----

----

| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|-----------------------------------------------------------------------------------------|

|  ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|--------|------------------------------------------------------------------------------------------|

| Nevada                                                         |   | 20-1778374                           |
|----------------------------------------------------------------|--------|--------------------------------------|
| (State or other jurisdiction of incorporation or organization) |   | (I.R.S. Employer Identification No.) |

----

| Large accelerated filer  ̈ | Accelerated filer  ̈    |
|--------------------------------|-----------------------------|
| Non-accelerated filer  ̈   | Smaller reporting company x |

----

----

----

QU

| PART I     | -      | FINANCIAL INFORMATION                                                                       |   |
|------------|--------|---------------------------------------------------------------------------------------------|--------|
|       |   |                                                                                        |   |
| Item 1.    |   | Financial Statements                                                                        | 1      |
| Item 2.    |   | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16     |
| Item 3     |   | Quantitative and Qualitative Disclosures About Market Risk                                  | 23     |
| Item 4.    |   | Controls and Procedures                                                                     | 23     |
|       |   |                                                                                        |   |
| PART II    | -      | OTHER INFORMATION                                                                           |   |
|       |   |                                                                                        |   |
| Item 1.    |   | Legal Proceedings                                                                           | 24     |
| Item 1A.   |   | Risk Factors                                                                                | 24     |
| Item 2.    |   | Unregistered Sales of Equity Securities and Use of Proceeds                                 | 24     |
| Item 3.    |   | Defaults Upon Senior Securities                                                             | 24     |
| Item 4.    |   | Removed and Reserved                                                                        | 24     |
| Item 5.    |   | Other Information                                                                           | 24     |
| Item 6.    |   | Exhibits                                                                                    | 24     |
| Signatures | 25     |

----

Table of Contents

Item 1. Financial Statements.

|                                                                      | Page |
|---------------------------------------------------------------------------|------|
| Consolidated Balance Sheets                                               | 2    |
| Unaudited Consolidated Statements of Operations                           | 3    |
| Unaudited Consolidated Statement of Changes in Stockholders’ Equity | 4    |
| Unaudited Consolidated Statements of Cash Flows                           | 5    |
| Notes to Unaudited Consolidated Financial Statements                      | 6    |

----

Table of Contents

|                                                                                                               |   | March 31, |        |   | December 31, |   |
|--------------------------------------------------------------------------------------------------------------------|--------|----------------|-------------|--------|-------------------|--------|
|                                                                                                               |   | 2011           |        |   | 2010              |   |
|                                                                                                               |   | (Unaudited)    |        |   |              |   |
| ASSETS                                                                                                             |   |           |        |   |              |   |
| Current assets:                                                                                                    |   |           |        |   |              |   |
| Cash and cash equivalents                                                                                          |   | $              | 4,645,898   |   |              | $      | 6,584,396 |   |
| Marketable equity securities, available for sale                                                                   |   |           | 7,203       |   |              |   | 9,433 |   |
| Accounts receivable, net                                                                                           |   |           | 324,497     |   |              |   | 220,926 |   |
| Inventory                                                                                                          |   |           | 385,321     |   |              |   | 428,280 |   |
| Prepaid expenses                                                                                                   |   |           | 779,577     |   |              |   | 756,461 |   |
| Loan receivable from related party                                                                                 |   |           | 306,462     |   |              |   | 304,529 |   |
| Amounts due from shareholders                                                                                      |   |           | 396,819     |   |              |   | 184,086 |   |
| Other current assets                                                                                               |   |           | 588,961     |   |              |   | 597,362 |   |
| Total current assets                                                                                               |   |           | 7,434,738   |   |              |   | 9,085,473 |   |
|                                                                                                               |   |           |        |   |              |   |   |   |
| Property and equipment, net                                                                                        |   |           | 4,491,905   |   |              |   | 4,463,920 |   |
| Intangible assets, net                                                                                             |   |           | 8,091,171   |   |              |   | 8,592,244 |   |
| Goodwill                                                                                                           |   |           | 6,105,478   |   |              |   | 6,105,478 |   |
| Amount due from non-controlling interest                                                                           |   |           | 1,522,048   |   |              |   | 1,512,448 |   |
| Investment in equity investment                                                                                    |   |           | 571,315     |   |              |   | 574,486 |   |
| Other assets                                                                                                       |   |           | 456,041     |   |              |   | 299,163 |   |
| Total assets                                                                                                       |   | $              | 28,672,696  |   |              | $      | 30,633,212 |   |
|                                                                                                               |   |           |        |   |              |   |   |   |
| LIABILITIES AND SHAREHOLDERS' EQUITY                                                                               |   |           |        |   |              |   |   |   |
| Current liabilities:                                                                                               |   |           |        |   |              |   |   |   |
| Accounts payable                                                                                                   |   | $              | 1,902,477   |   |              | $      | 1,620,481 |   |
| Accrued expenses and liabilities                                                                                   |   |           | 1,042,822   |   |              |   | 804,341 |   |
| Deferred revenue                                                                                                   |   |           | 1,708,724   |   |              |   | 1,711,796 |   |
| Loan payable                                                                                                       |   |           | 398,960     |   |              |   | 398,960 |   |
| Payable to Jinan Parent                                                                                            |   |           | 138,672     |   |              |   | 137,797 |   |
| Other current liabilities                                                                                          |   |           | 734,987     |   |              |   | 792,413 |   |
| Total current liabilities                                                                                          |   |           | 5,926,642   |   |              |   | 5,465,788 |   |
|                                                                                                               |   |           |        |   |              |   |   |   |
| Contingent purchase consideration liability                                                                        |   |           | 3,323,496   |   |              |   | 3,362,105 |   |
| Deferred tax liability and uncertain tax position liability                                                        |   |           | 1,104,903   |   |              |   | 1,180,323 |   |
| Total liabilities                                                                                                  |   |           | 10,355,041  |   |              |   | 10,008,216 |   |
|                                                                                                               |   |           |        |   |              |   |   |   |
| Commitments and Contingencies                                                                                      |   |           |        |   |              |   |   |   |
|                                                                                                               |   |           |        |   |              |   |   |   |
| Convertible reedeemable preferred stock, $.001 par value; 50,000,000 shares authorized                             |   |           |        |   |              |   |   |   |
| Series A - 7,000,000 shares issued and outstanding, liquidation preference of $3,500,000                           |   |           | 1,261,995   |   |              |   | 1,261,995 |   |
| Series B - 10,266,800 shares issued and outstanding, liquidation preference of $5,133,400                          |   |           | 3,950,358   |   |              |   | 3,950,358 |   |
|                                                                                                               |   |           |        |   |              |   |   |   |
| Shareholders' equity                                                                                               |   |           |        |   |              |   |   |   |
| Common stock, $.001 par value; 1,500,000,000 shares authorized, 660,968,748 and 660,768,748 issued and outstanding |   |           | 660,969     |   |              |   | 660,769 |   |
| Additional paid-in capital                                                                                         |   |           | 42,410,931  |   |              |   | 42,255,089 |   |
| Accumulated deficit                                                                                                |   |           | (34,660,930 | )      |              |   | (32,434,324 | ) |
| Accumulated other comprehensive income                                                                             |   |           | 252,023     |   |              |   | 246,983 |   |
| Total YOU On Demand shareholders' equity (deficit)                                                                 |   |           | 8,662,993   |   |              |   | 10,728,517 |   |
| Noncontrolling interests                                                                                           |   |           | 4,442,309   |   |              |   | 4,684,126 |   |
|                                                                                                               |   |           |        |   |              |   |   |   |
| Total shareholders' equity                                                                                         |   |           | 13,105,302  |   |              |   | 15,412,643 |   |
|                                                                                                               |   |           |        |   |              |   |   |   |
| Total liabilities and shareholders' equity                                                                         |   | $              | 28,672,696  |   |              | $      | 30,633,212 |   |

