible Promissory Notes were issued
with a five (5) year warrant to purchase an aggregate 186,667 shares of the
Company’s common stock at an exercise price of $2.00 per share. The warrant
holders were also granted certain piggy-back registration rights with respect to
the shares of common stock underlying the Convertible Promissory Notes and the
warrants. Additionally, if the Company was able to successfully complete a
financing of at least $2,500,000 from the sale of its equity securities prior to
the maturity date of the Convertible Promissory Notes, the principal amount of
each note would automatically convert into shares or units of the equity
securities sold in such financing at a per share sale price or unit price of the
financing on a one-for-one ratio. The financing was completed in December 2005,
and all related debt principal was converted into Series A-1 Convertible
Preferred Stock. This $560,000 was converted at $0.75 into 746,667 shares of
Series A-1 Convertible Preferred Stock. At December 31, 2005, outstanding
related accrued interest was $2,433.





F-14
 Table of Contents





UVUMOBILE,
INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007, 2006 and 2005





In
connection with the above convertible debt issuances, the convertible debt and
freestanding warrants issued were classified as conventional convertible debt
pursuant to EITF 00-19. EITF 00-19 does not apply if the hybrid contract is a
conventional convertible debt instrument in which the holder may only realize
the value of the conversion option by exercising the option and receiving the
entire proceeds in a fixed number of shares or the equivalent amount of cash (at
the discretion of the issuer).  Since the time that Issue No. 00-19 was
issued, complex structures have arisen such that the term "conventional
convertible debt instrument" is no longer adequately defined.





In Issue
No. 05-2, "The Meaning of 'Conventional Convertible Debt Instrument' in EITF
00-19," the EITF concluded that an instrument with the following characteristics
should be considered "conventional" for purposes of applying Issue No.
00-19:





·
            The
      holder has an option to convert the instrument into a fixed number of
      shares (or a corresponding amount of cash at the issuer’s discretion);
      and




·
            The
      holder's ability to exercise the option is based on either the passage of
      time or a contingent event.





As a
result of applying the definitions of EITF 00-19 and EITF 05-2, the Company has
accounted for the convertible debt financings pursuant to the provisions of EITF
98-5 and ETIF 00-27. The Company computed a debt discount on the aggregate
$1,310,000 in convertible debt financing based on the provisions of APB No. 14
totaling $713,134. The allocation was based on the allocable proceeds of the
debt financings between the fair value of the beneficial conversion option of
the related convertible debt instruments and detachable freestanding warrants.
The Company began amortizing the debt discount to interest expense over the
one-year life of the related convertible debt. Upon full conversion of the
convertible debt in November 2005, all remaining unamortized debt discount was
charged to the statement of operations for the year ended December 31, 2005. The
Company recorded the effect of the conversion by debiting interest expense and
crediting additional paid in capital.





The
following is a summary of the activity for convertible debt issuances the year
ended December 31, 2005.





Convertible
      notes payable - related party
            
            $
            750,000Convertible
      notes payable
            
            
            560,000Total
      convertible notes payable
            
            $
            1,310,000





Pursuant
to the terms of the convertible debt, the entire $1,310,000 debt financing was
automatically converted into the Company’s Series A-1 Convertible Preferred
Stock offering in November 2005 at $0.75 per share for an aggregate 1,746,667
shares. The conversions were triggered due to an amount greater than $2,500,000
being raised in a subsequent equity financing.





At
December 31, 2005, there are no outstanding convertible debt instruments. The
following is a summary of total accrued interest payable that remained
unconverted from these convertible debt instruments at December 31,
2005:





Convertible
      notes payable - related party
            
            $
            6,110Convertible
      notes payable
            
            
            2,443Total
      accrued interest payable
            
            $
            8,553




There
were no related issuances during the year ended December 31, 2006.





F-15
 Table of Contents


UVUMOBILE,
INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007, 2006 and 2005





On
December 17, 2007, uVuMobile, Inc. (the “Company”) entered into a definitive
agreement (the “Securities Purchase Agreement”) to sell $2,033,423 of its 8%
Secured Convertible Debentures (the “Debentures”) to institutional and private
investors (collectively, the “Investors” or “Holders”).




The
Debentures bear interest at the rate of 8% per annum and mature on December 17,
2009 (the “Maturity Date”).  The Company shall pay interest to the
holders of the Debentures quarterly on each of January 1, April 1, July 1, and
October 1 of each year prior to the Maturity Date of the
Debentures.  The Debentures are also convertible into shares of the
Company’s common stock at a conversion price of $0.064 per share, subject to
adjustment in accordance with terms of the Debentures.  Any voluntary
conversion by the Investors of the Debentures is subject to a Beneficial
Ownership Limitation (as defined in the Debentures).  In addition, the
Debentures are subject to a forced conversion (the “Forced Conversion”) in all
or in part by the Company in the event that the daily volume weighted average
stock price of the Company’s common stock for any twenty (20) consecutive
trading days exceeds $0.256.  The Debentures are secured by all of the
assets of the Company pursuant to a security agreement.




In
connection with the Debentures, the Company issued warrants to certain
investors.  The warrants have substantially the same terms and
conditions and give the Holders the right to purchase a total of 12,500,000 and
7,500,000 shares of the Company’s common stock, respectively, at an exercise
price of $0.15 per share for a period of five (5) years.  3,177,223 of
these shares are issuable upon exercise of warrants, exercisable for a period of
five (5) years at a price of $0.064 per share in connection with the Debenture
issued to the finder of the Debenture, Forte Partners LLC (“Forte”), as a
finder’s fee.




As a
result of applying the definitions of EITF 00-19 and EITF 05-2, the Company has
accounted for the convertible debt financings pursuant to the provisions of EITF
98-5 and EITF 00-27. The Company computed a debt discount on the aggregate
$2,033,423 in convertible debt financing based on the provisions of APB No. 14
totaling $2,033,423. The allocation was based on the allocable proceeds of the
debt financings between the fair value of the beneficial conversion option of
the related convertible debt instruments and detachable freestanding warrants.
The Company began amortizing the debt discount to interest expense over the
two-year life of the related convertible debt.




The
following is a summary of the activity for convertible debt issuances the year
ended December 31, 2007.









Convertible
      notes payable
            
            $
            2,033,423Loan
      discount
            
            
            (2,008,005
            )Total
      convertible notes payable
            
            $
            25,418





Note 7 - Promissory
Notes





Concurrent
with the merger between Armagh and OVT, the Company assumed a $50,000 loan
payable to a third-party. The loan bears interest at 5% and is payable on
demand. The accrued interest on the loan payable was approximately $16,000 and
$13,000 as of December 31, 2007 and 2006 respectively.




On July
20, 2007 the Company entered into five Bridge Loan Agreements in the amount of
$100,000 each with Glenn Singer, Justin A. Stanley,
David Oros, Michael Criden, and John E. Abdo for total
proceeds of $500,000 and issued 8.25% promissory notes to all five Directors of
the Company.  The loan is evidenced by an unsecured promissory note
(the “Note”) which accrues interest at a rate of 8.25% per
annum.  Interest and principal on the Note are due in full one hundred
and twenty (120) days from the date of the Note.  On August 23,
2007 Messrs. Abdo, Oros and Stanley resigned their positions as
Directors of the Company.  In connection with their resignations,
Messrs. Abdo, Oros and Stanley each forgave repayment of the $100,000
bridge loan that each had made to the Company on July 20, 2007, as well as all
accrued interest on the loan.  The accrued interest on the five loans
payable was approximately $3,330.  As a result of the forgiveness of
the three loans by Messrs. Abdo, Oros and Stanley, paid-in capital
increased $303,330.





