-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Em1ekTfObLBMOKKBSoFlOdvAouPH86JLY2oLkhRb0P4pql/6nWQ+E0jW67NSrLlt h8HnLd+Bs3ZUJgMICKCeoA== 0001140361-08-011671.txt : 20080509 0001140361-08-011671.hdr.sgml : 20080509 20080508212639 ACCESSION NUMBER: 0001140361-08-011671 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20080331 FILED AS OF DATE: 20080509 DATE AS OF CHANGE: 20080508 FILER: COMPANY DATA: COMPANY CONFORMED NAME: uVuMobile, Inc CENTRAL INDEX KEY: 0001089525 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 911962104 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-26809 FILM NUMBER: 08815790 BUSINESS ADDRESS: STREET 1: 2160 SATELLITE BOULEVARD STREET 2: SUITE 130 CITY: DULUTH STATE: GA ZIP: 30097 BUSINESS PHONE: 678-417-2000 MAIL ADDRESS: STREET 1: 2160 SATELLITE BOULEVARD STREET 2: SUITE 130 CITY: DULUTH STATE: GA ZIP: 30097 FORMER COMPANY: FORMER CONFORMED NAME: SMART VIDEO TECHNOLOGIES INC DATE OF NAME CHANGE: 20030228 FORMER COMPANY: FORMER CONFORMED NAME: ARMAGH GROUP INC DATE OF NAME CHANGE: 20021107 FORMER COMPANY: FORMER CONFORMED NAME: ASPI EUROPE INC DATE OF NAME CHANGE: 20000817 10-Q 1 form10q.htm UVU MOBILE 10Q 3-31-2008 form10q.htm


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 1934

For the quarterly period ended March 31, 2008

OR

 
£
TRANSITION 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 £
Accelerated Filer £
Non-accelerated Filer £
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 May 2, 2008 was 76,349,987.
 


 
 

 

SMARTVIDEO TECHNOLOGIES INC.
  
Index to Form 10-Q

 
ii
PART I - FINANCIAL INFORMATION
   
   
Historical Financial Statements
   
 
1
 
2
 
3
 
4
 
14
 
17
 
17
     
PART II - OTHER INFORMATION
   
 
18
 
18
 
18
Item 6. Exhibits
 
18
   

- i - -

 
Unless the context otherwise requires, all references to “uVuMobile,TMthe “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”).
 
You should also consider carefully the statements under “Risk Factors” and other sections of this Form 10-Q, which address additional factors that could cause actual results to differ from those set forth in the forward-looking statements and could materially and adversely affect the Company’s business, operating results and financial condition. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the applicable cautionary statements.
 
The forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In addition, the Company cannot assess the impact of each factor on its business or the extent to which any factor, or combination of factors, or factors it is unaware of, may cause actual results to differ materially from those contained in any forward-looking statements.

- ii - -


PART I - FINANCIAL INFORMATION
 
UVUMOBILE, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS
March 31, 2008 and December 31, 2007

 
   
March 31,
   
December 31,
 
   
2007
   
2007
 
Assets
 
(Unaudited)
       
             
Current Assets
           
Cash
  $ 352,957     $ 1,078,055  
Accounts receivable - net of allowance for doubtful accounts of $22,000 and $22,000
    284,971       275,402  
Prepaid expenses
    14,121       32,306  
Total Current Assets
    652,049       1,385,763  
                 
Property and Equipment, net of accumulated depreciation of $1,996,679 and $1,793,926
    737,976       940,729  
                 
Other Assets
               
Deferred finance costs
    502,563       549,795  
Intangible assets - net of accumulated amortization of $296,359 and $244,060
    17,433       69,732  
Other
    36,111       36,110  
Total Other Assets
    556,107       655,637  
                 
Total Assets
  $ 1,946,132     $ 2,982,129  
                 
Liabilities and Stockholders' Deficit
               
                 
Current Liabilities
               
Accounts payable and accrued expenses
  $ 2,427,721     $ 2,967,281  
Deferred revenues
    3,136       7,840  
Loan payable and related accrued interest
    390,902       95,255  
Total Current Liabilities
    2,821,759       3,070,376  
                 