----

Table of Contents

|                                                               |   | Three Months Ended |        |
|--------------------------------------------------------------------|--------|--------------------|-------------|
|                                                               |   | March 31,     |        |   | March 31, |   |
|                                                               |   | 2011(unaudited)    |        |   | 2010(unaudited) |   |
|                                                               |   |               |        |   |   |   |
| Revenue                                                            |   | $                  | 1,697,924   |   |   | $ | 1,875,681 |   |
| Cost of revenue                                                    |   |               | 1,250,070   |   |   |   | 1,073,808 |   |
| Gross profit                                                       |   |               | 447,854     |   |   |   | 801,873 |   |
|                                                               |   |               |        |   |   |   |   |   |
| Selling, general and adminstrative expenses                        |   |               | 1,812,688   |   |   |   | 723,270 |   |
| Professional fees                                                  |   |               | 317,680     |   |   |   | 168,765 |   |
| Depreciation and amortization                                      |   |               | 1,074,327   |   |   |   | 945,444 |   |
|                                                               |   |               |        |   |   |   |   |   |
| Loss from operations                                               |   |               | (2,756,841  | ) |   |   | (1,035,606 | ) |
|                                                               |   |               |        |   |   |   |   |   |
| Interest & other income / (expense)                            |   |               |        |   |   |   |   |   |
| Interest income                                                    |   |               | 2,938       |   |   |   | 3,109 |   |
| Interest expense                                                   |   |               | (555        | ) |   |   | (91,235 | ) |
| Change in fair value of warrant liabilities                        |   |               | -           |   |   |   | 41,814 |   |
| Change in fair value of contingent consideration                   |   |               | 38,609      |   |   |   | - |   |
| Loss on equity investment                                          |   |               | (6,798      | ) |   |   | - |   |
| Other                                                              |   |               | (4          | ) |   |   | 26 |   |
|                                                               |   |               |        |   |   |   |   |   |
| Net loss before income taxes and noncontrolling interest           |   |               | (2,722,651  | ) |   |   | (1,081,892 | ) |
|                                                               |   |               |        |   |   |   |   |   |
| Income tax benefit                                                 |   |               | 75,420      |   |   |   | 13,728 |   |
|                                                               |   |               |        |   |   |   |   |   |
| Net loss, net of tax                                               |   |               | (2,647,231  | ) |   |   | (1,068,164 | ) |
|                                                               |   |               |        |   |   |   |   |   |
| Plus:  Net loss attributable to noncontrolling interests |   |               | 420,625     |   |   |   | 263,655 |   |
|                                                               |   |               |        |   |   |   |   |   |
| Net loss attributable to YOU On Demand shareholders                |   | $                  | (2,226,606  | ) |   | $ | (804,509 | ) |
|                                                               |   |               |        |   |   |   |   |   |
|                                                               |   |               |        |   |   |   |   |   |
| Net loss per share                                                 |   |               |        |   |   |   |   |   |
| Basic                                                              |   | $                  | -           |   |   | $ | (0.01 | ) |
| Diluted                                                            |   | $                  | -           |   |   | $ | (0.01 | ) |
|                                                               |   |               |        |   |   |   |   |   |
| Weighted average shares outstanding                                |   |               |        |   |   |   |   |   |
| Basic                                                              |   |               | 660,813,189 |   |   |   | 64,765,004 |   |
| Diluted                                                            |   |               | 660,813,189 |   |   |   | 64,765,004 |   |

