YOU ON DEMAND HOLDINGS, INC. (Form: 10-K, Received: 03/30/2012 17:23:28)

SIGNATURES

In accordance with section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this Report on Form 10-K to be signed on its behalf by the undersigned, thereto duly authorized individual.

Date: March 30, 2012

	YOU ON DEMAND HOLDINGS, INC.

	By:	/s/ Shane McMahon
		Shane McMahon
		Chief Executive Officer

	By:	/s/ Marc Urbach
		Marc Urbach
		President and Chief Financial Officer

In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Each person whose signature appears below hereby authorizes Shane McMahon and Marc Urbach, and each or any of them, as attorneys-in-fact to sign on his or her behalf, individually, and in each capacity stated below, and to file all amendments and/or supplements to this annual report on Form 10-K.

Signature	Title	Date

/s/ Shane McMahon	Chairman and Chief Executive Officer	March 30, 2012
Shane McMahon	(Principal Executive Officer)

/s/ Marc Urbach	President, Chief Financial Officer and Director	March 30, 2012
Marc Urbach	(Principal Financial and Accounting Officer)

/s/ Weicheng Liu	Senior Executive Officer and Director	March 30, 2012
Weicheing Liu

/s/ James Cassano	Director	March 30, 2012
James Cassano

Table of Contents

8. Financial Statements and Supplementary Data

YOU ON DEMAND HOLDINGS, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page

Report of Independent Registered Public Accounting Firm		F-1

Consolidated Financial Statements:

Balance Sheets as of December 31, 2011 and 2010		F-2

Statements of Operations for the years ended December 31, 2011 and 2010		F-3

Statements of Comprehensive Loss for the years ended December 31, 2011 and 2010		F-4

Statements of Equity for the years ended December 31, 2011 and 2010		F-5

Statements of Cash Flows for the years ended December 31, 2011 and 2010		F-6

Notes to Consolidated Financial Statements		F-7

Table of Contents

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders

YOU On Demand Holdings, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of YOU On Demand Holdings, Inc. and Subsidiaries (the “Company”) as of December 31, 2011 and 2010, and the related consolidated statements of operations, comprehensive loss, equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor are we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of YOU On Demand Holdings, Inc. and Subsidiaries as of December 31, 2011 and 2010, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has incurred significant losses during 2011 and 2010 and has relied on debt and equity financings to fund their operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

March 30, 2012

Albany, New York

A member of Urbach Hacker Young International Limited,

an international network of independent accounting and consulting firms

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Table of Contents

YOU On Demand Holdings, Inc. and Subsidiaries

(Formerly China Broadband, Inc.)

CONSOLIDATED BALANCE SHEETS

December 31, 2011 and 2010

	2011		2010
ASSETS
Current assets:
Cash and cash equivalents	$	7,519,574	$	6,584,396
Marketable equity securities, available for sale		2,229		9,433
Accounts receivable, net		399,791		220,926
Inventories		413,562		428,280
Licensed content, current		150,325		-
Prepaid expenses		438,712		756,461
Loan receivable from related party		316,660		304,529
Amounts due from shareholders		414,743		184,086
Amount due from non-controlling interest		1,572,699		1,512,448
Other current assets		340,175		597,362
Total current assets		11,568,470		10,597,921

Property and equipment, net		5,099,050		4,607,793
Licensed content, noncurrent		450,975		-
Intangible assets, net		7,149,748		8,604,799
Goodwill		6,105,478		6,105,478
Investment in unconsolidated entities		582,652		574,486
Other assets		101,031		142,735
Total assets	$	31,057,404	$	30,633,212

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	3,298,041	$	1,620,481
Accrued expenses and liabilities		862,473		804,341
Deferred revenue		1,856,674		1,711,796
Loan payable		-		398,960
Payable to Jinan Parent		143,286		137,797
Other current liabilities		543,163		792,413
Contingent purchase consideration liability, current		1,091,571		-
Total current liabilities		7,795,208		5,465,788

Deferred license fee		76,670		-
Contingent purchase consideration liability		2,267,518		3,362,105
Deferred tax and uncertain tax position liabilities		810,616		1,180,323
Total liabilities		10,950,012		10,008,216

Commitments and Contingencies

Convertible reedeemable preferred stock, $.001 par value; 50,000,000shares authorized
Series A - 7,000,000 shares issued and outstanding, liquidation preference of $3,500,000 in 2011 and 2010		1,261,995		1,261,995
Series B - 10,266,825 shares issued and outstanding, liquidation preference of $5,133,400 in 2011 and 2010		3,950,358		3,950,358

Equity:
Common stock, $.001 par value; 1,500,000,000 shares authorized, 10,467,400 and 8,810,250 issued and outstanding at December 31, 2011 and 2010, respectively		10,467			8,810
Additional paid-in capital		54,505,825			42,907,048
Accumulated deficit		(43,704,225	)		(32,434,324	)
Accumulated other comprehensive income		468,471			246,983
Total YOU On Demand equity		11,280,538			10,728,517
Noncontrolling interests		3,614,501			4,684,126

Total equity		14,895,039			15,412,643

Total liabilities and equity	$	31,057,404		$	30,633,212

See notes to consolidated financial statements.