Between
August 31, 2007 and September 25, 2007, the Company entered into six Bridge Loan
Agreements with Jerry Bratton, Ray Jones, Drew Arnold,
Chris Carson, Joseph Fitzpatrick and KLC Ventures, Inc. (the
“Lenders”) for total proceeds of $212,500 and issued 12% promissory notes to all
six Lenders.  The loan is evidenced by a promissory note (the “Note”)
which accrues interest at a rate of 12% per annum and provides for the repayment
of the principal amount and all accrued interest thirty (30) days from the date
of the Note (the “Maturity Date”), and Security Agreements between the Company
and each of the Lenders (a “Security Agreement”) pursuant to which the Company
is granting to the Lenders a lien on substantially all of the Company’s assets
(up to $282,625 in aggregate amount between the six Lenders) to secure the
repayment of the Note.  As an inducement for the Lenders to make the
Bridge Loans, the Company agreed in the Note to issue Warrants granting to the
Lender the right to acquire an aggregate of 425,000 shares of the Company’s
common stock at an exercise price of $0.10 per share (the “First
Warrants”).  The First Warrants will have a five (5) year term and
will have other normal and customary provisions, including anti-dilution
provisions and registration rights with respect to the underlying shares of
common stock.  The reason for the short duration of the Bridge Loan is
that certain accredited investors (the “Investors”) were in negotiations
with the Company to make up to a $4 million strategic equity investment in the
Company (the “Strategic Equity Transaction”), which investment would be made on
or about the Maturity Date to enable the Company to pay back the six Bridge
Loans.  Subject to the parties entering into definitive documentation
with respect to the Strategic Equity Transaction, the Investors would invest a
minimum of $1 million and a maximum of $4 million in the Company. If the
Strategic Equity Transaction is consummated, the Company plans to use a portion
of the proceeds to repay the Bridge Loans.  However, in the Note the
Lender has been granted the right, exercisable once the Company has closed on a
qualified strategic financing, to convert the principal balance of the Bridge
Loan into shares of the Company’s common stock at a conversion rate of ten
shares of common stock for each dollar of the Bridge Loan so
converted.  If a Lender chooses to convert the Bridge Loan to equity,
then the Company will have the option of paying the accrued interest owed to
such Lender in cash or in additional shares of common stock at the same
conversion rate.  To induce the Lender to convert the Bridge Loan to
equity and not seek repayment of the same, upon such conversion, the Company
will issue to that Lender a Warrant granting the right to acquire an aggregate
of 212,500 shares of the Company’s common stock at an exercise price of $0.10
per share (the “Second Warrant”).  The Second Warrant will have a five
(5) year term and will have other normal and customary provisions, including
anti-dilution provisions and registration rights with respect to the underlying
shares of common stock. As noted above, the Company is in negotiations with
respect to entering into a term sheet with respect to a Strategic Equity
Transaction.  There can be no assurance that the parties will be able
to agree upon definitive documentation and consummate the Strategic Equity
Transaction.  If the parties do not close the Strategic Equity
Transaction by the Maturity Date, then the Lenders will grant to the Company an
additional ninety (90) days to repay the Bridge Loans, with the interest rate
with respect to the Notes increasing from 12% to 14% during that 90-day period
until the Notes are repaid in full.




F-16
 Table of Contents





UVUMOBILE,
INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007, 2006 and 2005





On
December 17, 1007, Michael Criden and Glenn Singer converted their loans plus
interest in the amount of $103,300 each.  In consideration for the
cancellation of debt, Messrs. Criden and Singer received 1,614,062 and 1,614,063
shares of Series B Preferred Stock, respectively.




Note 8 - Commitments And
Contingencies





From
time-to-time, the Company is a party to claims and legal proceedings arising in
the ordinary course of business. The Company's management evaluates the exposure
to these claims and proceedings individually and in the aggregate and allocates
additional monies for potential losses on such litigation if it is possible to
estimate the amount of loss and determine if the loss is probable.





On or
about April 22, 2004, the Company filed a complaint in the United States
District Court, North District of Georgia (Case No. 1:04-CV-1123) against Rene
Hamouth, seeking the recovery of all profits realized by Mr. Hamouth resulting
from his alleged violations of Section 16(b) of the Securities Exchange Act of
1934 (the “Exchange Act”) relating to his purchases and sales of the Company’s
common stock since approximately January 1, 2003. The Company is seeking damages
in the amount of at least $151,428, interest on the amount of profits recovered
and all other general and equitable relief to which it may be entitled. Since
filing the complaint and serving Mr. Hamouth, Mr. Hamouth has filed an
answer. The court has entered a scheduling order, approving the Joint
Preliminary Planning Report and Discovery Plan. On March 16, 2005, the Company
received notice that Mr. Hamouth's attorney in this matter has withdrawn
from the case. On April 15, 2005, the Company filed a motion for summary
judgment on this matter. The motion was unopposed. On October 5, 2005, the Court
granted its motion and executed a judgment for us in the amount of
$172,342.  On July 16, 2007, the Company entered into a General
Release and Settlement Agreement with the Hamouth Family Trust and Rene
Hamouth.  (See October 20, 2006
Hamouth litigation paragraph below describing the settlement
agreement.)





On March
9, 2005, SmartVideo Europe, Ltd., or SVEL, which is not an affiliate of
uVuMobile, announced its intention to bring legal action in the form of a
mediation/arbitration against the Company in regard to its alleged repudiation
and breach of a distribution agreement between the parties, dated April 2, 2004,
which involved certain rights to distribute certain of the Company’s products.
The dispute includes claims of SVEL that the Company had anticipatorily breached
its agreement with SVEL, thus allegedly inhibiting the development of SVEL's
business utilizing the Company’s technology on an exclusive basis in 25
countries throughout the European Union. the Company contends that it had the
right to terminate the agreement because of breaches by SVEL. On or about
December 13, 2006, SVEL filed its Statement of Claim with the American
Arbitration Association. The Company filed its response to the Statement of
Claim on or about January 22, 2007. The parties have now agreed to mediate the
matter prior to proceeding with arbitration. The mediation, which was set for
October 23, 2007, has been postponed indefinitely.





F-17
 Table of Contents





UVUMOBILE,
INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007, 2006 and 2005


On or
about July 18, 2006, Manhattan Investments, Inc. (“Manhattan”) filed a Complaint
against the Company in the United States District Court, Northern District of
California (Case No. C-06-4379), alleging that the Company has wrongfully
refused to remove the restrictive legend on a stock certificate representing
49,795 shares. The Complaint includes claims for breach of fiduciary and
statutory duties, conversion and fraud, and seeks injunctive relief, as well as
monetary damages. On October 2, 2006, the Company filed a Motion to Transfer for
Improper Venue. The Motion was granted by the Court on November 13,
2006.  On July 23, 2007 (the “Effective Date”) the Company entered
into a Settlement Agreement and Mutual Release (the “Agreement”) with
Manhattan.  Pursuant to the Agreement, the parties agreed, among other
things, that the Company will issue 850,000 shares of the Company’s common
stock, par value $0.001 to Manhattan within seven business days following a
determination by the Court that the issuance of such common stock is fair,
reasonable, and adequate to Manhattan (the “Judicial
Determination”).  The 850,000 shares of the Company’s common stock
will be issued in reliance on the exemption from the registration requirements
of the Securities Act of 1933, as amended (the “Act”), provided by Section
3(a)(10) of the Act.  The Agreement also requires the Company to pay
$35,000 to Manhattan within 15 days after the closing of an equity financing
transaction, provided that the Company completes such transaction.  In
addition, the agreement requires the Company to cause 49,795 shares of the
Company’s common stock currently owned by Manhattan to be re-issued without
restrictive legends within seven business days of the Effective
Date.  In exchange for the payments and actions described above, the
Agreement provides for a release of the Company and each of the owners,
stockholders, predecessors, successors, directors, officers, employees,
representatives, attorneys, subsidiaries, and affiliates of the Company from all
charges, claims, liabilities, agreements, damages, causes of action, suits,
costs, losses, debts and expenses of any nature by Manhattan.  The
Agreement further provides for a release of Manhattan and each of the trustees,
representatives, attorneys and affiliates of Manhattan, and all persons acting
by, through, under or in concert with them from any and all charges, claims,
liabilities, agreements, damages, causes of action, suits, costs, losses, debts
and expenses of any nature by the Company.  On July 24, 2007, the
United States District Court entered an Order making the above-referenced
Judicial Determination. At September 30, 2007, based on the settlement date
of July 23, 2007, the Company accrued a settlement liability and related expense
of $332,500 based on the quoted closing trading price of $0.35 per share for the
underlying 850,000 common shares in addition to the $35,000 in cash
payments.




