UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC 20549







FORM
10-Q









x
      QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the quarterly period ended June 30, 2008ORrTRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




Commission
file number 000-26809




UVUMOBILE,
INC.


(Exact
name of registrant as specified in its charter)




Delaware
            
            91-1962104(State
      or other jurisdiction of incorporation)
            
            (IRS
      Employer Identification No.)




2160
      Satellite Boulevard, Suite 130, Duluth, Georgia
            30097(Address
      of principal executive offices)
            (Zip
      Code)




(678)
417-2000


(Issuer's
telephone number, including area code)




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




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




Large
      Accelerated Filer o
              Accelerated
      Filer oNon-accelerated
      Filer o
              Smaller
      reporting company x




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




The total
number of shares of the issuer's common stock, $.001 par value, outstanding on
September 4, 2008 was $0.04.
















UVUMOBILE,
INC.





Index
to Form 10-Q





Forward-Looking Statements
            iiPART I - FINANCIAL INFORMATIONItem 1. Financial StatementsHistorical
      Financial StatementsCondensed Consolidated Balance Sheet
      (Unaudited)
            1Condensed Consolidated Statements of Operations
      (Unaudited
            2Condensed Consolidated Statements of Cash Flows
      (Unaudited)
            3Notes to Condensed Consolidated Financial Statements
      (Unaudited)
            4Item 2. Management's Discussion and Analysis of Financial
      Condition and Results of Operations
            13Item 3. Quantitative and Qualitative Disclosures
      About Market Risk
            17Item 4T. Controls and Procedures
            17PART II - OTHER INFORMATIONItem 1. Legal Proceedings
            18Item 2. Unregistered Sales of Equity Securities and
      Use of Proceeds
            18Item 6. Exhibits
            18Signatures











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-Q, including the information incorporated
by reference into this Form 10-Q, 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-Q.  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”).




Although
we believe that the assumptions underlying our forward-looking statements are
reasonable, any of the assumptions could be inaccurate and actual results may
differ from those indicated by the forward-looking statements included in this
Form 10-Q.  In light of the significant uncertainties inherent in the
forward-looking statements included in this Form 10-Q, you should not consider
the inclusion of such information as a representation by us or anyone else that
we will achieve such results.  Moreover, we assume no obligation to
update these forward-looking statements to reflect actual results, changes in
assumptions or changes in other factors affecting such forward-looking
statements.


- ii
-





PARTI - FINANCIAL INFORMATION


Item 1.  Financial Statements


UVUMOBILE,
INC. AND SUBSIDIARY





CONSOLIDATEDBALANCE SHEETS


June
30, 2008 and December 31, 2007








June
      30,
              
              
              December
      31,2008
              
              
              2007Assets
              
              (Unaudited)Current
      AssetsCash
              
              $
              23,861
              
              
              $
              1,078,055Accounts
      receivable - net of allowance for doubtful accounts of $22,000 and
      $22,000
              
              
              229,696
              
              
              
              275,402Prepaid
      expenses
              
              
              431,043
              
              
              
              32,306Total
      Current Assets
              
              
              684,600
              
              
              
              1,385,763Property
      and Equipment, net of accumulated depreciation of $2,151,442 and
      $1,793,926
              
              
              583,213
              
              
              
              940,729Other
      AssetsDeferred
      finance costs
              
              
              1,978
              
              
              
              549,795Intangible
      assets - net of accumulated amortization of $313,792 and
      $244,060
              
              
              –
              
              
              
              69,732Other
              
              
              36,111
              
              
              
              36,110Total
      Other Assets
              
              
              38,089
              
              
              
              655,637Total
      Assets
              
              $
              1,305,902
              
              
              $
              2,982,129Liabilities and Stockholders'
      DeficitCurrent
      LiabilitiesAccounts
      payable and accrued expenses
              
              $
              2,702,202
              
              
              $
              2,967,281Deferred
      revenues
              
              
              –
              
              
              
              7,840Loan
      payable and related accrued interest
              
              
              552,374
              
              
              
              95,255Total
      Current Liabilities
              
              
              3,254,576
              
              
              
              3,070,376Total
      Liabilities
              
              
              3,254,576
              
              
              
              3,070,376Long-Term
      Liabilities
              
              
              –
              
              
              
              –Total
      Long-Term Liabilities
              
              
              –
              
              
              
              –Stockholders'
      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 June30, 2008; 11,666,666
      shares issued and 133,333 outstanding as of Dec. 31,
      2007.
              
              
              134
              
              
              
              134Preferred
      stock, Series B, Convertible, $.001 par value, 50,000,000 shares
      authorized,4,017,188
      shares issued and 0 outstanding as of June 30, 2008; 4,017,188 issued and
      4,017,188 outstanding as of Dec. 31, 2007.
              