Total Liabilities
    2,821,759       3,070,376  
                 
Commitments and Contingencies
           
                 
Stockholders' Deficit
               
Preferred stock, Series A-1, Convertible, $.001 par value, 50,000,000 shares authorized,11,666,666 shares issued and 133,333 outstanding as of March 31, 2008; 11,666,666 shares issued and 133,333 outstanding as of Dec. 31, 2007.
    134       134  
Preferred stock, Series B, Convertible, $.001 par value, 50,000,000 shares authorized,4,017,188 shares issued and 0 outstanding as of March 31, 2008; 4,017,188 issued and 4,017,188 outstanding as of Dec. 31, 2007.
          4,017  
Common stock, $.001 par value, 300,000,000 shares authorized, 76,349,987 shares issued and outstanding as of March 31, 2008, 67,645,299 shares issued and outstanding as of Dec. 31, 2007.
    76,350       67,645  
                 
Additional paid-in capital
    73,737,805       73,375,786  
Less: Deferred consulting fees
          (2,752 )
Accumulated deficit
    (74,689,916 )     (73,533,077 )
Total Stockholders' Deficit
    (875,627 )     (88,247 )
                 
Total Liabilities and Stockholders' Deficit
  $ 1,946,132     $ 2,982,129  

 
See accompanying notes to consolidated financial statements

- 1 - -

 
UVUMOBILE, INC AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

 
   
For the Three Months Ended
 
   
March 31,
 
   
2008
   
2007
 
Revenues
           
Revenue
  $ 283,606     $ 334,732  
Total Revenues
    283,606       334,732  
                 
Cost of Goods Sold
               
Cost of goods sold
    83,500       138,000  
Total Cost of Goods Sold
    83,500       138,000  
                 
Gross Profit
    200,106       196,732  
                 
Operating Expenses
               
Broadcast rights
    (1,534 )     99,807  
Compensation and benefits
    248,027       662,625  
Consulting and professional fees
    127,872       638,437  
Data center
    86,966       227,568  
Depreciation
    255,052       233,100  
Settlement expense
    50,180        
Selling, general and administrative - inlcuding stock based compensation of $72,025 and $1,645,261
    253,420       2,154,692  
Total Operating Expenses
    1,019,983       4,016,229  
                 
Loss from Operations
    (819,877 )     (3,819,497 )
                 
Other Income (Expense)
               
Interest income
    5,917       22,818  
Interest expense
    (342,879 )     (4,888 )
Total Other Income (Expense), Net
    (336,962 )     17,930  
                 
Net Loss
  $ (1,156,839 )   $ (3,801,567 )
                 
Net loss per share - Basic and Diluted
  $ (0.02 )   $ (0.07 )
                 
Weighted Average Common Shares outstanding during the period
    67,757,033       52,719,920  

 
See accompanying notes to unaudited consolidated financial statements

- 2 - -


UVUMOBILE, INC AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 

 
   
For the Three Months Ended March 31,
 
   
2008
   
2007
 
Cash Flows from Operating Activities
           
Net loss
  $ (1,156,839 )   $ (3,801,567 )
Adjustments to reconcile net loss to net cash used in operating activities:
               
Amortization of stock based compensation
    72,025       825,796  
Amortization of broadcast rights
          74,690  
Amortization of loan origination costs
    54,191        
Amortization of intangible assets
    52,299        
Depreciation
    202,753       233,100  
Issuance of common stock for legal settlement
    300,000       755,582  
Amortization of beneficial conversion
    254,184        
Conversion of preferred stock to common stock
    (4,017 )      
Changes in operating assets and liabilities:
               
(Increase) Decrease in:
               
Accounts receivable
    (9,569 )     (147,477 )
Prepaid expenses
    11,225       (46,558 )
Increase (Decrease) in:
               
Accounts payable and accrued expenses
    (311,743 )     343,061  
Accrued interest payable
    41,463       (795 )
Contracts rights payable
          (417,075 )
Accrued settlement expense
    (231,070 )      
Net Cash Used in Operating Activities
    (725,098 )     (2,181,243 )
 
               
Cash Flows from Investing Activities
               
Purchase of equipment
          (266,651 )
Net Cash Used in Investing Activities
          (266,651 )
 