On or
about October 20, 2006, Hamouth Family Trust (“Hamouth”) filed a Complaint
against the Company in the Court of Chancery of the State of Delaware, in which
Hamouth seeks declaratory and injunctive relief, as well as damages in an
unspecified amount, related to the Company's alleged wrongful refusal to issue
new stock certificates without restrictive legends for 800,000 shares of stock
owned by Hamouth.  On July 16, 2007 (the “Effective Date”), the
Company entered into a General Release and Settlement Agreement (the
“Agreement”) with the Hamouth Family Trust and Rene Hamouth (the “Claimant
Parties”) related to the Company's alleged wrongful refusal to issue new stock
certificates without restrictive legends for 800,000 shares of stock owned by
the Hamouth Family Trust and a judgment against Rene Hamouth in favor of the
Company in the amount of $172,325.  Pursuant to the Agreement, the
parties agreed, among other things, that the Company will issue 3,000,000 shares
of the Company’s common stock, par value $0.001 (the “Settlement Shares”) to the
Hamouth Family Trust within six business days following a determination by the
Chancery Court that the issuance of such common stock is fair, reasonable, and
adequate to the Hamouth Family Trust (the “Judicial
Determination”).  The 3,000,000 shares of the Company’s common stock
will be issued in reliance on the exemption from the registration requirements
of the Securities Act of 1933, as amended (the “Act”), provided by Section
3(a)(10) of the Act.  In the event the Chancery Court declines to make
the Judicial Determination, the Hamouth Family Trust has certain specified
registration rights relating to the Settlement Shares.  The Agreement
also requires (i) the Company to pay $50,000 to the Hamouth Family Trust on the
Effective Date, (ii) the Company to pay $50,000 to the Hamouth Family Trust on
the 30th day following the Effective Date, (iii) the Company to pay $300,000 to
the Hamouth Family Trust within 30 days after the closing of an equity financing
transaction, provided that the Company completes such transaction within 120
days of the Effective Date.  In addition, the agreement requires the
Company to: (a) cause 800,000 shares of the Company’s common stock currently
owned by the Hamouth Family Trust to be re-issued without restrictive legends
within six business days of receipt of the certificates representing such shares
of common stock and (b) release a judgment in the amount of $172,325 it holds
against Rene Hamouth.  In exchange for the payments and actions
described above, the Agreement provides for a release of the Company and each of
the owners, stockholders, predecessors, successors, directors, officers,
employees, representatives, attorneys, subsidiaries, and affiliates of the
Company from all charges, claims, liabilities, agreements, damages, causes of
action, suits, costs, losses, debts and expenses of any nature by the Claimant
Parties.  The Agreement further provides for a release of the Claimant
Parties and each of the trustees, representatives, attorneys and affiliates of
the Claimant Parties, and all persons acting by, through, under or in concert
with them from any and all charges, claims, liabilities, agreements, damages,
causes of action, suits, costs, losses, debts and expenses of any nature by the
Company.  The Agreement also provides that neither the Company nor the
Claimant Parties will file or pursue certain specified claims, grievances,
complaints, lawsuits, or arbitrations.  On July 18, 2007, the Chancery
Court entered an Order making the above-referenced Judicial
Determination. The Company accrued a settlement liability and related
expense of $955,000 based on the quoted trading price of $0.185 per share for
the 3,000,000 underlying common shares in addition to the $400,000 in cash
payments. During 2007, the Company made cash payments totaling $100,000 to
Mr. Hamouth pursuant to the Settlement Agreement dated July 16,
2007.  On February 25, 2008, the Company entered into a General
Release and Settlement Agreement (the “Agreement”) with Mr. Hamouth for the
third and final payment of $300,000.  Pursuant to the Agreement dated
February 25, 2008, in lieu of cash the Company agreed to issue 4,687,000 shares
of the Company’s common stock in full and complete satisfaction of any and all
obligations of the Company concerning the third payment of
$300,000.





F-18
 Table of Contents





UVUMOBILE,
INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007, 2006 and 2005


On
September 9, 2006 and February 14, 2007, respectively, the Company received
correspondence from Epsom Investment Services, N.V. (“Epsom”) demanding
repayment of an alleged outstanding Demand Loan made in 2002 from Epsom to
Sharps Eliminations Technologies, Inc. (“Sharps”) in the amount of $50,000
bearing interest at 5%. Epsom claims that the Company agreed to repay this loan
on behalf of Sharps. The Company currently does not believe any such amounts are
due and owing to Epsom.





On
November 6, 2007, the Company filed a demand for arbitration against Jeremy
DeBonet (“DeBonet”) and Skyward Mobile, LLC (“Skyward”) alleging breach of
contract, misappropriation of trade secrets, conversion and deceptive trade
practices and unfair competition under the statutory and common law of the State
of Delaware arising, in part, out of DeBonet/Skyward’s failure to perform their
obligations under a technology development agreement between the Company and
DeBonet/Skyward.  More specifically, despite repeated demands by the
Company that DeBonet/Skyward turn over intellectual property for which the
Company has paid over a $500,000, DeBonet/Skyward have refused to do so. 
Furthermore, the Company believes that DeBonet/Skyward have converted the
intellectual property at issue through the wrongful exercise of dominion or
right of ownership over the Company’s intellectual property in denial of, or
inconsistent with the Company’s right as owner.  The Company is asking
for:  (a) judgment that DeBonet/Skyward have materially breached the
technology development agreement; (b) an order requiring DeBonet/Skyward to
perform their obligations under the technology development agreement, and to
produce all technology developed under the agreement, or in the alternative, a
judgment that the Company is entitled to an award of monetary damages; (c)
certain other monetary and declaratory relief.





Except as
set forth above, the Company believes that there are no material litigation
matters at the current time. The results of such litigation matters and claims
cannot be predicted with certainty, and an adverse outcome in one or more of
such matters and claims could have a material adverse impact on the Company’s
financial position, liquidity, or results of operations.





(A)
            Commitments




In August
2007, the Company assumed a sublease for approximately 4,541 square feet of
office space in Duluth, Georgia. This office space currently serves as the
Company's corporate headquarters. This sublease calls for monthly rental
payments of approximately $6,528 and terminates on December 30, 2009. Rent
expense for the year ended December 31, 2007, 2006, and 2005 was $165,369,
$280,315, and $273,215, respectively.




The
following represents minimum rental payments due pursuant to non-cancelable
operating lease commitments during the remaining term of the operating lease
agreement.




For
      the Years Ended December 31, 2008-2011Contractual
      Obligations
            
            Total
            
            
            Less
      Than 1 Year
            
            
            1
      - 3 Years
            
            
            3
      - 5 years
            
            
            More
      Than 5 YearsOperating
      Lease Obligations
            
            $
            143,718
            
            
            $
            71,859
            
            
            $
            71,859
            
            
            $
            –
            
            
            $
            –Total
            
            $
            143,718
            
            
            $
            71,859
            
            
            $
            71,859
            
            
            $
            –
            
            
            $
            –





Note 9 - Stockholders’
Equity (Deficit)




Year Ended December 31,
2007




(A)
            Preferred
      Stock




(1)
            Capital
      Structure




As of
December 31, 2007, the authorized Preferred Stock of the Company consisted of
50,000,000 shares of $.001 par value Series A-1 Preferred Stock of which
11,666,666 shares are issued and 133,333 shares are outstanding and are
designated as convertible, and Series B Preferred Stock with a par value of
$0.001 of which 4,017,188 are issued and outstanding.




F-19
 Table of Contents




UVUMOBILE,
INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007, 2006 and 2005


(2)
            Preferred
      Stock Issuances





On
December 17, 2007, the Company issued 3,892,188 shares of Series B Preferred
Stock with a par value of $0.001.  In addition, on December 17, 2007,
the Company issued 125,000 shares of Series B Preferred Stock with a par value
of $0.001 to settle an outstanding accounts payable obligation.





(B)
            Common
      Stock Issuances




On
December 17, 2007, the Company completed as strategic equity financing pursuant
to 8% Convertible Debentures among the Company and 15 accredited investors.
Under the terms of the agreement, the Company received gross proceeds of
$2,282,523 and issued to the investors a total of 31,772,234 shares of common
stock and five (5) year warrants exercisable at $0.15 per share to purchase up
to 28,531,538 shares of common stock; five (5) year warrants exercisable at
$0.10 per share to purchase up to 605,000 shares of common stock; and five (5)
year warrants exercisable at $0.064 per share to purchase up to 3,177,223 shares
of common stock. Such securities were issued pursuant to an exemption provided
by Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated
thereunder.





(1)
            Capital
      Structure





As of
December 31, 2007, the authorized common stock of the Company consists of
150,000,000 shares of $.001 par value.




(2)
            Preferred
      Stock Conversions





During
the year ended December 31, 2007, the Company converted 2,500,000 shares of the
Company’s Series A-1 Convertible Preferred Stock to shares of common stock on a
one-to-one basis.





(3)
            Legal
      Settlements





During
the year ended December 31, 2007, the Company settled six legal disputes for an
aggregate of 9,725,000 shares of common stock valued in range of $0.185 to $0.80
per share.





(4)
            Warrant
      Conversions And Exercises





During
the year ended December 31, 2007, 27,349,426 warrants were exercised through a
Warrant Tender Offer.




The
following is a summary of all common stock issued during the year ended December
31, 2007:





Activity
            
            Quantity
      of Shares
            
            
            ValuationPreferred
      stock conversion
            
            
            2,500,000
            
            
            $
            738,225Legal
      settlements
            
            
            9,725,000
            
            
            
            –Warrant
      conversions/exercises
            
            
            8,128,016
            
            
            
            5,748,500Total
            
            
            20,353,016
            
            
            $
            6,486,725





(C)
            Other
      Grants Of Common Stock Options And
Warrants




(1)
            2004
      Equity Incentive Plan




The Board
of Directors of the Company adopted the 2004 Equity Incentive Plan (“2004 Plan”)
effective January 1, 2004, to provide incentives to attract and retain
participating officers, directors, and key employees. The 2004 Plan allows for
the issuance of up to 5,000,000 shares of common stock in the form of incentive
awards, including, without limitation, stock options and restricted stock. This
Plan was approved by the stockholders at the Annual Meeting held on August 31,
2004.