              
              –
              
              
              
              4,017Common
      stock, $.001 par value, 300,000,000 shares authorized, 77,349,987 shares
      issued andoutstanding
      as of June 30, 2008, 67,645,299 shares issued and outstanding as of Dec.
      31, 2007.
              
              
              77,350
              
              
              
              67,645Additional
      paid-in capital
              
              
              73,962,941
              
              
              
              73,375,786Less:
      Deferred consulting fees
              
              
              –
              
              
              
              (2,752
              )Accumulated
      deficit
              
              
              (75,989,099
              )
              
              
              (73,533,077
              )Total
      Stockholders' Deficit
              
              
              (1,948,674
              )
              
              
              (88,247
              )Total
      Liabilities and Stockholders' Deficit
              
              $
              1,305,902
              
              
              $
              2,982,129




See
accompanying notes to consolidated financial statements






- 1
-




UVUMOBILE,
INC AND SUBSIDIARY





CONSOLIDATEDSTATEMENTS OF OPERATIONS


(Unaudited)





For
      the Three Months Ended
              
              
              For
      the Six Months EndedJune
      30,
              
              
              June
      30,2008
              
              
              2007
              
              
              2008
              
              
              2007RevenuesRevenue
              
              $
              55,670
              
              
              $
              278,169
              
              
              $
              339,276
              
              
              $
              612,901Total
      Revenues
              
              
              55,670
              
              
              
              278,169
              
              
              
              339,276
              
              
              
              612,901Cost
      of Goods SoldCost
      of goods sold
              
              
              35,000
              
              
              
              120,723
              
              
              
              118,500
              
              
              
              258,723Total
      Cost of Goods Sold
              
              
              35,000
              
              
              
              120,723
              
              
              
              118,500
              
              
              
              258,723Gross
      Profit
              
              
              20,670
              
              
              
              157,446
              
              
              
              220,776
              
              
              
              354,178Operating
      ExpensesBroadcast
      rights
              
              
              260
              
              
              
              55,034
              
              
              
              (1,274
              )
              
              
              154,842Impairment
      of broadcast rights
              
              
              –
              
              
              
              (732,365
              )
              
              
              –
              
              
              
              (732,365
              )Compensation
      and benefits
              
              
              185,332
              
              
              
              654,079
              
              
              
              433,359
              
              
              
              1,316,705Consulting
      and professional fees
              
              
              99,685
              
              
              
              290,310
              
              
              
              227,557
              
              
              
              928,746Data
      center
              
              
              181,472
              
              
              
              243,373
              
              
              
              268,438
              
              
              
              470,941Depreciation
              
              
              172,196
              
              
              
              248,441
              
              
              
              427,248
              
              
              
              481,542Settlement
      expense
              
              
              (27,326
              )
              
              
              1,287,500
              
              
              
              22,854
              
              
              
              1,288,500Selling,
      general and administrative - inlcuding stock-basedcompensation
      of $201,217 and $707,445
              
              
              269,942
              
              
              
              1,238,945
              
              
              
              523,362
              
              
              
              3,392,636Total
      Operating Expenses
              
              
              881,561
              
              
              
              3,285,317
              
              
              
              1,901,544
              
              
              
              7,301,547Loss
      from Operations
              
              
              (860,891
              )
              
              
              (3,127,871
              )
              
              
              (1,680,768
              )
              
              
              (6,947,369
              )Other
      Income (Expense)Interest
      income
              
              
              947
              
              
              
              9,501
              
              
              
              6,864
              
              
              
              32,317Interest
      expense
              
              
              (439,238
              )
              
              
              (4,735
              )
              
              
              (782,117
              )
              
              
              (9,622
              )Total
      Other Income (Expense), Net
              
              
              (438,291
              )
              
              
              4,766
              
              
              
              (775,253
              )
              
              
              22,695Net
      Loss
              
              $
              (1,299,182
              )
              
              $
              (3,123,105
              )
              
              $
              (2,456,021
              )
              
              $
              (6,924,674
              )Net
      loss per share - Basic and Diluted
              
              $
              (0.02
              )
              
              $
              (0.05
              )
              
              $
              (0.03
              )
              
              $
              (0.12
              )Weighted
      Average Common Sharesoutstanding
      during the period
              
              
              76,998,387
              
              
              
              58,749,201
              
              
              
              73,377,911
              
              
              
              55,750,474




See
accompanying notes to unaudited consolidated financial statements




- 2
-




UVUMOBILE,
INC AND SUBSIDIARY





CONSOLIDATEDSTATEMENTS OF CASH FLOWS


(Unaudited)