               
Net decrease in cash and cash equivalents
    (725,098 )     (2,447,894 )
 
               
Cash - Beginning of Period
    1,078,055       3,696,581  
 
               
Cash - End of Period
  $ 352,957     $ 1,248,687  
 
               
Supplemental Disclosure of Cash Flow Information
               
 
               
Cash paid for:
               
Income taxes
  $     $  
Interest
  $     $  
 
               
Supplemental Disclosure of Non-Cash Investing and Financing Activities
               
 
               
Issuance of common stock for settlement of accounts payable accrued expense
  $ 281,250     $  
Conversion of convertible preferred stock to common stock
  $     $ 200  
Forfeiture of stock based compensation
  $     $ 37,147  

 
See accompanying notes to unaudited consolidated financial statements

- 3 - -

 
UVUMOBILE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1 - Organization
 
uVuMobile, Inc. (hereinafter sometimes referred to as  “uVuMobile™,” the “Company,” “we,” “us,” or “our”) is a provider of video content distribution services and technology.

Incorporated in 1984, the Company acquired OVT, Inc., d/b/a SmartVideo, in November 2002, subsequently changing its name to SmartVideo Technologies, Inc., and in June 2007, the Company changed its name to uVuMobile, 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 $1,156,839 and net cash used in operations of $725,098 for the Quarter ended March 31, 2008. The Company also has an accumulated deficit of $74,689,916 at March 31, 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 second quarter of 2008. There can be no assurance that the Company will be able to secure additional financing on acceptable terms at or prior to the depletion of existing funds, or at all. If adequate funds are not available or not available on acceptable terms, the Company will be unable to continue as a going concern.  The Company has no firm commitment for any additional capital.

(B)           Basis Of Presentation

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

(C)           Use Of Estimates

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

Significant estimates during 2007, 2006 and 2005 include depreciable lives on property and equipment, the valuation of stock options/warrants granted for services, the value of warrants issued in connection with debt and equity related financings, valuation and related amortization of intangible broadcast rights pursuant to Statement of Financial Accounting Standards (“SFAS”) No. 63 and the valuation allowance for deferred tax assets since the Company had continuing operating losses.
 
- 4 - -

 
UVUMOBILE, INC.

NOTES TO CONDENSED CONSOLIDATED 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. At March 31, 2008, the balance exceeded the federally insured limit by approximately $252,957.  Additionally, at March 31, 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 Quarter Ended
 
   
March 31,
 
   
2008
   
2007
 
Depreciation and amortization expense
  $ 255,052     $ 233,100  



   
March 31,
   
December 31,
 
   
2008
   
2007
 
Computer equipment
  $ 1,646,244     $ 2,655,155  
Proprietary software development
    1,083,948       79,500  
Leasehold improvements
    4,463        
      2,734,655       2,734,655  
Less accumulated depreciation
    (1,996,679 )     (1,793,926 )
Property and equipment, net
  $ 737,976     $ 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 March 31, 2008 was $22,000 and at December 31, 2007, was $22,000.

- 5 - -

 
UVUMOBILE, INC.

NOTES TO CONDENSED CONSOLIDATED 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 March 31, 2008 and 2007, respectively. Accordingly, basic and diluted EPS are the same.
 
The following table shows all common stock equivalents outstanding at March 31, 2008, and 2007, respectively.

 
   
For the Quarter ended March 31,
 
   
2008
   
2007
 
Common stock options
    7,495,000       8,576,875  
Common stock warrants
    39,112,598       35,010,149  
Common stock upon conversion of debt
    31,722,234        
Preferred stock Series A-1
    133,000       2,433,333  
Total Common Stock Options and Warrants
    78,462,832       46,020,357  
 

(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 CONSOLIDATED 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 four types of products: business-to-business, direct-to-consumer mobile video service, mobile advertising and custom applications.