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Table of Contents

YOU On Demand Holdings, Inc. and Subsidiaries

(Formerly China Broadband, Inc.)

CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended December 31, 2011 and 2010

	2011			2010

Revenue	$	7,868,175		$	7,648,962
Cost of revenue		5,525,625			4,722,058
Gross profit		2,342,550			2,926,904

Selling, general and adminstrative expenses		8,801,085			3,919,384
Professional fees		2,114,942			1,240,290
Depreciation and amortization		4,423,760			4,282,586
Impairments of long-lived assets		244,861			2,405,008

Loss from operations		(13,242,098	)		(8,920,364	)

Interest & other income / (expense)
Interest income		10,574			8,113
Interest expense		(1,764	)		(553,971	)
Stock purchase right		(194,321	)		-
Inducement to convert and reduction in conversion price of convertible notes		-			(6,706,141	)
Change in fair value of warrant liabilities and modification to certain warrants		-			669,133
Change in fair value of contingent consideration		3,016			(501,127	)
Loss on sale of marketable equity securities		-			(14,650	)
Loss on investment in unconsolidated entities		(14,371	)		(15,240	)
Gain on deconsolidation of AdNet		470,041			-
Other		(42,849	)		(3,482	)

Net loss before income taxes and noncontrolling interest		(13,011,772	)		(16,037,729	)

Income tax benefit		369,707			517,723

Consolidated net loss		(12,642,065	)		(15,520,006	)

Plus: Net loss attributable to noncontrolling interests		1,372,164			2,616,032

Net loss attributable to YOU On Demand shareholders	$	(11,269,901	)	$	(12,903,974	)

Dividends on preferred stock		-			(2,315,309	)

Net loss attributable to YOU On Demand common shareholders	$	(11,269,901	)	$	(15,219,283	)

Net loss per share attributable to YOU On Demand shareholders
Basic	$	(1.15	)	$	(5.19	)
Diluted	$	(1.15	)	$	(5.19	)

Weighted average shares outstanding
Basic		9,759,430			2,930,983
Diluted		9,759,430			2,930,983

See notes to consolidated financial statements.

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YOU On Demand Holdings, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

	2011			2010
Consolidated net loss	$	(12,642,065	)	$	(15,520,006	)
Other comprehensive income (loss):
Foreign currency translation adjustments		379,472			477,281
Unrealized losses on available for sale securities		(7,204	)		(13,811	)
Less: Comprehensive loss attributable to non-controlling interest		1,221,384			2,068,262
Plus: Dividends on preferred stock		-			(2,315,309	)
Comprehensive loss attributable to YOU On Demand common shareholders	$	(11,048,413	)	$	(15,303,583	)

See notes to consolidated financial statements.

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YOU On Demand Holdings, Inc. and Subsidiaries

CONSOLIDATED STATEMENT OF EQUITY

For the Years Ended December 31, 2011 and 2010

	Common Shares		Par Value		Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income(loss)			YOU On Demand Shareholders' (Deficit)/Equity			Noncontrolling Interest			Total Equity

Balance December 31, 2009		863,485	$	864	$	14,965,391		$	(17,215,041	)	$	331,283		$	(1,917,503	)	$	5,259,427		$	3,341,924

Shares issued as payment for convertible note interest		8,708		9		132,626			-			-			132,635			-			132,635

Stock option compensation expense		-		-		503,372			-			-			503,372			-			503,372

Interest expense related to discount and beneficial convertible features in connection with convertible note and warrants issuance		-		-		90,000			-			-			90,000			-			90,000

Common shares issued for services		68,000		68		254,932			-			-			255,000			-			255,000

Other adjustment		-		-		22,126			-			-			22,126			-			22,126

Common shares issued for cash		833,333		833		2,058,831			-			-			2,059,664			-			2,059,664

Beneficial conversion feature of Series A and Series B preferred stock issued		-		-		2,315,309			-			-			2,315,309			-			2,315,309

Warrants issued with common stock, Series A and Series B preferred stock		-		-		4,486,383			-			-			4,486,383			-			4,486,383

Common shares and warrants issued and costs related to the conversion of convertible notes		838,067		838		9,848,055			-			-			9,848,893			-			9,848,893

Warrants issued to placement agent		-		-		135,774			-			-			135,774			-			135,774