F-20
 Table of Contents




UVUMOBILE,
INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007, 2006 and 2005


(2)
            2005
      Equity Incentive Plan




The Board
of Directors of the Company adopted the 2005 Equity Incentive Plan (“2005 Plan”)
on January 3, 2006 to provide incentives to attract and retain participating
officers, directors, employees, consultants and advisors. The 2005 Plan allows
for the issuance of 10,000,000 shares of common stock in the form of incentive
awards, including, without limitation, stock options and restricted stock. The
Plan was approved by the stockholders on February 23, 2006.





The
following tables summarize all stock option grants to employees and
non-employees as of December 31, 2007:




Stock
      Options
            
            Number
      of Options
            
            
            Weighted
      Average Exercise PriceBalance
      at December 31, 2004
            
            
            2,445,000
            
            
            $
            2.20Granted
            
            
            1,345,000
            
            
            
            1.61Exercised
            
            
            –
            
            
            
            –Forfeited
            
            
            (310,000
            )
            
            
            1.58Balance
      at December 31, 2005
            
            
            3,480,000
            
            
            
            2.03Granted
            
            
            6,710,000
            
            
            
            1.65Exercised
            
            
            –
            
            
            
            –Forfeited
            
            
            (1,160,000
            )
            
            
            1.00Balance
      at December 31, 2006
            
            
            9,030,000
            
            
            
            1.94Granted
            
            
            5,460,000
            
            
            
            1.14Exercised
            
            
            –
            
            
            
            –Forfeited
            
            
            (2,530,000
            )
            
            
            1.38Balance
      at December 31, 2007
            
            
            11,960,000
            
            
            $
            1.14Options
      exercisable at December 31, 2007
            
            
            6,767,917
            
            
            $
            1.66Weighted
      average fair value of options granted during 2007
            
            
            5,460,000
            
            
            $
            0.15







A summary
of the status of the Company’s nonvested shares as of December 31, 2007, and
changes during the fiscal year then ended as presented below.




Nonvested
      Shares
            
            Shares
            
            
            Weighted
      Average Grant Date Fair ValueNonvested
      at December 31, 2006
            
            
            4,530,938
            
            
            $
            1.89Granted
            
            
            5,460,000
            
            
            
            0.15Vested
            
            
            (2,268,855
            )
            
            
            1.20Cancelled
            
            
            (2,530,000
            )
            
            
            1.70Nonvested
      at December 31, 2007
            
            
            5,192,083
            
            
            $
            0.45





F-21
 Table of Contents




UVUMOBILE,
INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007, 2006 and 2005


Options
      Outstanding
            
            Options
      ExercisableExercise
      Price
            
            Number
      Outstanding as of December 31, 2006
            
            Weighted
      Average Remaining Contractual Years
            
            
            Weighted
      Average Exercise Price
            
            Number
      Exercisable at December 31, 2006
            
            
            Weighted
      Average Exercise Price$
            0.09
            
            575,000
            
            9.97
            
            $
            –
            
            –
            
            $
            0.09$
            0.13
            
            3,580,000
            
            9.83
            
            $
            0.04
            
            741,667
            
            $
            0.13$
            0.15
            
            500,000
            
            9.71
            
            $
            0.01
            
            125,000
            
            $
            0.15$
            0.30
            
            680,000
            
            9.33
            
            $
            0.02
            
            170,000
            
            $
            0.30$
            0.35
            
            –
            
            9.28
            
            $
            –
            
            –
            
            $
            0.35$
            0.90
            
            –
            
            7.52
            
            $
            –
            
            –
            
            $
            0.90$
            0.97
            
            –
            
            8.66
            
            $
            –
            
            –
            
            $
            0.97$
            1.00
            
            325,000
            
            6.85
            
            $
            0.03
            
            296,875
            
            $
            1.00$
            1.02
            
            15,000
            
            8.92
            
            $
            –
            
            15,000
            
            $
            1.02$
            1.31
            
            495,000
            
            8.78
            
            $
            0.05
            
            356,250
            
            $
            1.31$
            1.36
            
            250,000
            
            8.41
            
            $
            0.03
            
            250,000
            
            $
            1.36$
            1.40
            
            300,000
            
            8.52
            
            $
            0.04
            
            200,000
            
            $
            1.40$
            1.44
            
            –
            
            9.44
            
            $
            –
            
            –
            
            $
            1.44$
            1.48
            
            250,000
            
            8.15
            
            $
            0.03
            
            200,000
            
            $
            1.48$
            1.50
            
            –
            
            7.97
            
            $
            –
            
            –
            
            $
            1.50$
            1.55
            
            1,700,000
            
            7.37
            
            $
            0.22
            
            1,700,000
            
            $
            1.55$
            1.58
            
            –
            
            7.41
            
            $
            –
            
            –
            
            $
            1.58$
            1.75
            
            –
            
            8.32
            
            $
            –
            
            –
            
            $
            1.75$
            1.78
            
            –
            
            –
            
            $
            –
            
            –
            
            $
            1.78$
            1.86
            
            –
            
            8.31
            
            $
            –
            
            –
            
            $
            1.86$
            1.90
            
            500,000
            
            7.84
            
            $
            0.08
            
            500,000
            
            $
            1.90$
            1.91
            
            195,000
            
            8.27
            
            $
            0.03
            
            195,000
            
            $
            1.91$
            1.95
            
            100,000
            
            8.22
            
            $
            0.02
            
            100,000
            
            $
            1.95$
            2.10
            
            1,200,000
            
            8.17
            
            $
            0.21
            
            718,750
            
            $
            2.10$
            2.20
            
            150,000
            
            8.26
            
            $
            0.03
            
            150,000
            
            $
            2.20$
            2.25
            
            50,000
            
            5.04
            
            $
            0.01
            
            37,500
            
            $
            2.25$
            2.30
            
            150,000
            
            6.92
            
            $
            0.03
            
            150,000
            
            $
            2.30$
            2.53
            
            –
            
            8.18
            
            $
            –
            
            –
            
            $
            2.53$
            2.77
            
            25,000
            
            8.18
            
            $
            0.01
            
            21,875
            
            $
            2.77$
            2.90
            
            20,000
            
            7.27
            
            $
            –
            
            10,000
            
            $
            2.90$
            2.91
            
            –
            
            7.29
            
            $
            –
            
            –
            
            $
            2.91$
            2.95
            
            –
            
            6.76
            
            $
            –
            
            –
            
            $
            2.95$
            3.27
            
            150,000
            
            8.15
            
            $
            0.40
            
            80,000
            
            $
            3.27$
            3.50
            
            750,000
            
            6.52
            
            $
            0.22
            
            750,000
            
            $
            3.5011,960,000
            
            9.56
            
            $
            1.14
            
            6,767,917
            
            $
            1.66




At
December 31, 2007, the Company had a total of 40,062,598 warrants
outstanding.  All of these warrants are exercisable. The life of the
warrants range from zero to five years. The exercise price of these warrants
range from $0.064 to $6.50.




(3)
            Stock
      Plans





In 2006,
the Company adopted SFAS No. 123(R). Under SFAS No. 123(R), companies are
required to measure the compensation costs of share-based compensation
arrangements based on the grant date fair value and recognize the costs in the
financial statements over the period during which employees are required to
provide services. Share-based compensation arrangements include stock options,
restricted share plans, performance-based awards, share appreciation rights and
employee share purchase plans.




For the
year ended December 31, 2005, pro forma information regarding net income and
earnings per share is required by SFAS No. 123 and has been determined as if the
Company had accounted for its stock-based compensation plans using the fair
value method prescribed by that statement. For purposes of pro forma
disclosures, the estimated fair value of the options is amortized to expense
over the options’ vesting period on a straight-line basis. Compensation
previously recognized is reversed to the extent applicable to forfeitures of
unvested options. For purposes of presenting the comparative 2005 pro forma
financial statement information, the Company has determined the amount of
share-based awards previously accounted for pursuant to APB No. 25 prior to
January 1, 2006 and recorded the appropriate expense as if SFAS No. 123(R) had
been followed in the previous comparative period.





F-22
 Table of Contents





UVUMOBILE,
INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007, 2006 and 2005





The
following table illustrates the effect on the consolidated net loss and net loss
per share if the Company had accounted for its stock-based compensation plans
using SFAS No. 123(R) for the employee share-based awards.