   
March 31,
 
Revenues
 
2008
   
2007
 
Business-to-business
  $       %   $ 2,293       1 %
Direct-to-consumer
    902       1 %     128,939       38 %
Mobile video services
    166,000       58 %           %
Mobile advertising
    4,704       2 %           %
Custom applications
    112,000       39 %     203,500       61 %
Total Revenue
  $ 283,606       100 %   $ 334,732       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 CONSOLIDATED 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 March 31, 2008 the Company’s identifiable intangible assets subject to amortization consisted of the following:


   
As of
 
   
March 31, 2008
   
December 31, 2007
 
   
Intangible Assets
   
Accumulated Amortization
   
Intangible Assets
   
Accumulated Amortization
 
Contract Based
  $ 313,792     $ 296,359     $ 313,792     $ 244,060  
Total
  $ 313,792     $ 296,359     $ 313,792     $ 244,060  


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 March 31, 2008 and 2007 was $52,299 and $22,086, respectively.
 
Note 3 - Stockholders’ Equity (Deficit)
 
(A)           Preferred Stock
 
(1)                 Capital Structure
 
As of March 31, 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 March 31, 2008, the authorized common stock of the Company consists of 300,000,000 shares of $.001 par value.
 
(2)  Preferred Stock Conversions

During the three months ended March 31, 2008, the Company converted 4,017,188 shares of the Company’s Series B Convertible Preferred Stock to shares of common stock on a one-to-one basis.

(3)  Legal Settlements

During the three months ended March 31, 2008, the Company settled one legal dispute for an aggregate of 4,687,000 shares of common stock valued at $0.06 per share.

(4)  Warrant Conversions And Exercises
 
The following is a summary of all common stock issued during the quarter ended March 31, 2008:

- 8 - -


UVUMOBILE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Activity
 
Quantity of Shares
   
Valuation
 
Preferred stock conversion
    4,017,188     $  
Legal settlements
    4,687,000       281,250  
Total
    8,704,188     $ 281,250  


(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 March 31, 2008:

 
Stock Options
 
Number of Options
   
Weighted Average Exercise Price
 
Balance at December 31, 2007
    11,960,000       1.14  
Granted
    275,000       0.08  
Exercised
           
Forfeited
    (4,740,000 )     1.78  
Balance at March 31, 2008
    7,495,000       0.69  
                 
Options exercisable at March 31, 2008
    4,327,917       1.06  
                 
Weighted average fair value of options granted during the three months ended March 31, 2008
    275,000       0.08  

- 9 - -

 
UVUMOBILE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
Options Outstanding
 
Options Exercisable
Exercise Price
 
Number Outstanding as of March 31, 2008
 
Weighted Average Remaining Contractual Years
 
Weighted Average Exercise Price
 
Number Exercisable at March 31, 2008
 
Weighted Average Exercise Price
$
0.08
 
 275,000
 
9.05
 
$
 –
 
 –
 
$
0.08
$
0.09
 
 575,000
 
8.97
 
$
 0.01
 
 143,750
 
$
0.09
$
0.13
 
 2,900,000
 
8.83
 
$
 0.05
 
 1,079,167
 
$
0.13
$
0.15
 
 500,000
 
8.70
 
$
 0.01
 
 250,000
 
$
0.15
$
0.30
 
 405,000
 
8.33
 
$
 0.02
 
 151,875
 
$
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
 
$
 0.03
 
 206,250
 
$
1.00
$
1.02
 
 –
 
7.92
 
$
 –
 
 –
 
$
1.02
$
1.31
 
 190,000
 
7.78
 
$
 0.03
 
 131,250
 
$
1.31
$
1.36
 
 –
 
7.40
 
$
 –
 
 –
 
$
1.36
$
1.40
 
 150,000
 
7.51
 
$
 0.03
 
 125,000
 
$
1.40
$
1.44
 
 –
 
8.44
 
$
 –
 
 –
 
$
1.44
$
1.48
 
 250,000
 
7.14
 
$
 0.05
 
 225,000
 
$
1.48
$
1.50
 
 –
 
6.97
 
$
 –
 
 –
 
$
1.50
$
1.55
 
 1,500,000
 
6.37
 
$
 0.32
 
 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
 
$
 0.01
 
 50,000
 
$
2.10
$
2.20
 
 150,000
 
7.26
 
$
 0.05
 
 150,000
 
$
2.20
$
2.25
 
 50,000
 
4.04
 
$
 0.02
 
 40,625
 
$
2.25
$
2.30
 
 150,000
 
5.92
 
$
 0.05
 
 150,000
 
$
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
 
$
 –
 
 –
 
$
3.50
     
 7,495,000
 
8.71
 
$
 0.72
 
 4,327,917
 
$
1.06

 
At March 31, 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.
 