----

Table of Contents

|                                                                                                                               |   |   |        |   |   |   |    |       |   |   |        |   |   | Accumulated   |        |   | YOU On           |   |    |           |   |   |        |   |   |          |       |
|------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|---------|------------|--------|--------|-------------|--------|--------|---------------|-------------|--------|------------------|--------|---------|----------------|--------|--------|-------------|--------|--------|---------------|------------|
|                                                                                                                               |   |   |        |   |   |   |    | Additional |   |   |        |   |   | Other         |        |   | Demand           |   |    |           |   |   |        |   |   |          |       |
|                                                                                                                               |   | Common |        |   | Par    |   |    | Paid-in    |   |   | Accumulated |   |   | Comprehensive |        |   | Shareholders'    |   |    | Noncontrolling |   |   | Total       |   |   | Comprehensive |       |
|                                                                                                                               |   | Shares |        |   | Value  |   |    | Capital    |   |   | Deficit     |   |   | Income(loss)  |        |   | (Deficit)/Equity |   |    | Interest       |   |   | Equity      |   |   | Loss          |       |
|                                                                                                                               |   |   |        |   |   |   |    |       |   |   |        |   |   |          |        |   |             |   |    |           |   |   |        |   |   |          |       |
| Balance December 31, 2009                                                                                                          |   |   | 64,761,396  |   |   | $      | 64,762  |       |   | $      | 14,901,493  |   |   | $             | (17,215,041 | )      |             | $      | 331,283 |           |   | $      | (1,917,503  | )      |   | $             | 5,259,427  |   |   | $ | 3,341,924 |   |   | $ | (5,428,700 | ) |
|                                                                                                                               |   |   |        |   |   |   |    |       |   |   |        |   |   |          |        |   |             |   |    |           |   |   |        |   |   |          |       |   |   |   |   |   |   |   |   |   |
| Shares issued as payment for convertible note interest                                                                             |   |   | 653,119     |   |   |   | 653     |       |   |   | 131,982     |   |   |          | -           |   |             |   | -       |           |   |   | 132,635     |   |   |          | -          |   |   |   | 132,635 |   |   |   |   |   |
|                                                                                                                               |   |   |        |   |   |   |    |       |   |   |        |   |   |          |        |   |             |   |    |           |   |   |        |   |   |          |       |   |   |   |   |   |   |   |   |   |
| Stock option compensation expense                                                                                                  |   |   | -           |   |   |   | -       |       |   |   | 503,372     |   |   |          | -           |   |             |   | -       |           |   |   | 503,372     |   |   |          | -          |   |   |   | 503,372 |   |   |   |   |   |
|                                                                                                                               |   |   |        |   |   |   |    |       |   |   |        |   |   |          |        |   |             |   |    |           |   |   |        |   |   |          |       |   |   |   |   |   |   |   |   |   |
| Interest expense related to discount and beneficial convertible features in connection with convertible note and warrants issuance |   |   | -           |   |   |   | -       |       |   |   | 90,000      |   |   |          | -           |   |             |   | -       |           |   |   | 90,000      |   |   |          | -          |   |   |   | 90,000 |   |   |   |   |   |
|                                                                                                                               |   |   |        |   |   |   |    |       |   |   |        |   |   |          |        |   |             |   |    |           |   |   |        |   |   |          |       |   |   |   |   |   |   |   |   |   |
| Common shares issued for services                                                                                                  |   |   | 5,100,000   |   |   |   | 5,100   |       |   |   | 249,900     |   |   |          | -           |   |             |   | -       |           |   |   | 255,000     |   |   |          | -          |   |   |   | 255,000 |   |   |   |   |   |
|                                                                                                                               |   |   |        |   |   |   |    |       |   |   |        |   |   |          |        |   |             |   |    |           |   |   |        |   |   |          |       |   |   |   |   |   |   |   |   |   |
| Other adjustment                                                                                                                   |   |   | -           |   |   |   | -       |       |   |   | 22,126      |   |   |          | -           |   |             |   | -       |           |   |   | 22,126      |   |   |          | -          |   |   |   | 22,126 |   |   |   |   |   |
|                                                                                                                               |   |   |        |   |   |   |    |       |   |   |        |   |   |          |        |   |             |   |    |           |   |   |        |   |   |          |       |   |   |   |   |   |   |   |   |   |
|                                                                                                                               |   |   |        |   |   |   |    |       |   |   |        |   |   |          |        |   |             |   |    |           |   |   |        |   |   |          |       |   |   |   |   |   |   |   |   |   |
| Common shares issued for cash                                                                                                      |   |   | 62,500,000  |   |   |   | 62,500  |       |   |   | 1,997,164   |   |   |          | -           |   |             |   | -       |           |   |   | 2,059,664   |   |   |          | -          |   |   |   | 2,059,664 |   |   |   |   |   |
|                                                                                                                               |   |   |        |   |   |   |    |       |   |   |        |   |   |          |        |   |             |   |    |           |   |   |        |   |   |          |       |   |   |   |   |   |   |   |   |   |
| Beneficial conversion feature of Series A and Series B preferred stock issued                                                      |   |   | -           |   |   |   | -       |       |   |   | 2,315,309   |   |   |          | -           |   |             |   | -       |           |   |   | 2,315,309   |   |   |          | -          |   |   |   | 2,315,309 |   |   |   |   |   |
|                                                                                                                               |   |   |        |   |   |   |    |       |   |   |        |   |   |          |        |   |             |   |    |           |   |   |        |   |   |          |       |   |   |   |   |   |   |   |   |   |
| Warrants issued with common stock, Series A and Series B preferred stock                                                           |   |   | -           |   |   |   | -       |       |   |   | 4,486,383   |   |   |          | -           |   |             |   | -       |           |   |   | 4,486,383   |   |   |          | -          |   |   |   | 4,486,383 |   |   |   |   |   |
|                                                                                                                               |   |   |        |   |   |   |    |       |   |   |        |   |   |          |        |   |             |   |    |           |   |   |        |   |   |          |       |   |   |   |   |   |   |   |   |   |
| Common shares and warrants issued and costs related to the conversion of convertible notes                                         |   |   | 62,855,048  |   |   |   | 62,855  |       |   |   | 9,786,038   |   |   |          | -           |   |             |   | -       |           |   |   | 9,848,893   |   |   |          | -          |   |   |   | 9,848,893 |   |   |   |   |   |
|                                                                                                                               |   |   |        |   |   |   |    |       |   |   |        |   |   |          |        |   |             |   |    |           |   |   |        |   |   |          |       |   |   |   |   |   |   |   |   |   |
| Warrants issued to placement agent                                                                                                 |   |   | -           |   |   |   | -       |       |   |   | 135,774     |   |   |          | -           |   |             |   | -       |           |   |   | 135,774     |   |   |          | -          |   |   |   | 135,774 |   |   |   |   |   |
|                                                                                                                               |   |   |        |   |   |   |    |       |   |   |        |   |   |          |        |   |             |   |    |           |   |   |        |   |   |          |       |   |   |   |   |   |   |   |   |   |
| Issuance costs related to the issuance of shares and warrants                                                                      |   |   | -           |   |   |   | -       |       |   |   | (632,503    | )      |   |          | -           |   |             |   | -       |           |   |   | (632,503    | )      |   |          | -          |   |   |   | (632,503 | ) |   |   |   |   |
|                                                                                                                               |   |   |        |   |   |   |    |       |   |   |        |   |   |          |        |   |             |   |    |           |   |   |        |   |   |          |       |   |   |   |   |   |   |   |   |   |
| Warrant liability reclassified to equity                                                                                           |   |   | -           |   |   |   | -       |       |   |   | 150,017     |   |   |          | -           |   |             |   | -       |           |   |   | 150,017     |   |   |          | -          |   |   |   | 150,017 |   |   |   |   |   |
|                                                                                                                               |   |   |        |   |   |   |    |       |   |   |        |   |   |          |        |   |             |   |    |           |   |   |        |   |   |          |       |   |   |   |   |   |   |   |   |   |
| Shares issued for Sinotop Group Ltd acquisition                                                                                    |   |   | 90,859,389  |   |   |   | 90,859  |       |   |   | 4,452,110   |   |   |          | -           |   |             |   | -       |           |   |   | 4,542,969   |   |   |          | -          |   |   |   | 4,542,969 |   |   |   |   |   |
|                                                                                                                               |   |   |        |   |   |   |    |       |   |   |        |   |   |          |        |   |             |   |    |           |   |   |        |   |   |          |       |   |   |   |   |   |   |   |   |   |
| Warrants and options issued for Sinotop Group Ltd acquisition                                                                      |   |   | -           |   |   |   | -       |       |   |   | 4,039,964   |   |   |          | -           |   |             |   | -       |           |   |   | 4,039,964   |   |   |          | -          |   |   |   | 4,039,964 |   |   |   |   |   |
|                                                                                                                               |   |   |        |   |   |   |    |       |   |   |        |   |   |          |        |   |             |   |    |           |   |   |        |   |   |          |       |   |   |   |   |   |   |   |   |   |
| Sinotop Beijing joint venture                                                                                                      |   |   | -           |   |   |   | -       |       |   |   | -           |   |   |          | -           |   |             |   | -       |           |   |   | -           |   |   |          | 1,492,961  |   |   |   | 1,492,961 |   |   |   |   |   |
|                                                                                                                               |   |   |        |   |   |   |    |       |   |   |        |   |   |          |        |   |             |   |    |           |   |   |        |   |   |          |       |   |   |   |   |   |   |   |   |   |
| Shares issued in warrant exchange                                                                                                  |   |   | 374,039,793 |   |   |   | 374,040 |       |   |   | (374,040    | )      |   |          | -           |   |             |   | -       |           |   |   | -           |   |   |          | -          |   |   |   | - |   |   |   |   |   |
|                                                                                                                               |   |   |        |   |   |   |    |       |   |   |        |   |   |          |        |   |             |   |    |           |   |   |        |   |   |          |       |   |   |   |   |   |   |   |   |   |
| Comprehensive loss:                                                                                                                |   |   |        |   |   |   |    |       |   |   |        |   |   |          |        |   |             |   |    |           |   |   |        |   |   |          |       |   |   |   |   |   |   |   |   |   |
| Net loss                                                                                                                           |   |   | -           |   |   |   | -       |       |   |   | -           |   |   |          | (15,219,283 | )      |             |   | -       |           |   |   | (15,219,283 | )      |   |          | (2,616,032 | ) |   |   | (17,835,315 | ) |   |   | (15,219,283 | ) |
| Foreign currency translation adjustments                                                                                           |   |   | -           |   |   |   | -       |       |   |   | -           |   |   |          | -           |   |             |   | (70,489 | )              |   |   | (70,489     | )      |   |          | 547,770    |   |   |   | 477,281 |   |   |   | 477,281 |   |
|                                                                                                                               |   |   |        |   |   |   |    |       |   |   |        |   |   |          |        |   |             |   |    |           |   |   |        |   |   |          |       |   |   |   |   |   |   |   |   |   |
| Unrealized gain on marketable equity securities                                                                                    |   |   | -           |   |   |   | -       |       |   |   | -           |   |   |          | -           |   |             |   | (13,811 | )              |   |   | (13,811     | )      |   |          | -          |   |   |   | (13,811 | ) |   |   | (13,811 | ) |
| Balance December 31, 2010                                                                                                          |   |   | 660,768,745 |   |   | $      | 660,769 |       |   | $      | 42,255,089  |   |   | $             | (32,434,324 | )      |             | $      | 246,983 |           |   | $      | 10,728,517  |   |   | $             | 4,684,126  |   |   | $ | 15,412,643 |   |   | $ | (14,755,813 | ) |
|                                                                                                                               |   |   |        |   |   |   |    |       |   |   |        |   |   |          |        |   |             |   |    |           |   |   |        |   |   |          |       |   |   |   |   |   |   |   |   |   |
|                                                                                                                               |   |   |        |   |   |   |    |       |   |   |        |   |   |          |        |   |             |   |    |           |   |   |        |   |   |          |       |   |   |   |   |   |   |   |   |   |
| Common shares issued for services                                                                                                  |   |   | 200,000     |   |   |   | 200     |       |   |   | 9,800       |   |   |          | -           |   |             |   | -       |           |   |   | 10,000      |   |   |          | -          |   |   |   | 10,000 |   |   |   |   |   |
|                                                                                                                               |   |   |        |   |   |   |    |       |   |   |        |   |   |          |        |   |             |   |    |           |   |   |        |   |   |          |       |   |   |   |   |   |   |   |   |   |
| Stock option compensation expense                                                                                                  |   |   | -           |   |   |   | -       |       |   |   | 146,042     |   |   |          | -           |   |             |   | -       |           |   |   | 146,042     |   |   |          | -          |   |   |   | 146,042 |   |   |   |   |   |
|                                                                                                                               |   |   |        |   |   |   |    |       |   |   |        |   |   |          |        |   |             |   |    |           |   |   |        |   |   |          |       |   |   |   |   |   |   |   |   |   |
| Contribution from noncontrolling interest                                                                                          |   |   | -           |   |   |   | -       |       |   |   | -           |   |   |          | -           |   |             |   | -       |           |   |   | -           |   |   |          | 151,759    |   |   |   | 151,759 |   |   |   |   |   |
|                                                                                                                               |   |   |        |   |   |   |    |       |   |   |        |   |   |          |        |   |             |   |    |           |   |   |        |   |   |          |       |   |   |   |   |   |   |   |   |   |
| Comprehensive loss:                                                                                                                |   |   |        |   |   |   |    |       |   |   |        |   |   |          |        |   |             |   |    |           |   |   |        |   |   |          |       |   |   |   |   |   |   |   |   |   |
| Net loss                                                                                                                           |   |   | -           |   |   |   | -       |       |   |   | -           |   |   |          | (2,226,606  | )      |             |   | -       |           |   |   | (2,226,606  | )      |   |          | (420,625   | ) |   |   | (2,647,231 | ) |   |   | (2,226,606 | ) |
| Foreign currency translation adjustments                                                                                           |   |   | -           |   |   |   | -       |       |   |   | -           |   |   |          | -           |   |             |   | 7,270   |           |   |   | 7,270       |   |   |          | 27,049     |   |   |   | 34,319 |   |   |   | 34,319 |   |
|                                                                                                                               |   |   |        |   |   |   |    |       |   |   |        |   |   |          |        |   |             |   |    |           |   |   |        |   |   |          |       |   |   |   |   |   |   |   |   |   |
| Unrealized loss on marketable equity securities                                                                                    |   |   | -           |   |   |   | -       |       |   |   | -           |   |   |          | -           |   |             |   | (2,230  | )              |   |   | (2,230      | )      |   |          | -          |   |   |   | (2,230 | ) |   |   | (2,230 | ) |
|                                                                                                                               |   |   |        |   |   |   |    |       |   |   |        |   |   |          |        |   |             |   |    |           |   |   |        |   |   |          |       |   |   |   |   |   |   |   |   |   |
|                                                                                                                               |   |   |        |   |   |   |    |       |   |   |        |   |   |          |        |   |             |   |    |           |   |   |        |   |   |          |       |   |   |   |   |   |   |   |   |   |
| Balance March 31, 2011                                                                                                             |   |   | 660,968,745 |   |   | $      | 660,969 |       |   | $      | 42,410,931  |   |   | $             | (34,660,930 | )      |             | $      | 252,023 |           |   | $      | 8,662,993   |   |   | $             | 4,442,309  |   |   | $ | 13,105,302 |   |   | $ | (2,194,517 | ) |