For
      the Six Months Ended June, 302008
              
              
              2007Cash
      Flows from Operating ActivitiesNet
      loss
              
              $
              (2,456,021
              )
              
              $
              (6,924,674
              )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Amortization
      of stock based compensation
              
              
              2,752
              
              
              
              867,817Amortization
      of stock options pursuant to SFAAS No. 123R
              
              
              198,465
              
              
              
              1,592,655Amortization
      of broadcast rights
              
              
              (1,274
              )
              
              
              154,842Imapirment
      of broadcast rights
              
              
              
              
              
              
              456,823Amortization
      of loan origination costs
              
              
              146,147
              
              
              
              –Amortization
      of intangible assets
              
              
              69,732
              
              
              
              –Depreciation
              
              
              357,516
              
              
              
              481,543Issuance
      of common stock for legal settlement
              
              
              339,000
              
              
              
              1,128,500Amortization
      of beneficial conversion
              
              
              451,893
              
              
              
              –Conversion
      of preferred stock to common stock
              
              
              (4,017
              )
              
              
              –Changes
      in operating assets and liabilities:(Increase)
      Decrease in:Accounts
      receivable
              
              
              45,705
              
              
              
              (220,657
              )Prepaid
      expenses
              
              
              4,911
              
              
              
              52,320Restricted
      cash
              
              
              –
              
              
              
              (75
              )Intangible
      assets
              
              
              –
              
              
              
              (48,750
              )Marketable
      securities
              
              
              –
              
              
              
              (4,378
              )Increase
      (Decrease) in:Accounts
      payable and accrued expenses
              
              
              (168,049
              )
              
              
              784,094Accrued
      interest payable
              
              
              115,949
              
              
              
              1,590Deferred
      revenues
              
              
              (7,840
              )
              
              
              (6,354
              )Contracts
      rights payable
              
              
              
              
              
              
              (2,125,575
              )Accrued
      settlement expense
              
              
              (231,070
              )
              
              
              –Net Cash Used in Operating
      Activities
              
              
              (1,136,201
              )
              
              
              (3,810,279
              )Cash
      Flows from Investing ActivitiesPurchase
      of equipment
              
              
              –
              
              
              
              (256,652
              )Net Cash Used in Investing
      Activities
              
              
              –
              
              
              
              (256,652
              )Cash
      Flows from Financing Activities
              
              
              –Redemption
      of warrants
              
              
              –
              
              
              
              (2,888
              )Issuance
      of common stock for cash
              
              
              –
              
              
              
              738,221Loans
      Payable
              
              
              25,063
              
              
              
              –Proceeds
      from warrant purchases
              
              
              56,944
              
              
              
              –Capital
      lease obligations
              
              
              –
              
              
              
              (16,218
              )Net
      Cash Provided by Financing Activities
              
              
              82,007
              
              
              
              719,115Net
      decrease in cash and cash equivalents
              
              
              (1,054,194
              )
              
              
              (3,347,816
              )Cash
      - Beginning of Period
              
              
              1,078,055
              
              
              
              3,681,457Cash
      - End of Period
              
              $
              23,861
              
              
              $
              333,641Supplemental
      Disclosure of Cash Flow InformationCash
      paid for:Income
      taxes
              
              $
              –
              
              
              $
              –Interest
              
              $
              –
              
              
              $
              –Supplemental
      Disclosure of Non-Cash Investing and Financing ActivitiesIssuance
      of common stock for settlement of accounts payable accrued
      expense
              
              $
              –
              
              
              $
              –Conversion
      of convertible preferred stock to common stock
              
              $
              –
              
              
              $
              –Forfeiture
      of stock based compensation
              
              $
              –
              
              
              $
              –




See
accompanying notes to unaudited consolidated financial statements  - 3
-
 UVUMOBILE,
INC.
 NOTES
TO CONDENSED CONSOLDIATED FINANCIAL STATEMENTS
 (Unaudited)





Note 1 - Organization




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.





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




(A)           Going
Concern




As
reflected in the accompanying unaudited consolidated financial statements, the
Company has a net loss of $1,299,182 and net cash used in operations of
$1,136,201 for the Quarter ended June 30, 2008. The Company also has an
accumulated deficit of $75,989,099 at June 30, 2008.





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 third 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.





- 4
-
 UVUMOBILE,
INC.
 NOTES
TO CONDENSED CONSOLDIATED FINANCIAL STATEMENTS
 (Unaudited)


(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.  Additionally, at June
30, 2008, 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)           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.