For
      the Year EndedDecember
      31,2007
            
            
            2006
            
            
            2005Net
      loss to common shareholders, as reported
            
            $
            (8,841,345
            )
            
            $
            (24,488,876
            )
            
            $
            (19,740,274
            )Add:  Stock-based
      employee compensation expense included in reported
      net loss, net of related tax effects
            
            
            –
            
            
            
            –
            
            
            
            –Deduct:  Total
      stock-based employee compensation expense determinedunder fail
      value based method for all awards, net of related tax
      effects
            
            
            –
            
            
            
            –
            
            
            
            1,090,181Pro
      forma net loss to common shareholders
            
            $
            (8,841,345
            )
            
            $
            (24,488,876
            )
            
            $
            (18,650,093
            )Basic
      and diluted net loss per share, as reported
            
            $
            (0.15
            )
            
            $
            (0.61
            )
            
            $
            (0.76
            )Pro
      forma basic and diluted net loss per share
            
            $
            (0.15
            )
            
            $
            (0.61
            )
            
            $
            (0.80
            )





For
purposes of this pro forma presentation at December 31, 2005, the fair value of
each option grant was estimated at the date of the grant using a Black-Scholes
option pricing model with the following weighted average assumptions: the
risk-free interest rate was 4.875%, expected dividend yield of 0%, expected
volatility factor was 122.76% with an expected life of three years.





For the
years ended December 31, 2007 and 2006, the Company recorded a charge to income
in the amount of approximately $2,541,000 and $3,287,000, respectively, for the
effects of the adoption of SFAS 123(R) in the current year for employee
share-based awards.  For the years ended December 31, 2007 and 2006,
the fair value of each option grant was estimated as the date of the grant using
a Black-Scholes option pricing model with the following weighted average
assumptions.




For
      the Year EndedDecember
      31,2007
            
            
            2006Risk-free
      interest rate
            
            
            3.20
      - 4.25
            %
            
            
            4.50
      - 4.87
            %Expected
      dividend yield
            
            
            0
            %
            
            
            0
            %Expected
      volatility
            
            
            118.93
      - 178.48
            %
            
            
            116.62
      - 122.30
            %Expected
      live of option
            
            3
      Years
            
            
            3
      Years




Year Ended December 31,
2006




(A)
            Preferred
      Stock





(1)
            Capital
      Structure




As of
December 31, 2006, the authorized Preferred Stock of the Company consisted of
50,000,000 shares of $.001 par value Series A-1 Preferred Stock of which
11,666,666 shares are issued and 2,633,333 shares are outstanding and are
designated as convertible.





(B)
            Common
      Stock Issuances




On July
17, 2006, the Company completed an equity financing pursuant to a securities
purchase agreement dated as of July 7, 2006 among the Company and 74 accredited
investors. Under the terms of the agreement, the Company received gross proceeds
of $9,000,000 and issued to the investors a total of 7,200,000 shares of common
stock and five (5) year warrants exercisable at $2.50 per share to purchase up
to 7,200,000 shares of common stock. Such securities were issued pursuant to an
exemption provided by Section 4(2) of the Securities Act and Rule 506 of
Regulation D promulgated thereunder. This round of financing triggered an
anti-dilution provision under a prior financing resulting in the issue of
additional five (5) year warrants exercisable at $1.25 per share to purchase an
additional 6,553,663 shares of common stock.





F-23
 Table of Contents





UVUMOBILE,
INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007, 2006 and 2005


(1)
            Capital
      Structure





As of
December 31, 2006, the authorized common stock of the Company consists of
150,000,000 shares of $.001 par value.





(2)
            Preferred
      Stock Conversions




During
the year ended December 31, 2006, the Company converted 9,033,333 shares of the
Company’s Series A-1 Convertible Preferred Stock to shares of common stock on a
one-to-one basis.





(3)
            Accounts
      Payable




During
the year ended December 31, 2006, the Company settled two outstanding vendor
payables with unrelated third parties by issuing an aggregate of 434,916 shares
of common stock having an aggregate fair value of $501,937. Fair value was
determined based on the quoted closing trading price on the dates of settlement.
The share prices on the dates of issuance ranged from $0.75 - $2.08 per share.
Of the total shares issued, 100,000 shares valued at $208,000, were applied
directly against a vendor payable in connection with the purchase of computer
software.  In addition the Company settled with a consultant by
issuing 60,000 shares of common stock for all amounts due and owing, issued
75,000 shares to a consultant for services rendered, and issued 199,916 shares
in payment of services performed by a vendor.





(4)
            Warrant
      Exercises




During
the year ended December 31, 2006, the Company issued 1,929,463 shares of common
stock in connection with the exercise of previously issued stock purchase
warrants. Of the total, 807,607 shares were issued based on the original warrant
contractual exercise price. These exercise prices ranged from $0.75 - $2.00 per
share and total cash proceeds raised from these exercised warrants was $943,975.
The remaining 1,121,856 shares were issued based on an anti-dilution exercise
price adjustment feature in the related warrant contracts. The Company recorded
related offsetting amounts in additional paid-in capital and common stock at the
par value of the stock issued, which was $1,122.





During
the quarter ended December 31, 2006, the Company redeemed 706,670 callable
warrants at a price of $.10 per warrant for a total payment of $70,667 which
also reduced additional paid-in capital by $70,667.




The
following is a summary of all common stock issued during the year ended December
31, 2006:





Activity
            
            Quantity
      of Shares
            
            
            ValuationPreferred
      stock conversion
            
            
            9,033,333
            
            
            $
            –Accounts
      payable settlements
            
            
            434,916
            
            
            
            501,937Warrant
      conversions
            
            
            1,929,463
            
            
            
            943,975Sale
      of common stock
            
            
            7,206,109
            
            
            
            9,033,333Total
            
            
            18,603,821
            
            
            $
            10,479,245





(C)
            Common
      Stock Options And Warrants





(1)
            Services




On
January 19, 2006, the Company entered into a consulting agreement with Growth
Consultants LLC (“consultant”). The initial term of the agreement was through
June 30, 2006, but was extended through September 30, 2006 pursuant to a letter
agreement dated July 7, 2006.  Pursuant to the agreement, the
consultant was issued 300,000 common stock purchase warrants having an exercise
price of $3.00 per warrant.  For the year ended December 31, 2006, the
Company recorded $1,424,250 in consulting expense using fair value accounting as
prescribed by SFAS No. 123(R) and the related Black-Scholes pricing model with
the following weighted average assumptions:





F-24
 Table of Contents





UVUMOBILE,
INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007, 2006 and 2005


Exercise
      price
            
            $
            3.00Expected
      dividend yield
            
            
            0
            %Expected
      volatility
            
            
            122.37
            %Risk
      free interest rate
            
            
            4.50
            %Expected
      life of option
            
            5
      years





On July
24, 2006, the Company entered into a Master Consulting Agreement with James
Morrison for a two-year term expiring on July 24, 2008.  Pursuant to
the agreement, Morrison was issued an aggregate of 400,000 common stock purchase
warrants, 50,000 of which are exercisable at any time during the exercise period
and the remaining 350,000 warrants will only be exercisable upon obtaining
certain thresholds and milestones.  50,000 of these warrants have an
exercise price of $1.40 and the remaining 350,000 warrants will have an exercise
price equal to the lesser of (i) $1.40 and(ii) the closing price quoted on the
OTC Bulletin Board or another recognized tracking system on the date the
applicable thresholds and/or milestones are achieved.  The Company
also is obligated to pay Morrison a specified amount per month to provide
consulting services which includes general advice and directions on business
development, strategic planning, and engineering and design.





For the
year ended December 31, 2006, the Company recorded $66,720 in compensation
expense using fair value accounting as prescribed in SFAS 123(R) and the related
Black-Scholes pricing model with the following weighted average
assumptions:





Exercise
      price
            
            $
            1.40Expected
      dividend yield
            
            
            0
            %Expected
      volatility
            
            
            119.39
            %Risk
      free interest rate
            
            
            4.63
            %Expected
      life of option
            
            5
      years





On July
24, 2006, the Company entered into a Master Development Agreement with Skyward
Mobile for a two year term expiring on July 24, 2008.  Pursuant to the
agreement, Skyward Mobile was issued an aggregate of 400,000 common stock
purchase warrants, 50,000 of which are exercisable at any time during the
exercise period and the remaining 350,000 warrants will only be exercisable upon
obtaining certain thresholds and milestones.  50,000 of these warrants
have an exercise price of $1.40 and the remaining 350,000 warrants will have an
exercise price equal to the lesser of (i) $1.40 and (ii) the closing price
quoted on the OTC Bulletin Board or another recognized tracking system on the
date the applicable thresholds and/or milestones are achieved.





For the
year ended December 31, 2006, the Company recorded $66,720 in compensation
expense using fair value accounting as prescribed in SFAS 123(R) and the related
Black-Scholes pricing model with the following weighted average
assumptions:





Exercise
      price
            
            $
            1.40Expected
      dividend yield
            
            
            0
            %Expected
      volatility
            
            
            119.39
            %Risk
      free interest rate
            
            
            4.63
            %Expected
      life of option
            
            5
      years





(D)
            Other
      Grants Of Common Stock Options And
Warrants




(1)
            2004
      Equity Incentive Plan




The Board
of Directors of the Company adopted the 2004 Equity Incentive Plan (“2004 Plan”)
effective January 1, 2004, to provide incentives to attract and retain
participating officers, directors, and key employees. The 2004 Plan allows for
the issuance of up to 5,000,000 shares of common stock in the form of incentive
awards, including, without limitation, stock options and restricted stock. This
Plan was approved by the stockholders at the Annual Meeting held on August 31,
2004.