----

Table of Contents

|                                                                                          |   | Three Months Ended |       |
|-----------------------------------------------------------------------------------------------|--------|--------------------|------------|
|                                                                                          |   | March 31,     |       |   | March 31, |   |
|                                                                                          |   | 2011(unaudited)    |       |   | 2010(unaudited) |   |
| Cash flows from operating                                                                     |   |               |       |   |   |   |
| Net loss                                                                                      |   | $                  | (2,647,231 | ) |   | $ | (1,068,164 | ) |
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities |   |               |       |   |   |   |   |   |
| Stock compensation expense                                                                    |   |               | 156,042    |   |   |   | 74,167 |   |
| Depreciation and amortization                                                                 |   |               | 1,074,327  |   |   |   | 945,444 |   |
| Noncash interest expense - original issue discount                                            |   |               | -          |   |   |   | 24,875 |   |
| Deferred income tax                                                                           |   |               | (75,420    | ) |   |   | (13,728 | ) |
| Change in fair value of warrant liabilities                                                   |   |               | -          |   |   |   | (41,814 | ) |
| Change in fair value of contingent consideration liability                                    |   |               | (38,609    | ) |   |   | - |   |
| Change in assets and liabilities,                                                             |   |               |       |   |   |   |   |   |
| Accounts receivable                                                                           |   |               | (101,524   | ) |   |   | (18,913 | ) |
| Inventory                                                                                     |   |               | 45,949     |   |   |   | (37,963 | ) |
| Prepaid expenses and other assets                                                             |   |               | (6,613     | ) |   |   | (3,582 | ) |
| Accounts payable and accrued expenses                                                         |   |               | 478,857    |   |   |   | 342,005 |   |
| Deferred revenue                                                                              |   |               | 6,736      |   |   |   | (113,841 | ) |
| Other                                                                                         |   |               | (337       | ) |   |   | - |   |
| Net cash (used in) provided by operating activities                                      |   |               | (1,107,823 | ) |   |   | 88,486 |   |
|                                                                                          |   |               |       |   |   |   |   |   |
| Cash flows from investing activities:                                                         |   |               |       |   |   |   |   |   |
| Acquisition of property and equipment                                                         |   |               | (553,535   | ) |   |   | (224,334 | ) |
| Loan to Sinotop Group Ltd                                                                     |   |               | -          |   |   |   | (580,000 | ) |
| Loan advances to Shandong Media shareholders                                                  |   |               | (210,230   | ) |   |   | (585,111 | ) |
| Loan repayments to from Shandong Media shareholders                                           |   |               | -          |   |   |   | 17,203 |   |
| Other                                                                                         |   |               | (156,464   | ) |   |   | - |   |
| Net cash used in investing activities                                                         |   |               | (920,229   | ) |   |   | (1,372,242 | ) |
|                                                                                          |   |               |       |   |   |   |   |   |
| Cash flows from financing activities                                                          |   |               |       |   |   |   |   |   |
| Proceeds from issuance of convertible notes payable                                           |   |               | -          |   |   |   | 600,000 |   |
| Proceeds from Jinan Parent                                                                    |   |               | 151,759    |   |   |   | - |   |
| Payments to Jinan Parent                                                                      |   |               | -          |   |   |   | (18,992 | ) |
| Net cash provided by financing activities                                                     |   |               | 151,759    |   |   |   | 581,008 |   |
|                                                                                          |   |               |       |   |   |   |   |   |
| Effect of exchange rate changes on cash                                                       |   |               | (62,205    | ) |   |   | 26,181 |   |
|                                                                                          |   |               |       |   |   |   |   |   |
| Net decrease in cash and cash equivalents                                                     |   |               | (1,938,498 | ) |   |   | (676,567 | ) |
| Cash and cash equivalents at beginning of period                                              |   |               | 6,584,396  |   |   |   | 2,190,494 |   |
|                                                                                          |   |               |       |   |   |   |   |   |
| Cash and cash equivalents at end of period                                                    |   | $                  | 4,645,898  |   |   | $ | 1,513,927 |   |
|                                                                                          |   |               |       |   |   |   |   |   |
|                                                                                          |   |               |       |   |   |   |   |   |
| Supplemental Cash Flow Information:                                                           |   |               |       |   |   |   |   |   |
|                                                                                          |   |               |       |   |   |   |   |   |
| Cash paid for taxes                                                                           |   | $                  | -          |   |   | $ | - |   |
| Cash paid for interest                                                                        |   | $                  | 555        |   |   | $ | 413 |   |
| Value assigned to shares as payment for interest expense                                      |   | $                  | -          |   |   | $ | 65,951 |   |