For
      the Three Months Ended
              
              
              For
      the Six Months EndedJune
      30,
              
              
              June
      30,2008
              
              
              2007
              
              
              2008
              
              
              2007Depreciation
      and amortization expense
              
              $
              172,196
              
              
              $
              248,441
              
              
              $
              427,248
              
              
              $
              481,542







June
      30,
              
              
              December
      31,2008
              
              
              2007Computer
      equipment
              
              $
              2,655,155
              
              
              $
              2,655,155Proprietary
      software development
              
              
              79,500
              
              
              
              79,5002,734,655
              
              
              
              2,734,655Less
      accumulated depreciation
              
              
              (2,151,442
              )
              
              
              (1,793,926
              )Property
      and equipment, net
              
              $
              583,213
              
              
              $
              940,729





(F)           Broadcast
Rights





The
Company acquires rights to programming so that it may deliver this programming
to is subscribers.  The costs incurred in acquiring programs 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.





(G)           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.





(H)           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 June
30, 2008 was $22,000 and at December 31, 2007, was $22,000.





- 5
-
 UVUMOBILE,
INC.
 NOTES
TO CONDENSED CONSOLDIATED FINANCIAL STATEMENTS
 (Unaudited)


(I)           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 June 30, 2008 and 2007, respectively. Accordingly, basic
and diluted EPS are the same.




The
following table shows all common stock equivalents outstanding at June 30, 2008,
and 2007, respectively.





For the Six Months Ended June
      30,2008
              
              
              2007Common
      stock options
              
              
              –
              
              
              
              9,260,000Common
      stock warrants
              
              
              –
              
              
              
              7,748,837Common
      stock upon conversion of debt
              
              
              31,722,234
              
              
              
              –Preferred
      stock Series A-1
              
              
              133,333
              
              
              
              –Total
      Common Stock Options and Warrants
              
              
              31,855,567
              
              
              
              17,008,837







(J)           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.





(K)           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.





- 6
-
 UVUMOBILE,
INC.
 NOTES
TO CONDENSED CONSOLDIATED FINANCIAL STATEMENTS
 (Unaudited)


(L)           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.





(M)           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.





(N)           Product
Concentration





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





For
      the Three Months Ended
              
              
              For
      the Six Months EndedJune
      30,
              
              
              June
      30,Revenues
              
              2008
              
              
              2007
              
              
              2008
              
              
              2007Business-to-business
              
              $
              10,019
              
              
              
              18
              %
              
              $
              7,375
              
              
              
              3
              %
              
              $
              168,179
              
              
              
              50
              %
              
              $
              9,668
              
              
              
              2
              %Direct-to-consumer
              
              
              515
              
              
              
              1
              %
              
              
              69,638
              
              
              
              25
              %
              
              
              1,417
              
              
              
              0
              %
              
              
              198,577
              
              
              
              32
              %Mobile
      video services
              
              
              –
              
              
              
              0
              %
              
              
              37,500
              
              
              
              13
              %
              
              
              –
              
              
              
              0
              %
              
              
              37,500
              
              
              
              6
              %Mobile
      advertising
              
              
              3,136
              
              
              
              6
              %
              
              
              –
              
              
              
              –
              %
              
              
              15,680
              
              
              
              5
              %
              
              
              –
              
              
              
              –
              %Custom  applications
              
              
              42,000
              
              
              
              75
              %
              
              
              163,656
              
              
              
              59
              %
              
              
              154,000
              
              
              
              45
              %
              
              
              367,156
              
              
              
              60
              %Total
      Revenue
              
              $
              55,670
              
              
              
              100
              %
              
              $
              278,169
              
              
              
              100
              %
              
              $
              339,276
              
              
              
              100
              %
              
              $
              612,901
              
              
              
              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.





(O)           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.




- 7
-
 UVUMOBILE,
INC.
 NOTES
TO CONDENSED CONSOLDIATED FINANCIAL STATEMENTS
 (Unaudited)


(P)           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
June 30, 2008 the Company’s identifiable intangible assets subject to
amortization consisted of the following:





June
      30,
              
              
              December
      31,2008
              
              
              2007Computer
      equipment
              
              $
              2,655,155
              
              
              $
              2,655,155Proprietary
      software development
              
              
              79,500
              
              
              
              79,5002,734,655
              
              
              
              2,734,655Less
      accumulated depreciation
              
              
              (2,151,442
              )
              
              
              (1,793,926
              )Property
      and equipment, net
              
              $
              583,213
              
              
              $
              940,729





Amortization
of these intangible assets, recorded on a straight line basis over an average
finite useful life of 18 months.  The amortization expense for the
three months ended June 30, 2008 and 2007 was $313,792 and $244,060,
respectively.




(Q)           Recent
Accounting Pronouncements





All new
accounting pronouncements issued but not yet effective have been deemed to not
be applicable, hence the adoption of these new standards is not expected to have
a material impact on the Company’s financial reporting.