F-25
 Table of Contents




UVUMOBILE,
INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007, 2006 and 2005


(2)
            2005
      Equity Incentive Plan




The Board
of Directors of the Company adopted the 2005 Equity Incentive Plan (“2005 Plan”)
on January 3, 2006 to provide incentives to attract and retain participating
officers, directors, employees, consultants and advisors. The 2005 Plan allows
for the issuance of 10,000,000 shares of common stock in the form of incentive
awards, including, without limitation, stock options and restricted stock. The
Plan was approved by the stockholders on February 23, 2006.





The
following tables summarize all stock option grants to employees and
non-employees as of December 31, 2006:







Stock
      Options
            
            Number
      of Options
            
            
            Weighted
      Average Exercise PriceBalance
      at December 31, 2003
            
            
            –
            
            
            $
            –Granted
            
            
            2,445,000
            
            
            
            2.20Exercised
            
            
            –
            
            
            
            –Forfeited
            
            
            –
            
            
            
            –Balance
      at December 31, 2004
            
            
            2,445,000
            
            
            $
            2.20Granted
            
            
            1,345,000
            
            
            
            1.61Exercised
            
            
            –
            
            
            
            –Forfeited
            
            
            (310,000
            )
            
            
            1.58Balance
      at December 31, 2005
            
            
            3,480,000
            
            
            $
            2.03Granted
            
            
            6,710,000
            
            
            
            1.65Exercised
            
            
            –
            
            
            
            –Forfeited
            
            
            (1,160,000
            )
            
            
            1.00Balance
      at December 31, 2006
            
            
            9,030,000
            
            
            $
            1.80Options
      exercisable at December 31, 2006
            
            
            4,499,062
            
            
            $
            1.89Weighted
      average fair value of options granted during 2006
            
            
            
            
            
            $
            1.65





F-26
 Table of Contents




UVUMOBILE,
INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007, 2006 and 2005


Options
      Outstanding
            
            Options
      ExercisableExercise
      Price
            
            Number
      Outstanding as of December 31, 2006
            
            Weighted
      Average Remaining Contractual Years
            
            
            Weighted
      Average Exercise Price
            
            Number
      Exercisable at December 31, 2006
            
            
            Weighted
      Average Exercise Price$
            0.09
            
            575,000
            
            9.97
            
            $
            –
            
            –
            
            $
            0.09$
            0.13
            
            3,580,000
            
            9.83
            
            $
            0.04
            
            741,667
            
            $
            0.13$
            0.15
            
            500,000
            
            9.71
            
            $
            0.01
            
            125,000
            
            $
            0.15$
            0.30
            
            680,000
            
            9.33
            
            $
            0.02
            
            170,000
            
            $
            0.30$
            0.35
            
            –
            
            9.28
            
            $
            –
            
            –
            
            $
            0.35$
            0.90
            
            –
            
            7.52
            
            $
            –
            
            –
            
            $
            0.90$
            0.97
            
            –
            
            8.66
            
            $
            –
            
            –
            
            $
            0.97$
            1.00
            
            325,000
            
            6.85
            
            $
            0.03
            
            296,875
            
            $
            1.00$
            1.02
            
            15,000
            
            8.92
            
            $
            –
            
            15,000
            
            $
            1.02$
            1.31
            
            495,000
            
            8.78
            
            $
            0.05
            
            356,250
            
            $
            1.31$
            1.36
            
            250,000
            
            8.41
            
            $
            0.03
            
            250,000
            
            $
            1.36$
            1.40
            
            300,000
            
            8.52
            
            $
            0.04
            
            200,000
            
            $
            1.40$
            1.44
            
            –
            
            9.44
            
            $
            –
            
            –
            
            $
            1.44$
            1.48
            
            250,000
            
            8.15
            
            $
            0.03
            
            200,000
            
            $
            1.48$
            1.50
            
            –
            
            7.97
            
            $
            –
            
            –
            
            $
            1.50$
            1.55
            
            1,700,000
            
            7.37
            
            $
            0.22
            
            1,700,000
            
            $
            1.55$
            1.58
            
            –
            
            7.41
            
            $
            –
            
            –
            
            $
            1.58$
            1.75
            
            –
            
            8.32
            
            $
            –
            
            –
            
            $
            1.75$
            1.78
            
            –
            
            –
            
            $
            –
            
            –
            
            $
            1.78$
            1.86
            
            –
            
            8.31
            
            $
            –
            
            –
            
            $
            1.86$
            1.90
            
            500,000
            
            7.84
            
            $
            0.08
            
            500,000
            
            $
            1.90$
            1.91
            
            195,000
            
            8.27
            
            $
            0.03
            
            195,000
            
            $
            1.91$
            1.95
            
            100,000
            
            8.22
            
            $
            0.02
            
            100,000
            
            $
            1.95$
            2.10
            
            1,200,000
            
            8.17
            
            $
            0.21
            
            718,750
            
            $
            2.10$
            2.20
            
            150,000
            
            8.26
            
            $
            0.03
            
            150,000
            
            $
            2.20$
            2.25
            
            50,000
            
            5.04
            
            $
            0.01
            
            37,500
            
            $
            2.25$
            2.30
            
            150,000
            
            6.92
            
            $
            0.03
            
            150,000
            
            $
            2.30$
            2.53
            
            –
            
            8.18
            
            $
            –
            
            –
            
            $
            2.53$
            2.77
            
            25,000
            
            8.18
            
            $
            0.01
            
            21,875
            
            $
            2.77$
            2.90
            
            20,000
            
            7.27
            
            $
            –
            
            10,000
            
            $
            2.90$
            2.91
            
            –
            
            7.29
            
            $
            –
            
            –
            
            $
            2.91$
            2.95
            
            –
            
            6.76
            
            $
            –
            
            –
            
            $
            2.95$
            3.27
            
            150,000
            
            8.15
            
            $
            0.40
            
            80,000
            
            $
            3.27$
            3.50
            
            750,000
            
            6.52
            
            $
            0.22
            
            750,000
            
            $
            3.5011,960,000
            
            9.56
            
            $
            1.14
            
            6,767,917
            
            $
            1.66




At
December 31, 2006, the Company had a total of 35,010,149 warrants
outstanding.  All of these warrants are exercisable. The life of the
warrants range from zero to five years. The exercise price of these warrants
range from $0.75 to $6.50. See additional disclosure above regarding warrant
activity.




Year Ended December 31,
2005:




(A)
            Preferred
      Stock




(1)
            Capital
      Structure




As of
December 31, 2005 and 2004, the authorized preferred stock of the Company
consists of 50,000,000 shares of $.001 par value preferred stock of which
10,666,666 and 0 shares are issued and outstanding, respectively and are
designated as convertible. Prior to its conversion in March 2004, each share of
preferred stock was entitled to the same voting preferences as the Company’s
common stock.




In March
2004, the holders of the 12,000,000 shares of Convertible Preferred Stock
provided notification to us for the conversion of their shares into common
stock. Under the terms of the Convertible Preferred Stock, the stockholders were
issued a total of 12,000,000 shares of common stock. These shares of common
stock were issued as restricted shares exempt from registration.




F-27
 Table of Contents


UVUMOBILE,
INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007, 2006 and 2005




On August
9, 2005 our Board of Directors authorized the issuance of 2,500 shares of Series
B 7% Convertible Preferred Stock. As of the date of this report, no shares of
such stock have been issued. Each share of Series B 7% Convertible Preferred
Stock is convertible into that number of shares of common stock determined by
dividing the Stated Value of the Series B 7% Convertible Preferred Stock, which
is presently equal to $1,000.





(2)
            Preferences




Currently,
the board has not designated any preferences.





(3)
            Issuance
      of Convertible Preferred Stock, Series
A-1




In
November 2005, the Company issued 5,333,333 shares of its Series A-1 Convertible
Preferred Stock. Of the total, 1,746,667 shares were issued in connection with
the conversion of $1,310,000 in convertible debt at $0.75 per share (see Notes 6
and 10). The remaining 3,586,666 shares were sold for cash of $2,690,000 or
$0.75 per share. This represented the first of two Convertible Preferred Stock
offerings traunches.




In
December 2005, the Company issued 5,333,333 shares of its series A-1 Convertible
Preferred Stock. All shares were sold for cash of $4,000,000 or $0.75 per share.
(See Notes 6 and 10) This represented the second of two Convertible Preferred
Stock offerings traunches.