----

Table of Contents

| 1. | Basis of Presentation |
|----|-----------------------|

----

Table of Contents

| 2. | Going Concern and Management’s Plans |
|----|--------------------------------------------|

| 3. | Sinotop Contingent Consideration |
|----|----------------------------------|

|                           |   | Number of   |       |   | December 31, 2010 |   |      | Change in       |   |   | March 31, 2011 |   |
|--------------------------------|--------|-------------|------------|--------|------------------------|--------|-----------|-----------------|--------|--------|---------------------|--------|
| Class of consideration         |   | Instruments |       |   | Fair Value        |   |      | Fair Value |   |   | Fair Value     |   |
| Common stock of the Company    |   |        | 30,286,464 |   |                   | $      | 1,817,187 |            |   | $      | -                   |   |   | $ | 1,817,187 |   |
| Warrants                       |   |        | 42,845,654 |   |                   |   | 1,358,715 |            |   |   | (34,252             | )      |   | $ | 1,324,463 |   |
| Stock options                  |   |        | 6,000,000  |   |                   |   | 186,203   |            |   |   | (4,357              | )      |   | $ | 181,846 |   |
| Total contingent consideration |   |        |       |   |                   | $      | 3,362,105 |            |   | $      | (38,609             | )      |   | $ | 3,323,496 |   |

| 4. | Shandong Media Joint Venture - Cooperation Agreement Additional Payment |
|----|-------------------------------------------------------------------------|

| 5. | Variable Interest Entities |
|----|----------------------------|

----

Table of Contents

| 6. | Fair Value Measurements |
|----|-------------------------|

|   | · | Level 1 — Financial assets and liabilities whose values are based on unadjusted quoted market prices for identical assets and liabilities in an active market that we have the ability to access. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Level 2 — Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable for substantially the full term of the asset or liability. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Level 3 — Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                              |   | March 31, 2011                |   |   |    |   |
|-----------------------------------|--------|------------------------------------|--------|--------|---------|--------|
|                              |   | Fair Value Measurements(Unaudited) |   |   |    |   |
|                              |   | Level 1                            |   |   | Level 2 |   |   | Level 3 |   |   | Total Fair Value |   |
| Assets                            |   |                               |   |   |    |   |   |   |   |   |   |   |
| Available-for-sale securities     |   | $                                  | 7,203  |   |    | $      | - |   |   | $ | - |   |   | $ | 7,203 |   |
| Liabilities                       |   |                               |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Contingent purchase consideration |   | $                                  | -      |   |    | $      | - |   |   | $ | 3,323,496 |   |   | $ |    3,323,496 |   |

|                          |   | December 31, 2010  |   |   |    |   |   |
|-------------------------------|--------|-------------------------|--------|--------|---------|--------|--------|
|                          |   | Fair Value Measurements |   |   |    |   |   |
|                          |   | Level 1                 |   |   | Level 2 |   |   | Level 3 |   |   | Total Fair Value |   |
| Assets                        |   |                    |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Available-for-sale securities |   | $                       | 9,433  |   |    | $      | -      |   |   | $ | - |   |   | $ | 9,433 |   |
| Liabilities                   |   |                    |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Fair value of warrants        |   | $                       | -      |   |    | $      | -      |   |   | $ | 3,362,105 |   |   | $ | 3,362,105 |   |

----

Table of Contents

|                                           |   | March 31, 2011 |      |   | December 31, 2010 |   |      |     |   |
|------------------------------------------------|--------|---------------------|-----------|--------|-----------------------------|--------|-----------|----------|--------|
|                                           |   | ContingentPurchase  |      |   | ContingentPurchase          |   |      |     |   |
|                                           |   | Consideration       |      |   | Consideration               |   |      | Warrants |   |
|                                           |   | (Unaudited)         |      |   |                        |   |      |     |   |   |   |
| Fair value at January 1,                       |   | $                   | 3,362,105 |   |                        | $      | -         |     |   | $ |     819,150 |   |
| Purchases, Sales and Issuances and Settlements |   |                | -         |   |                        |   | 2,860,978 |     |   |   | - |   |
| Realized Losses                                |   |                | -         |   |                        |   | -         |     |   |   | (669,133) |   |
| Unrealized (gains) losses                      |   |                | (38,609)  |   |                        |   | 501,127   |     |   |   | - |   |
| Transfer to equity                             |   |                | -         |   |                        |   | -         |     |   |   | (150,017) |   |
|                                           |   | $                   | 3,323,496 |   |                        | $      | 3,362,105 |     |   | $ | - |   |

| 7. | Related Party Transactions |
|----|----------------------------|

----

Table of Contents

| 8. | Property and Equipment |
|----|------------------------|

|                                      |   | March 31, |        |   | December 31, |   |
|-------------------------------------------|--------|----------------|-------------|--------|-------------------|--------|
|                                      |   | 2011           |        |   | 2010              |   |
|                                      |   | (Unaudited)    |        |   |              |   |
| Furniture and office equipment            |   | $              | 1,630,000   |   |              | $      | 1,241,000 |   |
| Headend facilities and machinery          |   |           | 14,531,000  |   |              |   | 15,762,000 |   |
| Vehicles                                  |   |           | 30,000      |   |              |   | 30,000 |   |
| Total property and equipment              |   |           | 16,191,000  |   |              |   | 17,033,000 |   |
| Less:  accumulated depreciation |   |           | (11,700,000 | )      |              |   | (11,064,000 | ) |
| Less:  impairment charge        |   |           | -           |   |              |   | (1,505,000) |   |
| Net carrying value                        |   | $              | 4,491,000   |   |              | $      | 4,464,000 |   |
|                                      |   |           |        |   |              |   |   |   |
| Depreciation expense                      |   | $              | 564,000     |   |              | $      | 804,000 |   |