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 March 31, 2008 and 2007 was $19,584 and $64,110, respectively.

- 10 - -


UVUMOBILE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
Note 5 – Convertible Promissory Notes

The following is a summary of the activity for convertible debt issuances for the quarter ended March 31, 2008 and the year ended December 31, 2007.  The accrued interest on the Convertible Promissory Notes was approximately $40,700 as of March 31, 2008.


   
March 31,
   
December 31,
 
   
2008
   
2007
 
Convertible notes payable
    2,033,423       2,033,423  
Loan discount
    (1,753,821 )     (2,008,005 )
Total convertible notes payable
    279,602       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 $16,222 as of March 31, 2008.
  
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 or about April 22, 2004, the Company filed a complaint in the United States District Court, North District of Georgia (Case No. 1:04-CV-1123) against Rene Hamouth, seeking the recovery of all profits realized by Mr. Hamouth resulting from his alleged violations of Section 16(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) relating to his purchases and sales of the Company’s common stock since approximately January 1, 2003. The Company is seeking damages in the amount of at least $151,428, interest on the amount of profits recovered and all other general and equitable relief to which it may be entitled. Since filing the complaint and serving Mr. Hamouth, Mr. Hamouth has filed an answer. The court has entered a scheduling order, approving the Joint Preliminary Planning Report and Discovery Plan. On March 16, 2005, the Company received notice that Mr. Hamouth's attorney in this matter has withdrawn from the case. On April 15, 2005, the Company filed a motion for summary judgment on this matter. The motion was unopposed. On October 5, 2005, the Court granted its motion and executed a judgment for us in the amount of $172,342.  On July 16, 2007, the Company entered into a General Release and Settlement Agreement with the Hamouth Family Trust and Rene Hamouth.  (See October 20, 2006 Hamouth litigation paragraph below describing the settlement agreement.)

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

On or about July 18, 2006, Manhattan Investments, Inc. (“Manhattan”) filed a Complaint against the Company in the United States District Court, Northern District of California (Case No. C-06-4379), alleging that the Company has wrongfully refused to remove the restrictive legend on a stock certificate representing 49,795 shares. The Complaint includes claims for breach of fiduciary and statutory duties, conversion and fraud, and seeks injunctive relief, as well as monetary damages. On October 2, 2006, the Company filed a Motion to Transfer for Improper Venue. The Motion was granted by the Court on November 13, 2006.  On July 23, 2007 (the “Effective Date”) the Company entered into a Settlement Agreement and Mutual Release (the “Agreement”) with Manhattan.  Pursuant to the Agreement, the parties agreed, among other things, that the Company will issue 850,000 shares of the Company’s common stock, par value $0.001 to Manhattan within seven business days following a determination by the Court that the issuance of such common stock is fair, reasonable, and adequate to Manhattan (the “Judicial Determination”).  The 850,000 shares of the Company’s common stock will be issued in reliance on the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Act”), provided by Section 3(a)(10) of the Act.  The Agreement also requires the Company to pay $35,000 to Manhattan within 15 days after the closing of an equity financing transaction, provided that the Company completes such transaction.  In addition, the agreement requires the Company to cause 49,795 shares of the Company’s common stock currently owned by Manhattan to be re-issued without restrictive legends within seven business days of the Effective Date.  In exchange for the payments and actions described above, the Agreement provides for a release of the Company and each of the owners, stockholders, predecessors, successors, directors, officers, employees, representatives, attorneys, subsidiaries, and affiliates of the Company from all charges, claims, liabilities, agreements, damages, causes of action, suits, costs, losses, debts and expenses of any nature by Manhattan.  The Agreement further provides for a release of Manhattan and each of the trustees, representatives, attorneys and affiliates of Manhattan, and all persons acting by, through, under or in concert with them from any and all charges, claims, liabilities, agreements, damages, causes of action, suits, costs, losses, debts and expenses of any nature by the Company.  On July 24, 2007, the United States District Court entered an Order making the above-referenced Judicial Determination. At September 30, 2007, based on the settlement date of July 23, 2007, the Company accrued a settlement liability and related expense of $332,500 based on the quoted closing trading price of $0.35 per share for the underlying 850,000 common shares in addition to the $35,000 in cash payments.
 