Note 3 - Stockholders’
Equity (Deficit)




(A)           Preferred
Stock




(1)                 Capital
Structure




As of
June 30, 2008, 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 0 outstanding.





(B)           Common
Stock Issuances




(1)                 Capital
Structure





As of
June 30, 2008, the authorized common stock of the Company consists of
300,000,000 shares of $.001 par value.




(2)                 Preferred
Stock Conversions





There was
no Preferred Stock Conversions during the quarter ended June 30,
2008.





(3)                 Legal
Settlements





During
the three months ended June 30, 2008, the Company settled one legal dispute for
an aggregate of 1,000,000 shares of common stock valued at $0.04 per
share.








- 8
-
 UVUMOBILE,
INC.
 NOTES
TO CONDENSED CONSOLDIATED FINANCIAL STATEMENTS
 (Unaudited)





(4)           Warrant
Conversions And Exercises




The
following is a summary of all common stock issued during the quarter ended June
30, 2008:





Activity
              
              Quantity
      of Shares
              
              
              ValuationPreferred
      stock conversion
              
              
              –
              
              
              $
              –Legal
      settlements
              
              
              1,000,000
              
              
              
              40,000Total
              
              
              1,000,000
              
              
              $
              40,000





(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.








(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 June 30, 2008:





Stock
      Options
              
              Number
      of Options
              
              
              Weighted
      Average Exercise PriceBalance
      at December 31, 2007
              
              
              11,960,000
              
              
              $
              1.14Granted
              
              
              675,000
              
              
              $
              0.07Exercised
              
              
              –
              
              
              $
              –Forfeited
              
              
              (5,890,000
              )
              
              $
              1.60Balance
      at June 30, 2008
              
              
              6,745,000
              
              
              $
              0.62Options
      exercisable at June 30, 2008
              
              
              4,309,583
              
              
              $
              0.89Weighted
      average fair value of options granted during the three months ended June
      30, 2008
              
              
              275,000
              
              
              $
              0.06




- 9
-
 UVUMOBILE,
INC.
 NOTES
TO CONDENSED CONSOLDIATED FINANCIAL STATEMENTS
 (Unaudited)







Options
      Outstanding
              
              
              Options
      ExercisableExercise
      Price
              
              
              Number
                Outstanding
      as of
                June
      30, 2008
              
              
              Weighted
      Average
                Remaining
                Contractual
      Years
              
              
              Weighted
      Average
                Exercise
      Price
              
              
              Number
                Exercisable
      at
                June
      30, 2008
              
              
              Weighted
      Average
                Exercise
      Price$
              0.06
              
              
              
              400,000
              
              
              
              9.19
              
              
              $
              -
              
              
              
              -
              
              
              
              0.06$
              0.08
              
              
              
              275,000
              
              
              
              9.05
              
              
              $
              –
              
              
              
              34,375
              
              
              $
              0.08$
              0.09
              
              
              
              575,000
              
              
              
              8.97
              
              
              $
              0.01
              
              
              
              287,500
              
              
              $
              0.09$
              0.13
              
              
              
              2,400,000
              
              
              
              8.83
              
              
              $
              0.05
              
              
              
              1,208,333
              
              
              $
              0.13$
              0.15
              
              
              
              500,000
              
              
              
              8.70
              
              
              $
              0.01
              
              
              
              375,000
              
              
              $
              0.15$
              0.30
              
              
              
              305,000
              
              
              
              8.33
              
              
              $
              0.02
              
              
              
              152,500
              
              
              $
              0.30$
              0.35
              
              
              
              –
              
              
              
              8.28
              
              
              $
              –
              
              
              
              –
              
              
              $
              0.35$
              0.90
              
              
              
              –
              
              
              
              6.52
              
              
              $
              –
              
              
              
              –
              
              
              $
              0.90$
              0.97
              
              
              
              –
              
              
              
              7.65
              
              
              $
              –
              
              
              
              –
              
              
              $
              0.97$
              1.00
              
              
              
              225,000
              
              
              
              5.58
              
              
              $
              0.04
              
              
              
              215,625
              
              
              $
              1.00$
              1.02
              
              
              
              –
              
              
              
              7.92
              
              
              $
              –
              
              
              
              –
              
              
              $
              1.02$
              1.31
              
              
              
              90,000
              
              
              
              7.78
              
              
              $
              0.02
              
              
              
              67,500
              
              
              $
              1.31$
              1.36
              
              
              
              –
              
              
              
              7.40
              
              
              $
              –
              
              
              
              –
              
              
              $
              1.36$
              1.40
              
              
              