----

Table of Contents

| 9. | Goodwill and Intangible Assets |
|----|--------------------------------|

|                              |   | Balance atDecember 31,2010 |                |   | Additions |   |   | AmortizationExpense |   |   | ImpairmentCharge |   |   | OtherChanges |   |   | Balance atMarch 31,2011(Unaudited) |   |
|-----------------------------------|--------|---------------------------------|---------------------|--------|-----------|--------|--------|---------------------|--------|--------|------------------|--------|--------|--------------|--------|--------|-----------------------------------------|--------|
| Amortized intangible assets:      |   |                            |                |   |      |   |   |                |   |   |             |   |   |         |   |   |                                    |   |
| Service agreement                 |   | $                               | 1,397,042           |   |      | $      | -      |                |   | $      | (21,680)         |   |   | $            | -      |   |                                    | $      | - |   |   | $ | 1,375,362 |   |
| Publication rights                |   |                            | 425,253             |   |      |   | -      |                |   |   | (6,075)          |   |   |         | -      |   |                                    |   | - |   |   |   | 419,178 |   |
| Customer relationships            |   |                            | 88,359              |   |      |   | -      |                |   |   | (2,945)          |   |   |         | -      |   |                                    |   | - |   |   |   | 85,414 |   |
| Operating permits                 |   |                            |   636,519 |   |      |   | -      |                |   |   | (9,093)          |   |   |         | -      |   |                                    |   | - |   |   |   | 627,426 |   |
| Software technology               |   |                            | 315,403             |   |      |   | -      |                |   |   | (63,081)         |   |   |         | -      |   |                                    |   | - |   |   |   | 252,322 |   |
| Charter / Cooperation agreements  |   |                            | 2,698,408           |   |      |   | -      |                |   |   | (34,448)         |   |   |         | -      |   |                                    |   | - |   |   |   | 2,663,960 |   |
| Non-compete agreement             |   |                            | 3,031,260           |   |      |   | -      | -                   |   |   | (363,751)        |   |   |         | -      |   |                                    |   | - |   |   |   | 2,667,509 |   |
| Total amortized intangible assets |   | $                               | 8,592,244           |   |      | $      | -      |                |   | $      | (501,073)        |   |   | $            | -      |   |                                    | $      | - |   |   | $ | 8,091,171 |   |
|                              |   |                            |                |   |      |   |   |                |   |   |             |   |   |         |   |   |                                    |   |   |   |   |   |   |   |
| Unamortized intangible assets:    |   |                            |                |   |      |   |   |                |   |   |             |   |   |         |   |   |                                    |   |   |   |   |   |   |   |
| Goodwill                          |   | $                               | 6,105,478           |   |      | $      | -      |                |   | $      | -                |   |   | $            | -      |   |                                    | $      | - |   |   | $ | 6,105,478 |   |

|                                |   | Jinan     |      |   | Shandong |   |      | AdNet  |   |   |    |   |   |   |      |
|-------------------------------------|--------|-----------|-----------|--------|----------|--------|-----------|--------|--------|--------|---------|--------|--------|--------|-----------|
| Years ending December 31,      |   | Broadband |      |   | Media    |   |      | Media  |   |   | Sinotop |   |   | Total  |      |
| 2011 (nine months)                  |   | $         | 65,040    |   |     | $      | 54,340    |   |   | $      | 189,242 |   |   | $      | 1,194,597 |   |   | $ | 1,503,219 |   |
| 2012                                |   |      | 86,720    |   |     |   | 72,454    |   |   |   | 63,080  |   |   |   | 1,592,796 |   |   |   | 1,815,050 |   |
| 2013                                |   |      | 86,720    |   |     |   | 72,454    |   |   |   | -       |   |   |   | 259,041   |   |   |   | 418,215 |   |
| 2014                                |   |      | 86,720    |   |     |   | 72,454    |   |   |   | -       |   |   |   | 137,791   |   |   |   | 296,965 |   |
| 2015                                |   |      | 86,720    |   |     |   | 72,454    |   |   |   | -       |   |   |   | 137,791   |   |   |   | 296,965 |   |
| Thereafter                          |   |      | 963,442   |   |     |   | 787,862   |   |   |   | -       |   |   |   | 2,009,453 |   |   |   | 3,760,757 |   |
| Total amortization to be recognized |   | $         | 1,375,362 |   |     | $      | 1,132,018 |   |   | $      | 252,322 |   |   | $      | 5,331,469 |   |   | $ | 8,091,171 |   |

| 10. | Accrued Expenses and Liabilities |
|-----|----------------------------------|

|             |   | March 31, 2011 |      |   | December 31, |   |
|------------------|--------|---------------------|-----------|--------|-------------------|--------|
|             |   | (Unaudited)         |      |   | 2010              |   |
|             |   |                |      |   |              |   |
| Accrued expenses |   | $                   | 774,000   |   |              | $      | 720,000 |   |
| Accrued payroll  |   |                | 269,000   |   |              |   | 84,000 |   |
|             |   | $                   | 1,043,000 |   |              | $      | 804,000 |   |

----

Table of Contents

| 11. | Private Financings, July 2010 |
|-----|-------------------------------|

| 12. | Net Loss Per Common Share |
|-----|---------------------------|

|                     |   | March 31,   |        |   | March 31,   |   |
|--------------------------|--------|-------------|-------------|--------|-------------|--------|
|                     |   | 2011        |        |   | 2010        |   |
|                     |   | (Unaudited) |        |   | (Unaudited) |   |
| Warrants                 |   |        | 11,393,500  |   |        |   | 16,874,800 |   |
| Options                  |   |        | 96,017,500  |   |        |   | 317,500 |   |
| Series A Preferred Stock |   |        | 70,000,000  |   |        |   | - |   |
| Series B Preferred Stock |   |        | 102,668,000 |   |        |   | - |   |
| Total                    |   |        | 280,079,000 |   |        |   | 17,192,300 |   |

| 13. | Comprehensive Loss |
|-----|--------------------|

|                                                   |   | March 31, |       |   | March 31, |   |
|--------------------------------------------------------|--------|----------------|------------|--------|----------------|--------|
|                                                   |   | 2011           |       |   | 2010           |   |
|                                                   |   | (Unaudited)    |       |   | (Unaudited)    |   |
| Net loss attributable to shareholders                  |   | $              | (2,226,606 | )      |           | $      | (804,509 | ) |
| Other comprehensive income (loss):                     |   |           |       |   |           |   |   |   |
| Currency translation adjustment                        |   |           | 34,319     |   |           |   | 19,617 |   |
| Unrealized (loss) gain on marketable equity securities |   |           | (2,230     | )      |           |   | 76,568 |   |
| Comprehensive loss                                     |   | $              | (2,194,517 | )      |           | $      | (708,324 | ) |

| 14. | Interest Expense and Share Issuance |
|-----|-------------------------------------|

----

Table of Contents

| 15. | Share Based Payments |
|-----|----------------------|

|                                 |   | March 31, |    |   | March 31, |   |
|--------------------------------------|--------|----------------|---------|--------|----------------|--------|
|                                 |   | 2011           |    |   | 2010           |   |
|                                 |   | (Unaudited)    |    |   | (Unaudited)    |   |
| Stock option amortization            |   | $              | 146,000 |   |           | $      | 8,000 |   |
| Stock issued as payment for interest |   |           | -       |   |           |   | 66,000 |   |
| Stock issued for services            |   |           | 10,000  |   |           |   | - |   |
|                                 |   | $              | 156,000 |   |           | $      | 74,000 |   |

|                                     |   | March 31, |        |   | March 31,                |   |
|------------------------------------------|--------|----------------|-------------|--------|-------------------------------|--------|
|                                     |   | 2011           |        |   | 2010                          |   |
|                                     |   | (Unaudited)    |        |   | (Unaudited)                   |   |
|                                     |   | Shares         |        |   | WeightedAverageExercise Price |   |   | Shares |   |   | WeightedAverageExercise Price |   |
| Options outstanding at beginning of year |   |           | 96,417,500  |   |                          | $      | 0.04 |   |   |   | 317,500 |   |   | $ | 0.66 |   |
| Granted                                  |   |           | 600,000     |   |                          |   | 0.05 |   |   |   | - |   |   |   | - |   |
| Exercised                                |   |           | -           |   |                          |   | - |   |   |   | - |   |   |   | - |   |
| Cancelled/expired                        |   |           | (1,000,000  | )      |                          |   | - |   |   |   | - |   |   |   | - |   |
| Options outstanding at end of period     |   |           | 96,017,500  |   |                          | $      | 0.04 |   |   |   | 317,500 |   |   | $ | 0.66 |   |
|                                     |   |           |        |   |                          |   |   |   |   |   |   |   |   |   |   |   |
| Options exercisable at end of period     |   |           | 39,738,625  |   |                          | $      | 0.05 |   |   |   | 255,000 |   |   | $ | 0.65 |   |
|                                     |   |           |        |   |                          |   |   |   |   |   |   |   |   |   |   |   |
| Options available for issuance           |   |           | 203,582,500 |   |                          |   |   |   |   |   | 2,182,500 |   |   |   |   |   |