In
connection with the issuance of these aggregate 10,666,666 Series A-1
Convertible Preferred Shares, the Company issued 13,333,333 stock purchase
warrants. For each share of Convertible Preferred Stock purchased, the holder is
entitled to receive freestanding warrants having an exercise price of either
$1.75 or $2.00. The quantity of warrants granted at $1.75 was equivalent to the
investment multiplied by 133 1/3 %; the quantity of warrants granted at $2.00
was equivalent to the investment multiplied by 33 1/3 %. All stock purchase
warrants have an exercise period of five years.




The
Company followed the provisions of EITF No. 98-5, EITF 00-27 and APB No. 14 by
allocating the proceeds raised between the Convertible Preferred Stock and
freestanding warrants. The allocation is deemed to be analogous to a dividend to
be recognized over the term in which the preferred stockholders can realize the
return. Since the Convertible Preferred Stock is immediately convertible at the
option of the holder, the benefit is realized immediately. The value of the
dividend was equivalent to $8,000,000 as the allocation exceeded the face amount
of the gross proceeds raised. The Company charged retained earnings and credited
additional paid-in capital. Additionally, the Company evaluated the underlying
common stock for purposes of determining fair value and the related conversion
price, however, the conversion price of $0.75 used to determine the allocable
amounts was based on the recent cash offering price of $0.75 for the same
Convertible Preferred Stock offering as opposed to any value ascribed to the
common stock.




The
Company also reviewed this transaction and determined that derivative accounting
and the related issues of EITF No. 00-19 do not apply.




Management
used the following weighted average assumptions on the date of issue when
determining the fair value of the freestanding warrants issued in connection
with the Series A-1 Convertible Preferred Shares:





Exercise
      price
            
            $
            1.75
      or $2.00Expected
      dividend yield
            
            
            0
            %Expected
      volatility
            
            
            175.48%
      - 176.68
            %Risk
      free interest rate
            
            
            4.25
            %Expected
      life of option
            
            2
      years




(B)
            Common
      Stock Issuances





(1)
            Issued
      For Cash




During
March 2005, the Company issued 1,761,345 shares of common stock for gross cash
proceeds of $3,963,000 in connection with a Private Placement requiring a
purchase price of $2.25 per share. Additionally, the Company paid a cash fee of
$233,125 to a placement agent in connection with the equity raise representing a
direct offering cost. The $233,125 was netted against the gross cash proceeds
and resulted in the Company raising $3,729,875 in net cash proceeds. All shares
issued in this Private Placement had piggy back registration rights and the
related registration statement was declared effective in July 2005.




F-28
 Table of Contents





UVUMOBILE,
INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007, 2006 and 2005


In
connection with the issuance of these shares of common stock, the Company issued
to each investor an aggregate 1,019,675 stock purchase warrants. These warrants
have an exercise price ranging from $2.25-3.50 and a life of 5 years. There is
no separate valuation for the attached warrants pursuant to fair value
accounting as they are deemed to be part of the aggregate gross proceeds raised
for the related 1,761,345 shares of common stock.




(2)
            Compensation
      To Investors





During
March 2005, the Company issued an aggregate 50,000 shares of common stock to two
individuals pursuant to the terms of a debt instrument held that required the
issuance of additional shares based upon certain market conditions. The value of
these shares was $3.95 per share based on the quoted closing trading price on
the date of grant. Total additional consideration charged to the statement of
operations as interest expense was $197,500.





(3)
            Accounts
      Payable




During
2005, the Company settled various outstanding vendor payables with unrelated
third parties by issuing an aggregate 72,882 shares of common stock having an
aggregate fair value of $82,850. Fair value was determined based on the quoted
closing trading price on the dates of grant. The share prices on the dates of
grant ranged from $0.79 - $3.04 per share and averaged $1.14 per
share.





(4)
            Consulting
      Services





In July
2005, the Company issued 750,000 shares of common stock to an unrelated
third-party as consideration for entering into a business advisory agreement.
The term of the agreement was for six months. The shares had a fair value of
$712,500 or $0.95 per share. Fair value was determined based on the quoted
closing trading price on the date of grant. There were no other services
provided to the Company as described in the terms of the agreement and there are
no outstanding accrued liabilities to this service provider at December 31,
2005. All shares had piggy back registration rights and as of the date of the
accompanying report were awaiting registration.





(5)
            Warrant
      Conversions





During
2005, the Company issued 1,866,402 shares of common stock in connection with the
exercise of previously granted stock purchase warrants. Of the total, 527,779
shares were issued pursuant to the warrant contractual exercise price. These
exercise prices ranged from $0.75 - $2.50 per share and averaged $1.37 per
share. Total cash proceeds raised from conversions was $723,335. The remaining
1,338,623 shares were issued pursuant to a cashless exercise provision as stated
in the related warrant contracts. The Company recorded related offsetting
amounts in the statements of changes in stockholders’ deficit for common stock
and additional paid-in capital at the par value of the stock issued, the total
was $1,339.





The
following is a summary of all common stock issued during 2005:




Activity
            
            Quantity
      of Shares
            
            
            ValuationCash
            
            
            1,761,345
            
            
            $
            3,729,875Compensation
      to investors
            
            
            50,000
            
            
            
            197,500Accounts
      payable settlements
            
            
            72,882
            
            
            
            82,850Consulting
      services
            
            
            750,000
            
            
            
            712,500Warrant
      conversions
            
            
            1,866,402
            
            
            
            723,335Total
            
            
            4,500,629
            
            
            $
            5,446,060





F-29
 Table of Contents




UVUMOBILE,
INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007, 2006 and 2005


(C)
            Common
      Stock Options And Warrants





(1)
            Services




On March
1, 2005, the Company entered into two separate consulting agreements with
unrelated third parties to provide professional services for an aggregate
$17,500 per month for a period of one-year. Under the terms of these agreements,
the Company issued an aggregate 1,400,000 stock purchase warrants having a fair
value of $2,624,450. The value of these warrants was based on a computation
derived from the use of a Black-Scholes option pricing model. Management used
the following weighted average assumptions at the grant date:





Exercise
      price
            
            $
            3.50
      - $6.50Expected
      dividend yield
            
            
            0
            %Expected
      volatility
            
            
            151.06
            %Risk
      free interest rate
            
            
            4.25
            %Expected
      life of option
            
            4 -
      4.25 years





In June
2005, both agreements were terminated. At December 31, 2005, there were no
outstanding accrued liabilities to either service provider. At December 31,
2005, the Company had charged the statement of operations for the entire
$2,624,450 to consulting expense with an offsetting credit to additional paid in
capital, additionally, all 1,400,000 warrants remain outstanding.





(D)
            Other
      Grants Of Common Stock Options And
Warrants





(2)
            2004
      Equity Incentive Plan




The Board
of Directors of the Company adopted the 2004 Stock Incentive Plan (“2004 Plan”)
effective January 1, 2004, to provide incentives to attract and retain officers,
directors, and key employees. The 2004 Plan allows for the issuance of up to
5,000,000 shares of common stock. This Plan was approved by the stockholders at
the annual meeting held on August 31, 2004.




At
December 31, 2005, the Company had a total of 31,161,589 warrants outstanding.
Of these warrants, 30,336,589 are exercisable. The life of the warrants
range from zero to five years. The exercise price of these warrants range from
$0.75 to $6.50. See additional disclosure above regarding activity.




Note 10 - Related Party
Transactions





On August
12, 2005, the Company borrowed $225,000 from one of its directors. Pursuant to
the promissory note issued in connection with the loan, the Company is obligated
to pay all principal and interest due under the note by no later than September
12, 2006. Interest on the unpaid principal balance of the note accrues at a rate
equal to the fluctuating prime lending rate of LaSalle Bank, N.A., Chicago,
Illinois; as such rate is in effect less one hundred basis points. This
principal portion of this note in the amount of $225,000 was repaid on November
22, 2005. The Company had related outstanding accrued interest of $3,845 at
December 31, 2005.





Until
August 31, 2005, the Company was provided the use of office facilities from a
former related party. The amount paid by the Company during 2005 under this
leasing arrangement amounted to approximately $81,000.





On
September 26, 2005 and October 19, 2005, the Company borrowed an aggregate
$600,000 from two different related parties (four separate notes) pursuant to
the terms of a Convertible Promissory Note.





On
November 10, 2005, the Company borrowed $150,000 from a related party pursuant
to the terms of a Convertible Promissory Note. (See Note 6)





F-30
 Table of Contents


UVUMOBILE,
INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007, 2006 and 2005





In
connection with these offerings, a family member of a director invested $50,000
in exchange for 66,667 shares of common stock ($0.75 per share). This individual
also received 83,334 warrants under the same terms as all other investors
participating in the Series A-1, Convertible Preferred Stock offerings in
November and December 2005.





During
the years ending December 31, 2005, 2004 and 2003, the Company generated revenue
from a former related party accounting for $55,228, $31,945 and $22,432
respectively. These amounts were fully reserved at year-end.