              100,000
              
              
              
              7.51
              
              
              $
              0.02
              
              
              
              100,000
              
              
              $
              1.40$
              1.44
              
              
              
              –
              
              
              
              8.44
              
              
              $
              –
              
              
              
              –
              
              
              $
              1.44$
              1.48
              
              
              
              –
              
              
              
              7.14
              
              
              $
              –
              
              
              
              –
              
              
              $
              1.48$
              1.50
              
              
              
              –
              
              
              
              6.97
              
              
              $
              –
              
              
              
              –
              
              
              $
              1.50$
              1.55
              
              
              
              1,500,000
              
              
              
              6.37
              
              
              $
              0.38
              
              
              
              1,500,000
              
              
              $
              1.55$
              1.58
              
              
              
              –
              
              
              
              6.40
              
              
              $
              –
              
              
              
              –
              
              
              $
              1.58$
              1.75
              
              
              
              –
              
              
              
              7.32
              
              
              $
              –
              
              
              
              –
              
              
              $
              1.75$
              1.78
              
              
              
              –
              
              
              
              –
              
              
              $
              –
              
              
              
              –
              
              
              $
              1.78$
              1.86
              
              
              
              –
              
              
              
              7.31
              
              
              $
              –
              
              
              
              –
              
              
              $
              1.86$
              1.90
              
              
              
              –
              
              
              
              6.84
              
              
              $
              –
              
              
              
              –
              
              
              $
              1.90$
              1.91
              
              
              
              –
              
              
              
              7.27
              
              
              $
              –
              
              
              
              –
              
              
              $
              1.91$
              1.95
              
              
              
              100,000
              
              
              
              7.22
              
              
              $
              0.03
              
              
              
              100,000
              
              
              $
              1.95$
              2.10
              
              
              
              50,000
              
              
              
              7.16
              
              
              $
              0.02
              
              
              
              50,000
              
              
              $
              2.10$
              2.20
              
              
              
              150,000
              
              
              
              7.26
              
              
              $
              0.05
              
              
              
              150,000
              
              
              $
              2.20$
              2.25
              
              
              
              50,000
              
              
              
              4.04
              
              
              $
              0.02
              
              
              
              43,750
              
              
              $
              2.25$
              2.30
              
              
              
              –
              
              
              
              5.92
              
              
              $
              –
              
              
              
              –
              
              
              $
              2.30$
              2.53
              
              
              
              –
              
              
              
              7.18
              
              
              $
              –
              
              
              
              –
              
              
              $
              2.53$
              2.77
              
              
              
              25,000
              
              
              
              7.17
              
              
              $
              0.01
              
              
              
              25,000
              
              
              $
              2.77$
              2.90
              
              
              
              –
              
              
              
              6.27
              
              
              $
              –
              
              
              
              –
              
              
              $
              2.90$
              2.91
              
              
              
              –
              
              
              
              6.29
              
              
              $
              –
              
              
              
              –
              
              
              $
              2.91$
              2.95
              
              
              
              –
              
              
              
              5.75
              
              
              $
              –
              
              
              
              –
              
              
              $
              2.95$
              3.27
              
              
              
              –
              
              
              
              7.15
              
              
              $
              –
              
              
              
              –
              
              
              $
              3.27$
              3.50
              
              
              
              –
              
              
              
              5.52
              
              
              $
              –
              
              
              
              –
              
              
              $
              3.506,745,000
              
              
              
              7.23
              
              
              $
              0.69
              
              
              
              4,309,583
              
              
              $
              0.89




At June
30, 2008, the Company had a total of 39,112,598 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 form $0.064 to
$3.50.  See additional disclosure above regarding warrant
activity.




(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.




- 10
-
 UVUMOBILE,
INC.
 NOTES
TO CONDENSED CONSOLDIATED FINANCIAL STATEMENTS
 (Unaudited)


Note 4 – Office
Space





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 quarter ended June 30, 2008 and 2007 was
$19,584 and $66,263, respectively.  For the six months ended June 30,
2008 and 2007, rent expense was $39,168 and $132,526, respectively.





Note 5 – Convertible
Promissory Notes





The
following is a summary of the activity for convertible debt issuances for the
quarter ended June 30, 2008 and the year ended December 31, 2007.  The
accrued interest on the Convertible Promissory Notes was approximately $115,949
as of June 30, 2008.