----

Table of Contents

| 16. | Warrants |
|-----|----------|

|                                     |   | March 31,          |       |   | December 31,       |   |       |          |   |           |
|------------------------------------------|--------|-------------------------|------------|--------|-------------------------|--------|------------|---------------|--------|----------------|
|                                     |   | 2011                    |       |   | 2010                    |   |       |          |   |           |
| Warants Outstanding                      |   | Number ofWarrantsIssued |       |   | Number ofWarrantsIssued |   |       | ExercisePrice |   | ExpirationDate |
| Share Exchange Consulting Warrants       |   |                    | 4,474,800  |   |                    |   | 4,474,800  |          |   | $              | 0.60 |   | 1/11/2013 |
| 2007 Private Placement Broker Warrants   |   |                    | 640,000    |   |                    |   | 640,000    |          |   | $              | 0.60 |   | 1/11/2013 |
| 2007 Private Placement Investor Warrants |   |                    | 4,000,000  |   |                    |   | 4,000,000  |          |   | $              | 2.00 |   | 1/11/2013 |
| July 2010 Sinotop Acquisition Warrants   |   |                    | 1,278,700  |   |                    |   | 1,278,700  |          |   | $              | 0.60 |   | 1/11/2013 |
| July 2010 Sinotop Acquisition Warrants   |   |                    | 1,000,000  |   |                    |   | 1,000,000  |          |   | $              | 2.00 |   | 1/11/2013 |
|                                     |   |                    |       |   |                    |   |       |          |   |           |   |   |   |
|                                     |   |                    | 11,393,500 |   |                    |   | 11,393,500 |          |   |           |   |   |   |

| 17. | Income Taxes |
|-----|--------------|

----

Table of Contents

| 18. | Commitments and Contingencies |
|-----|-------------------------------|

----

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

|   | · | Growth in the Chinese Economy. We operate in China and derive almost all of our revenues from sales to customers in China. Economic conditions in China, therefore, affect virtually all aspects of our operations, including the demand for our products, the availability and prices of our raw materials and our other expenses. China has experienced significant economic growth, achieving a compound annual growth rate of over 10% in gross domestic product from 1996 through 2008. China is expected to experience continued growth in all areas of investment and consumption, even in the face of a global economic recession. However, China has not been entirely immune to the global economic slowdown and is experiencing a slowing of its growth rate. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Table of Contents

|   | · | PRC Economic Stimulus Plans. The PRC government has issued a policy entitled “Central Government PolicyOn Stimulating Domestic Consumption To Counter The Damage Result From Export Business Of The Country,” pursuant to which the PRC Central Government is dedicating approximately $580 billion to stimulate domestic consumption. Companies that are either directly or indirectly related to construction, and to the manufacture and sale of building materials, electrical household appliances and telecommunication equipment, are expected to benefit.   We could potentially benefit if the stimulus plan injects funds into cable infrastructure allowing access to our PPV network. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Deployment of Value-added Services. To augment our product offerings and create other revenue sources, we work with strategic partners to deploy value-added services to our cable broadband customers.  Value-added services, including but not limited to the synergies created by the additions of our new assets, will become a focus of revenue generation for our company. No assurance can be made that we will add other value-added services, or if added, that they will succeed. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                   |   | Three Months Ended |                                              |   | Amount    |   |        | %          |   |
|--------------------------------------------------------|--------|--------------------|---------------------------------------------------|--------|-----------|--------|-------------|------------|--------|
|                                                   |   | March 31,     |                                              |   | March 31, |   |        | Increase / |   |   | Increase / |   |
|                                                   |   | 2011               |                                              |   | 2010      |   |        | (Decrease) |   |   | (Decrease) |   |
|                                                   |   |               |                                              |   |      |   |        |       |   |   |   |   |
| Revenue                                                |   | $                  | 1,698,000                                         |   |      | $      | 1,876,000   |       |   | $ | (178,000) |   |   |   | -9 | % |
| Cost of revenue                                        |   |               | 1,250,000                                         |   |      |   | 1,074,000   |       |   |   | 176,000 |   |   |   | 16 | % |
| Gross profit                                           |   |               | 448,000                                           |   |      |   | 802,000     |       |   |   | (354,000) |   |   |   | -44 | % |
|                                                   |   |               |                                              |   |      |   |        |       |   |   |   |   |   |   |   |   |
| Selling, general and administrative expenses           |   |               | 1,813,000                                         |   |      |   | 723,000     |       |   |   | 1,090,000 |   |   |   | 151 | % |
| Professional fees                                      |   |               | 318,000                                           |   |      |   | 169,000     |       |   |   | 149,000 |   |   |   | 88 | % |
| Depreciation and amortization                          |   |               | 1,074,000                                         |   |      |   | 946,000     |       |   |   | 128,000 |   |   |   | 14 | % |
|                                                   |   |               |                                              |   |      |   |        |       |   |   |   |   |   |   |   |   |
| Loss from operations                                   |   |               | (2,757,000)                                       |   |      |   | (1,036,000) |       |   |   | (1,721,000) |   |   |   | 166 | % |
|                                                   |   |               |                                              |   |      |   |        |       |   |   |   |   |   |   |   |   |
| Interest & other income / (expense)                |   |               |                                              |   |      |   |        |       |   |   |   |   |   |   |   |   |
| Interest income                                        |   |               | 3,000                                             |   |      |   | 3,000       |       |   |   | - |   |   |   | 0 | % |
| Interest expense                                       |   |               |        (1,000) |   |      |   | (91,000)    |       |   |   | 90,000 |   |   |   | -99 | % |
| Change in fair value of warrant liabilities            |   |               | -                                                 |   |      |   | 42,000      |       |   |   | (42,000) |   |   |   | - |   |
| Change in fair value of contingent consideration       |   |               | 39,000                                            |   |      |   | -           |       |   |   | 39,000 |   |   |   | - |   |
| Loss on equity investment                              |   |               | (7,000)                                           |   |      |   | -           |       |   |   | (7,000) |   |   |   | - |   |
|                                                   |   |               |                                              |   |      |   |        |       |   |   |   |   |   |   |   |   |
| Loss before income taxes and non-controlling interests |   |               | (2,723,000)                                       |   |      |   | (1,082,000) |       |   |   | (1,641,000) |   |   |   | 152 | % |
|                                                   |   |               |                                              |   |      |   |        |       |   |   |   |   |   |   |   |   |
| Income tax benefit                                     |   |               | 75,000                                            |   |      |   | 14,000      |       |   |   | 61,000 |   |   |   | 436 | % |
|                                                   |   |               |                                              |   |      |   |        |       |   |   |   |   |   |   |   |   |
| Net loss, net of tax                                   |   |               | (2,648,000)                                       |   |      |   | (1,068,000) |       |   |   | (1,580,000) |   |   |   | 148 | % |
|                                                   |   |               |                                              |   |      |   |        |       |   |   |   |   |   |   |   |   |
| Net loss attributable to non-controlling interests     |   |               | 421,000                                           |   |      |   | 263,000     |       |   |   | 158,000 |   |   |   | 60 | % |
|                                                   |   |               |                                              |   |      |   |        |       |   |   |   |   |   |   |   |   |
| Net loss attributable to YOU On Demand shareholders    |   | $                  | (2,227,000)                                       |   |      | $      | (805,000)   |       |   | $ | 1,422,000 |   |   |   | 177 | % |