- 11 - -

 
UVUMOBILE, INC.

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

On September 9, 2006 and February 14, 2007, respectively, the Company received correspondence from Epsom Investment Services, N.V. (“Epsom”) demanding repayment of an alleged outstanding Demand Loan made in 2002 from Epsom to Sharps Eliminations Technologies, Inc. (“Sharps”) in the amount of $50,000 bearing interest at 5%. Epsom claims that the Company agreed to repay this loan on behalf of Sharps. The Company currently does not believe any such amounts are due and owing to Epsom.  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.
 
- 12 - -

 
UVUMOBILE, INC.

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

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

Note 8 – Related Party Transactions

None

Note 9 – Subsequent Events

None

- 13 - -


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 March 31, 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 “uVuMobile™”,” the “Company,” “we,” “us,” or “our”) is a provider of video content distribution services and technology.

Incorporated in 1984, the Company acquired OVT, Inc., d/b/a SmartVideo, in November 2002, subsequently changing its name to SmartVideo Technologies, Inc., and in June 2007, the Company changed its name to uVuMobile, 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.
 
- 14 - -


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

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

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(S) (Going Concern, Significant Accounting Policies and Risks and Uncertainties) to the consolidated financial statements for the years ended December 31, 2007, 2006 and 2005 for a description of the valuation of Stock-Based Compensation.

Recent Accounting Pronouncements 
 
See Note 2(V) to the consolidated financial statements for the years ended December 31, 2007, 2006, and 2005 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 March 31, 2008 Compared To Quarter Ended March 31, 2007

Revenues
 
Revenues for the quarter ended March 31, 2008, consisted primarily of proceeds from custom applications and direct-to-consumer services.  The Company’s revenues were $283,606 for the Quarter ended March 31, 2008 as compared to $334,732 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.

- 15 - -


Cost Of Goods Sold

For the quarter ended March 31, 2008, Costs of Goods Sold decreased from approximately $138,000 as compared to $83,500 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 March 31, 2008 was approximately $(1,530) as compared to $99,800 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 $414,600 or 62.6% for the year ended March 31, 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 $510,570 or 80% for the quarter ended March 31, 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 $140,600 or 61.8% for the quarter ended March 31, 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 March 31, 2008, the Company recorded approximately $72,000, as compared to $1,645,000 for the quarter ended March 31, 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 quarter ended March 31, 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 quarter ended March 31, 2008, increased by approximately $22,000 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 $328,000 or 64.4% for the quarter ended March 31, 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 March 31, 2008, was approximately $5,900.  Interest expense for the quarter ended March 31, 2008, was approximately $342,900. 

- 16 - -


Liquidity And Capital Resources And Going Concern 

The Company has incurred recurring losses and negative cash flows since inception.  For the three months ended March 31, 2008, the Company had an accumulated deficit of $74,689,916, a consolidated net loss of $1,156,839 and consolidated net cash flows used in operations of $725,098. 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 second quarter of 2008. As a result, it will be necessary for the Company to secure additional financing to support its operations. There can be no assurance that the Company will be able to obtain such financing on acceptable terms, or at all. If adequate funds are not available or not available on acceptable terms, the Company will be unable to continue as a going concern. The Company currently has no firm commitments for any additional capital.

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.

Item 4.  Controls and Procedures

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

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

- 17 - -


PART II - OTHER INFORMATION

Item 1. Legal Proceedings
 
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.  Unregistered Sales of Equity Securities and Use of Proceeds

As is described in Note 7 - Commitments and Contingencies to the Financial Statements, we issued 4,687,000 shares of common stock to the Hamouth Family Trust in connection with a settlement agreement dated February 25, 2008. In addition, we issued an aggregate of 3,892,188 shares of common stock to Messrs. Glenn Singer, Michael Criden and William J. Loughman upon conversion of their Series B Convertible Preferred Stock and 125,000 shares of commons stock to Management Decisions Inc. pursuant to a Settlement Agreement in lieu of payment for accounts payable.
 