June
      30,
                2008
              
              
              December
      31,
                2007Convertible
      notes payable
              
              
              2,108,486
              
              
              
              2,033,423Loan
      discount
              
              
              (1,556,112
              )
              
              
              (2,008,005
              )Total
      convertible notes payable
              
              
              552,374
              
              
              
              25,418





Note 6 - 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 $17,224 as of
June 30, 2008.  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
March 27, 2008, the Company entered into a Settlement Agreement (the
“Agreement”) with Epsom.  Pursuant to the Agreement dated March 27,
2008, in lieu of cash the Company agreed to issue 1,000,000 shares of the
Company’s common stock in full and complete satisfaction of any and all
obligations of the Company concerning the alleged Demand Loan.





Note 7 - 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 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.





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.





- 11
-
 UVUMOBILE,
INC.
 NOTES
TO CONDENSED CONSOLDIATED FINANCIAL STATEMENTS
 (Unaudited)


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 March 27, 2008, the Company entered into a
Settlement Agreement (the “Agreement”) with Epsom.  Pursuant to the
Agreement dated March 27, 2008, in lieu of cash the Company agreed to issue
1,000,000 shares of the Company’s common stock in full and complete satisfaction
of any and all obligations of the Company concerning the alleged Demand
Loan.





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.



























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-


Item 2 –
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 quarters ended June 30, 2008
and 2007, 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.




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.





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(K) (Going
Concern, Significant Accounting Policies and Risks and Uncertainties) to the
consolidated financial statements included elsewhere in this
report.





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-


Valuation
And Recoverability Of Long-Lived Assets




See Note
2(O) (Going Concern, Significant Accounting Policies and Risks and
Uncertainties) to the financial statements included elsewhere in this report 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.





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(J) (Going Concern, Significant Accounting Policies and Risks and
Uncertainties) to the financial statements included elsewhere in this report for
a description of the valuation of Stock-Based Compensation.





Recent
Accounting Pronouncements




See Note
2(Q) to the financial statements included elsewhere in this report for a
description of previously disclosed new accounting pronouncements and their
impact on the Company.





FASB
161 - Disclosures about Derivative Instruments and Hedging
Activities





In March
2008, the FASB issued FASB Statement No. 161, which amends and expands the
disclosure requirements of FASB Statement No. 133 with the intent to provide
users of financial statements with an enhanced understanding of how and why an
entity uses derivative instruments, how the derivative instruments and the
related hedged items are accounted for and how the related hedged items affect
an entity’s financial position, performance and cash flows. This Statement is
effective for financial statements for fiscal years and interim periods
beginning after November 15, 2008. Management believes this Statement will have
no impact on the financial statements of the Company once adopted.





Results
Of Operations





Quarter
Ended June 30, 2008 Compared To Quarter Ended June 30, 2007





Revenues




Revenues
for the quarter ended June 30, 2008, consisted primarily of proceeds from custom
applications and direct-to-consumer services.  The Company’s revenues
were $55,670 for the Quarter ended June 30, 2008 as compared to $278,169 in the
same period in 2007.  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.





- 14
-


Cost
Of Goods Sold





For the
quarter ended June 30, 2008, Costs of Goods Sold decreased to approximately
$35,000 as compared to $ 121,000 for the same period in 2007.  This
increase is primarily attributable to the Company’s exit from its
direct-to-consumer business.





Broadcast
Rights




Broadcast
right expenses for the quarter ended June 30, 2008 was approximately $260 as
compared to $55,000 for the same period in 2007. 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 $469,000
or 71.7% for the quarter ended June 30, 2008 as compared to the same period in
2007.  The decrease is primarily attributable to staff reductions
during 2007.





Consulting
And Professional Fees




The
Company’s consulting and professional fees decreased by approximately $191,000
or 65.7%for the
quarter ended June 30, 2008, as compared to the same period in
2007.  The decrease is primarily attributable to the reduction in
legal fees.





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 $62,000 or 25.4% for the
quarter ended June 30, 2008, when compared to 2007 is primarily attributable to
cost reductions due to the Company’s exit from its direct-to-consumer business
in the third quarter of 2007.





Stock-Based
Compensation




For the
quarter ended June 30, 2008, the Company recorded approximately $201,000, as
compared to $707,000 for the quarter ended June 30, 2007, 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. 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 quarter ended June 30, 2008, increased by
approximately $427,000 when compared to the same period in 2007. 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 $969,003 or 78.2% for the quarter ended June 30,
2008 when compared to the same period in 2007.  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 quarter ended June 30, 2008, was approximately
$950.  Interest expense for the quarter ended June 30, 2008, was
approximately $439,000.











- 15
-


For
the Six Months Ended June 30, 2008 Compared To Six Months Ended June 30,
2007





Revenues




Revenues
for the six months ended June 30, 2008, consisted primarily of proceeds from
custom applications and business-to-business services.  The Company’s
revenues were $339,276 for the six months ended June 30, 2008 as compared to
$612,901 in the same period in 2007.  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
six months ended June 30, 2008, Costs of Goods Sold decreased to approximately
$118,000 as compared to $259,000 for the same period in 2007.  This
increase is primarily attributable to the Company’s exit from its
direct-to-consumer business.