On March
7, 2006, a director of the Company exercised 25,000 warrants for 25,000 shares
of common stock. These warrants were exercised at a price of $1.50 for 12,500
common shares and $2.00 for the additional 12,500 common shares.





On July
17, 2006, the Company completed an equity financing pursuant to a securities
purchase agreement dated July 7, 2006, among the Company and 74 accredited
investors (“Investors”). Included among these Investors are two directors along
with an officer of the Company who collectively invested $350,000 in exchange
for 280,000 shares of common stock (at a price of $1.25 per share). These
individuals also received 280,000 warrants under the same terms as all the other
Investors who participated in the financing.





In
conjunction with the equity financing, a family member of one of the Company's
directors invested $100,000 in exchange for 80,000 shares of common stock (at a
price of $1.25 per share). This individual also received 80,000 warrants under
the same terms as the other investors.





On July
20, 2007 the Company entered into five Bridge Loan Agreements in the amount of
$100,000 each with Glenn Singer, Justin A. Stanley,
David Oros, Michael Criden, and John E. Abdo for total
proceeds of $500,000 and issued 8.25% promissory notes to all five Directors of
the Company.  The loan is evidenced by an unsecured promissory note
(the “Note”) which accrues interest at a rate of 8.25% per
annum.  Interest and principal on the Note are due in full one hundred
and twenty (120) days from the date of the Note.  On August 23, 2007
Messrs. Abdo, Oros and Stanley resigned their positions as Directors of the
Company.  In connection with their resignations, Messrs. Abdo,
Oros and Stanley each forgave repayment of the $100,000 bridge loan that each
had made to the Company on July 20, 2007, as well as all accrued interest on the
loan.  The accrued interest on the five loans payable was
approximately $3,330 as of September 30, 2007.  As a result of the
forgiveness of the three loans by Messrs. Abdo, Oros and Stanley, paid-in
capital increased $300,000.





The
Company also issued 664,063 shares, 1,614,062 shares and 1,614,063 shares of its
Series B Convertible Preferred Stock, respectively, to William J. Loughman, its
Chief Executive Officer, and Michael Criden and Glenn Singer, Directors of the
Company, in consideration for the cancellation of debt owed by the Company to
each of these individuals.  In connection with the issuance of these shares
of Series B Convertible Preferred Stock, the Company also issued warrants to
purchase 531,250; 1,291,250; and 1,291,250 shares of the Company's common stock,
respectively, to each of Messrs. Loughman, Criden and Singer. These
warrants have an exercise price of $0.15 per share and are exercisable for a
period of five (5) years.




Note 11 - Income
Taxes




In July
2006, the Financial Accounting Standard Board (FASB) issued FASB Interpretation
No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes”. 
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise’s financial statements in accordance with SFAS No. 109, “Accounting
for Income Taxes”.  FIN 48 requires a company to evaluate whether the tax
position taken by a company will more likely than not be sustained upon
examination by the appropriate taxing authority.  It also provides guidance
on how a company should measure the amount of benefit that the company is to
recognize in its financial statements.  FIN 48 also provides guidance on
de-recognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition.  FIN 48 is effective for fiscal years
beginning after December 15, 2006.
  The
Company adopted FIN 48 as of January 1, 2007.  As a result of the
implementation of FIN 48, the Company concluded that it has not
taken any uncertain tax positions on any of its open income tax returns
filed through the period ended December 31, 2006 that would materially
distort its financial statement.  The Company's methods of
accounting are based on established income tax principles approved in the
Internal Revenue Code (IRC) and are properly calculated and reflected
within its income tax returns.  In addition, the Company has
filed income tax returns in all applicable jurisdictions in which it
had material nexus warranting an income tax return
filing.
  The
Company re-assesses the validity of its conclusions regarding
uncertain income tax positions on a quarterly basis to determine if facts or
circumstances have arisen that might cause the Company to
change its judgment regarding the likelihood of a tax position's
sustainability under audit.  The impact of this reassessment for the year
ended December 31, 2007 did not have any impact on its results of
operations, financial condition or liquidity.


There was
no provision for income taxes for 2007, 2006 and 2005 due to continuing
operating losses.





Income
tax expense differs from the “expected income tax expense for the periods
(computed by applying the statutory U.S. Federal income tax rate of 35% to
earnings before income taxes) as follows:





2007
            
            
            
            
            
            2006
            
            
            
            
            
            2005Computed
      "expected" tax expense
            
            $
            (3,094,471
            )
            
            
            35.00
            %
            
            $
            (8,571,107
            )
            
            
            35.00
            %
            
            $
            (6,909,096
            )
            
            
            35.00
            %Increase
      (decrease) in income taxes resulting from:State
      taxe, net of Federal benefit
            
            
            (303,819
            )
            
            
            3.44
            %
            
            
            (1,122,056
            )
            
            
            4.60
            %
            
            
            (582,338
            )
            
            
            2.96
            %Permanent
      items
            
            
            3,242
            
            
            
            (0.04
            %)
            
            
            27,198
            
            
            
            –
            %
            
            
            257,424
            
            
            
            (1.31
            %)Cancellation
      of broadcast rights liability
            
            
            369,592
            
            
            
            (4.18
            %)
            
            
            –
            
            
            
            –
            %
            
            
            –
            
            
            
            –
            %Increase
      in valuation allowance
            
            
            3,030,402
            
            
            
            (34.28
            %)
            
            
            11,433,041
            
            
            
            (46.84
            %)
            
            
            7,199,753
            
            
            
            (36.54
            %)OtherTrue-up
      of net operating loss charitable contribution carry
forward
            
            
            (9,080
            )
            
            
            0.10
            %
            
            
            (1,671,112
            )
            
            
            6.85
            %
            
            
            –
            
            
            
            –
            %True-up
      of prior depreciation adjustments
            
            
            3,890
            
            
            
            (0.04
            %)
            
            
            (24,744
            )
            
            
            0.10
            %
            
            
            –
            
            
            
            –
            %Other
            
            
            244
            
            
            
            –
            %
            
            
            (71,220
            )
            
            
            0.29
            %
            
            
            34,257
            
            
            
            (0.11
            %)Actual
      tax expense
            
            $
            –
            
            
            
            –
            %
            
            $
            –
            
            
            
            –
            %
            
            $
            –
            
            
            
            –
            %





The
income tax effects of temporary differences that give rise to significant
portions our deferred tax assets at December 31, 2007 and 2006 are presented
below:





F-31
 Table of Contents





UVUMOBILE,
INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007, 2006 and 2005


December
      31,2007
            
            
            2006Deferred
      income tax assets:Net
      operating loss and research credit carryforwards
            
            $
            17,718,853
            
            
            $
            12,956,554Noncash
      stock-based compensation
            
            
            6,142,168
            
            
            
            4,813,480Depreciation
      and amortization
            
            
            143,962
            
            
            
            1,390,202Accruals
      not deducted for tax purposes
            
            
            138,873
            
            
            
            1,953,558Other
            
            
            340
            
            
            
            –Gross
      deferred income tax assets
            
            $
            24,144,196
            
            
            $
            21,113,794Less
      valuation allowance for deferred income tax assets
            
            
            (24,144,196
            )
            
            
            (21,113,794
            )Net
      deferred income tax assets
            
            $
            –
            
            
            $
            –





At
December 31, 2007, the valuation allowance for deferred income tax assets
increased by $3,030,402 from December 31, 2006. In assessing the realizability
of deferred tax assets, management considers whether it is more likely than not
that some portion or all of the deferred income tax assets will not be realized.
The ultimate realization of deferred income tax assets is dependent upon the
generation of future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled reversal of
deferred income tax liabilities, projected future taxable income, and tax
planning strategies in making this assessment. Based on consideration of these
items, Management has determined that enough uncertainty exists relative to the
realization of the deferred income tax asset balances to warrant the application
of a full valuation allowance as of December 31, 2007.




At
December 31, 2007, we had net operating loss carryforwards for U.S. federal
income tax purposes of $45.5 million available for offset against future taxable
income. Such net operating losses expire in varying amounts beginning in the
year 2025. Utilization of these net operating losses may be limited due to
potential ownership changes under Section 382 of the Internal Revenue
Code.




Note 12 - Subsequent
Events





On
February 13, 2008, the Company received the consent of a majority of the
outstanding holders of record of its common stock, par value $0.001 per share,
the Company’s Series A-1 Convertible Preferred Stock, par value $0.001 per
share, and the Company’s Series B Convertible Preferred Stock, par value $0.001
per share, to amend the Company’s Certificate of Incorporation to increase the
number of authorized shares of Common Stock from 150,000,000 shares to
300,000,000 shares.  The amendment to the Certificate of Incorporation
became effective on February 13, 2008, upon the filing of the Certificate of
Amendment to the Certificate of Incorporation with the Secretary of State of the
State of Delaware.






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