----

Table of Contents

|                                                  |   | Three Months Ended |       |   | Three Months Ended |   |
|-------------------------------------------------------|--------|--------------------|------------|--------|--------------------|--------|
|                                                  |   | March 31, 2011     |       |   | March 31, 2010     |   |
|                                                  |   |               |       |   | % of               |   |   |   |   |   |   |   |   |   |   |   | % of |   |   |   |   |   |   |   |
|                                                  |   |               |       |   | Total              |   |   | Non- |   |   |   |   |   |   |   |   | Total |   |   | Non- |   |   |   |   |
|                                                  |   | Operating          |       |   | Revenue            |   |   | Operating |   |   | Total |   |   | Operating |   |   | Revenue |   |   | Operating |   |   | Total |   |
|                                                  |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenue                                               |   | $                  | 1,698,000  |   |               |   |   |   | $ | - |   |   | $ | 1,698,000 |   |   | $ | 1,876,000 |   |   |   |   |   | $ | - |   |   | $ | 1,876,000 |   |
| Cost of revenue                                       |   |               | 1,250,000  |   |               |   |   |   |   | - |   |   |   | 1,250,000 |   |   |   | 1,074,000 |   |   |   |   |   |   | - |   |   |   | 1,074,000 |   |
| Gross profit                                          |   |               | 448,000    |   |               |   | 26 | % |   |   | - |   |   |   | 448,000 |   |   |   | 802,000 |   |   |   | 43 | % |   |   | - |   |   |   | 802,000 |   |
|                                                  |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling, general and administrative expenses          |   |               | 935,000    |   |               |   | 55 | % |   |   | 878,000 |   |   |   | 1,813,000 |   |   |   | 532,000 |   |   |   | 28 | % |   |   | 191,000 |   |   |   | 723,000 |   |
| Professional fees                                     |   |               | 15,000     |   |               |   | 1 | % |   |   | 303,000 |   |   |   | 318,000 |   |   |   | 1,000 |   |   |   | 0 | % |   |   | 168,000 |   |   |   | 169,000 |   |
| Depreciation and amortization                         |   |               | 610,000    |   |               |   | 36 | % |   |   | 464,000 |   |   |   | 1,074,00 |   |   |   | 805,000 |   |   |   | 43 | % |   |   | 141,000 |   |   |   | 946,000 |   |
|                                                  |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss from operations                                  |   |               | (1,112,000 | )      |               |   | -65 | % |   |   | (1,645,000 | ) |   |   | (2,757,000 | ) |   |   | (536,000 | ) |   |   | -29 | % |   |   | (500,000 | ) |   |   | (1,036,000 | ) |
|                                                  |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest & other income / (expense)               |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest income                                       |   |               | 3,000      |   |               |   |   |   |   |   | - |   |   |   | 3,000 |   |   |   | 1,000 |   |   |   |   |   |   |   | 2,000 |   |   |   | 3,000 |   |
| Interest expense                                      |   |               | (1,000     | )      |               |   |   |   |   |   | - |   |   |   | (1,000 | ) |   |   | - |   |   |   |   |   |   |   | (91,000 | ) |   |   | (91,000 | ) |
| Change in fair value of warrant liabilities           |   |               | -          |   |               |   |   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   |   |   |   |   | 42,000 |   |   |   | 42,000 |   |
| Change in fair value of contingent consideration      |   |               | -          |   |               |   |   |   |   |   | 39,000 |   |   |   | 39,000 |   |   |   | - |   |   |   |   |   |   |   | - |   |   |   | - |   |
| Loss on equity investment                             |   |               | -          |   |               |   |   |   |   |   | (7,000 | ) |   |   | (7,000 | ) |   |   | - |   |   |   |   |   |   |   | - |   |   |   | - |   |
|                                                  |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss before income taxes and non-controlling interest |   |               | (1,110,000 | )      |               |   |   |   |   |   | (1,613,000 | ) |   |   | (2,723,000 | ) |   |   | (535,000 | ) |   |   |   |   |   |   | (547,000 | ) |   |   | (1,082,000 | ) |
|                                                  |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income tax benefit                                    |   |               | 10,000     |   |               |   |   |   |   |   | 65,000 |   |   |   | 75,000 |   |   |   | - |   |   |   |   |   |   |   | 14,000 |   |   |   | 14,000 |   |
|                                                  |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss)                                     |   |               | (1,100,000 | )      |               |   |   |   |   |   | (1,548,000 | ) |   |   | (2,648,000 | ) |   |   | (535,000 | ) |   |   |   |   |   |   | (533,000 | ) |   |   | (1,068,000 | ) |
|                                                  |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss attributable to non-controlling interest     |   |               | 421,000    |   |               |   |   |   |   |   | - |   |   |   | 421,000 |   |   |   | 263,000 |   |   |   |   |   |   |   | - |   |   |   | 263,000 |   |
|                                                  |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss attributable to shareholders                 |   | $                  | (679,000   | )      |               |   |   |   |   | $ | (1,548,000 | ) |   | $ | (2,227,000 | ) |   | $ | (272,000 | ) |   |   |   |   |   | $ | (533,000 | ) |   | $ | (805,000 | ) |

----

Table of Contents

----

Table of Contents

----

Table of Contents

|                                                 |   | Three Months Ended |       |
|------------------------------------------------------|--------|--------------------|------------|
|                                                 |   | March 31,     |       |   | March 31, |   |
|                                                 |   | 2011               |       |   | 2010 |   |
|                                                 |   | (Unaudited)        |       |   | (Unaudited) |   |
| Net cash (used in) provided by operating activities  |   | $                  | (1,108,000 | ) |   | $ | 89,000 |   |
| Net cash used in investing activities                |   |               | (920,000   | ) |   |   | (1,372,000 | ) |
| Net cash provided by financing activities            |   |               | 152,000    |   |   |   | 581,000 |   |
| Effect of exchange rate change in cash               |   |               | (62,000    | ) |   |   | 26,000 |   |
| Net decrease in cash and cash equivalents            |   |               | (1,938,000 | ) |   |   | (676,000 | ) |
| Cash and cash equivalents at beginning of the period |   |               | 6,584,000  |   |   |   | 2,190,000 |   |
| Cash and cash equivalents at end of the period       |   |               | 4,646,000  |   |   |   | 1,514,000 |   |

----

Table of Contents

----

Table of Contents

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Item 4. Controls and Procedures

----

Table of Contents

Item 1. Legal Proceedings.

Item 1A. Risk Factors

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Item 3. Defaults Upon Senior Securities.

Item 4. [Removed and Reserved]

Item 5. Other Information.

Item 6. Exhibits.

| Exhibit No. |   | Description                                                                      |
|-------------|--------|----------------------------------------------------------------------------------|
| 31.1        |   | Certification by Chief Executive Officer pursuant to Sarbanes Oxley Section 302. |
| 31.2        |   | Certification by Chief Financial Officer pursuant to Sarbanes Oxley Section 302. |
| 32.1        |   | Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350.     |
| 32.2        |   | Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350.     |

----

Table of Contents

SIGNATURES

|   | YOU ON DEMAND HOLDINGS, INC |
|--------|-----------------------------|
|   |                        |   |
|   | By:                         | /s/ Marc Urbach |
|   |                        | Name: Marc Urbach |
|   |                        | Title: President and Chief Financial Officer (Principal Accounting Officer and Principal Financial Officer) |

----

Table of Contents

| Exhibit No. |   | Description                                                                      |
|-------------|--------|----------------------------------------------------------------------------------|
| 31.1        |   | Certification by Chief Executive Officer pursuant to Sarbanes Oxley Section 302. |
| 31.2        |   | Certification by Chief Financial Officer pursuant to Sarbanes Oxley Section 302. |
| 32.1        |   | Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350.     |
| 32.2        |   | Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350.     |

----