Broadcast
Rights




Broadcast
right expenses for the six months ended June 30, 2008 was approximately $(1,200)
as compared to $155,000 for the same period in 2007. 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
$­883,000 or 67.1% for the six months ended June 30, 2008 as compared to the
same period in 2007.  The decrease is primarily attributable to staff
reductions during 2007.





Consulting
And Professional Fees




The
Company’s consulting and professional fees decreased by approximately $701,000
or 75.5%for the
six months ended June 30, 2008, as compared to the same period in
2007.  The decrease is primarily attributable to the reduction in
legal fees.





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 $202,000 or 43% for the
six months ended June 30, 2008, when compared to 2007 is primarily attributable
to cost reductions due to the Company’s exit from its direct-to-consumer
business in the third quarter of 2007.





Stock-Based
Compensation




For the
six months ended June 30, 2008, the Company recorded approximately $273,000, as
compared to $2,352,000 for the six months ended June 30, 2007, 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 six months ended June 30, 2008, 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 six months ended June 30, 2008,
increased by approximately $413,000 when compared to the same period in
2007. 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 $2,869,000 or 84.6% for the six months ended June
30, 2008 when compared to the same period in 2007.  This decrease is
attributable to a reduction in staffing, travel related expenses, marketing and
advertising costs as well as a decrease in Directors’ compensation.





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-


Interest
Income (Expense)




Interest
income for the six months ended June 30, 2008, was approximately
$6,800.  Interest expense for the six months ended June 30, 2008, was
approximately $32,000.





Liquidity And Capital Resources And
Going Concern





The
Company has incurred recurring losses and negative cash flows since
inception.  For the six months ended June 30, 2008, the Company had an
accumulated deficit of $75,989,099, a consolidated net loss of
$6,924,674 and consolidated net cash flows used in operations of
$3,810,279. 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.





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 third 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.





Item 3.  Quantitative And Qualitative
Disclosures About Market Risk




We do not
use any derivative financial instruments for hedging, speculative, or trading
purposes. Our exposure to market risk is currently immaterial.





Item4T.  Controls And Procedures.





Our
management, including our Chief Executive Officer (our principal executive
officer) and Chief Financial Officer (our principal financial officer), have
reviewed and evaluated the effectiveness of our disclosure controls and
procedures (as defined in Rule 15d-15 under the under the Exchange Act, as of
June 30, 2008.  Based upon this review and evaluation, these officers
believe that our disclosure controls and procedures are presently effective in
ensuring that material information related to us is recorded, processed,
summarized and reported within the time periods required by the forms and rules
of the Securities and Exchange Commission.


Our
management, including our principal executive officer and our principal
financial  officer,  have  reviewed  and  evaluated  any
changes in our internal control over financial reporting that occurred as of
June 30, 2008 and there has
been  no  change  that  has  materially  affected  or
is  reasonably  likely  to materially affect our
internal control over financial reporting.





- 17
-


PARTII - OTHER INFORMATION





Item
1. LegalProceedings




See Note
7 - Commitments and Contingencies to the Financial Statements included elsewhere
in this report which discuss material pending legal proceedings to which the
Company is a party and which are incorporated herein by
reference.




Item
2.  UnregisteredSales of Equity Securities and
Use of Proceeds





As is
described in Note 7 - Commitments and Contingencies to the Financial Statements,
we issued 1,000,000 shares of common stock to Epson Investment Services NV in
connection with a settlement agreement dated March 27, 2008.




In each
of these unregistered issuances of equity securities, the Company relied on
Section 4(2) of the Securities Act of 1933, as amended.





Item
6. Exhibits




Exhibits


31.1
            
            Certification
      of the Chief Executive Officer and President pursuant to Rule
      13a-14(a)/15d-14(a) of the Securities and Exchange Act of
      1934.31.2
            
            Certification
      of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the
      Securities and Exchange Act of 1934.32.1
            
            Certification
      of the Chief Executive Officer and President pursuant to 18 U.S.C. Section
      1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2003.32.2
            
            Certification
      of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2003.





- 18
-


SIGNATURES




In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.








UVUMOBILE,
      INC.By: /s/Scott
      Hughes
            Date:  September
      8, 2008Scott
      HughesPresident
      and Chief Executive Officer(Principal
      Executive Officer)By: /s/Ronald
      A.
      Warren
            Date:  September
      8, 2008Ronald
      A. WarrenChief
      Financial Officer(Principal
      Financial Officer and Principal Accounting Officer)




















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