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 3. Submission of Matters to a Vote of Security Holders
 
On February 13, 2008, the Company received the consent of a majority of  the outstanding holders of record, as of January 3, 2008, of its capital stock.  Capital stock is described as the Company’s common stock, par value $0.001 per share, the Company’s Series A-1 Convertible Preferred Stock, par value $0.001 per share, and the Company’s Series B Convertible Preferred Stock, par value $0.001 per share.  The following item was presented for the consent of the holders (the “Shareholders”) of the Company’s issued and outstanding capital stock.

 
(1)
To amend the Company’s Certificate of Incorporation to increase the number of authorized shares of common stock from 150,000,000 shares to 300,000,000 shares.  

The number of votes cast for the above is summarized in the table below.  All numbers in the table below represent shares of common stock or the voting equivalent thereof:

Item Submitted to Shareholders
 
For
   
Against
   
Abstain
   
Non-Votes
   
Total
 
                                   
(1)
 
Increase in the number of Authorized shares of common stock from 150,000,000 shares to 300,000,000 shares
 
44,267,506
   
3,295,715
   
1,532,433
   
0
   
49,095,654
 

The amendment to the Certificate of Incorporation became effective on February 13, 2008, upon the filing of the Certificate of Amendment to the Certificate of Incorporation with the Secretary of State of the State of Delaware.

Item 6. Exhibits
 
Exhibits
 
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.
 
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities and Exchange Act of 1934.
 
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.
 
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 - -


 
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:  May 8, 2008
 
Scott Hughes
   
 
President and Chief Executive Officer
   
 
(Principal Executive Officer)
   
       
       
       
By:
/s/Ronald A. Warren
 
Date:  May 8, 2008
 
Ronald A. Warren
   
 
Chief Financial Officer
   
 
(Principal Financial Officer and Principal Accounting Officer)
   
 
 

EX-31.1 2 ex31_1.htm EXHIBIT 31.1 ex31_1.htm

EXHIBIT 31.1
 
RULE 13a – 14(a) / 15d – 14(a)
CERTIFICATION
 
I, Scott Hughes, certify that:

 
1.
I have reviewed the this Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2008;
 
 
2.
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
 
 
3.
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
 
 
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
 
 
(a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
 
(b)
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 
(c)
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
 
 
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and audit committee of the registrant's board of directors (or persons performing the equivalent functions):
 
 
(a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
 
 
(b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 

Date:  May 8, 2008
 
By:
 /s/ Scott Hughes
     
Scott Hughes
     
President and Chief Executive Officer
 
 

EX-31.2 3 ex31_2.htm EXHIBIT 31.2 ex31_2.htm

EXHIBIT 31.2
 
RULE 13a – 14(a) / 15d – 14(a)
CERTIFICATION


I, Ronald A. Warren, certify that:

 
6.
I have reviewed the this Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2008;
 
 
7.
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
 
 
8.
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
 
 
9.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
 
 
(a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
 
(b)
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 
(c)
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
 
 
10.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and audit committee of the registrant's board of directors (or persons performing the equivalent functions):
 
 
(a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
 
 
(b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 

Date: May 8, 2008
 
By:
 /s/ Ronald A. Warren
     
Ronald A. Warren
     
Chief Financial Officer and
     
Principal Accounting Officer
 
 

EX-32.1 4 ex32_1.htm EXHIBIT 32.1 ex32_1.htm

EXHIBIT 32.1
 
SECTION 1350
CERTIFICATION


In connection with the Quarterly Report of uVuMobile, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Scott Hughes, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:

 
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
 
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 
Date: May 8, 2008
 
By:
 /s/ Scott Hughes
     
Scott Hughes
     
President and Chief Executive Officer
 
 

EX-32.2 5 ex32_2.htm EXHIBIT 32.2 ex32_2.htm

EXHIBIT 32.2
 
SECTION 1350
CERTIFICATION


In connection with the Quarterly Report of uVuMobile, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ronald A. Warren, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:

 
(3)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
 
(4)
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 
Date: May 8, 2008
 
By:
 /s/ Ronald A. Warren
     
Ronald A. Warren
     
Chief Financial Officer and
     
Principal Accounting Officer

 

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