Issuance costs related to the issuance of shares and warrants		-		-		(632,503	)		-			-			(632,503	)		-			(632,503	)

Warrant liability reclassified to equity		-		-		150,017			-			-			150,017			-			150,017

Shares issued for Sinotop Group Ltd acquisition		1,211,459		1,211		4,541,758			-			-			4,542,969			-			4,542,969

Warrants and options issued for Sinotop Group Ltd acquisition		-		-		4,039,964			-			-			4,039,964			-			4,039,964

Sinotop Beijing joint venture		-		-		-			-			-			-			1,492,961			1,492,961

Shares issued in warrant exchange		4,987,198		4,987		(4,987	)		-			-			-			-			-

Net loss		-		-		-			(15,219,283	)		-			(15,219,283	)		(2,616,032	)		(17,835,315	)
Foreign currency translation adjustments		-		-		-			-			(70,489	)		(70,489	)		547,770			477,281

Unrealized loss on marketable equity securities		-		-		-			-			(13,811	)		(13,811	)		-			(13,811	)
Balance December 31, 2010		8,810,250	$	8,810	$	42,907,048		$	(32,434,324	)	$	246,983		$	10,728,517		$	4,684,126		$	15,412,643


Common shares issued for services	2,667		3		9,997			-			-			10,000			-			10,000

Warrants issued for service	-		-		24,816			-			-			24,816			-			24,816

Stock option compensation expense	-		-		599,196			-			-			599,196			-			599,196

Stock purchase right	-		-		194,321			-			-			194,321			-			194,321

Stock warrants issued pursuant to licensed content	-		-		676,462			-			-			676,462			-			676,462

Common shares issued for cash	1,654,213		1,654		10,916,152			-			-			10,917,806			-			10,917,806

Issuance costs related to the issuance of common shares	-		-		(822,167	)		-			-			(822,167	)		-			(822,167	)

Contribution from noncontrolling interest	-		-		-			-			-			-			151,759			151,759

Share adjustment for round lot holders in connection with 75-for-1 reverse split	270		-		-			-			-			-			-			-

Net loss	-		-		-			(11,269,901	)		-			(11,269,901	)		(1,372,164	)		(12,642,065	)

Foreign currency translation adjustments	-		-		-			-			228,692			228,692			150,780			379,472

Unrealized losses on marketable securities marketable equity securities	-		-		-			-			(7,204	)		(7,204	)		-			(7,204	)


Balance December 31, 2011	10,467,400	$	10,467	$	54,505,825		$	(43,704,225	)	$	468,471		$	11,280,538		$	3,614,501		$	14,895,039

See notes to consolidated financial statements.

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YOU On Demand Holdings, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2011 and 2010

	2011			2010
Cash flows from operating
Net loss	$	(12,642,065	)	$	(15,520,006	)
Adjustments to reconcile net loss to net cash used in operating activities
Stock compensation expense		634,012			891,008
Interest expense related to discount and beneficial convertible features in connection with convertible note and warrant issuance		-			90,000
Provision for bad debt expense		52,429			-
Depreciation and amortization		4,423,760			4,282,586
Amortization of licensed content		75,162			-
Noncash interest expense - original issue discount		-			305,944
Deferred income tax		(369,707	)		(610,781	)
Loss on investment in unconsolidated entities		14,371			-
Loss on sale of marketable equity securities		-			14,650
Change in fair value of warrant liabilities		-			(669,133	)
Change in fair value of contingent consideration liability		(3,016	)		501,127
Cost of right to purchase		194,321			-
Inducement to convertible note holders and reduction in conversion price in connection to the July 2010 financing		-			6,706,141
Adjustment to foreign currency translation account		-			378,332
Impairment charge to Shandong Media intangibles		-			900,000
Impairment charge to Jinan Broadband equipment		-			1,505,008
Impairment charge to Sinotop equipment		32,681			-
Impairment charge to AdNet assets, net of cash		209,497			-
Gain on deconsolidation of AdNet		(470,041	)		-
Change in assets and liabilities,
Accounts receivable		(207,358	)		449
Inventory		33,990			44,095
Prepaid expenses and other assets		628,805			(928,150	)
Accounts payable		1,556,689			154,389
Accrued expenses and liabilities		41,206			(1,026,454	)
Deferred revenue		212,220			117,667
Deferred license fee		76,670			-
Other current liabilities		(221,462	)		427,890
Other		(7,203	)		-
Net cash used in operating activities		(5,735,039	)		(2,435,238	)

Cash flows from investing activities:
Proceeds from sale of marketable equity securities		-			9,350
Acquisition of property and equipment		(2,547,120	)		(1,295,121	)
Leasehold improvements		-			(148,316	)
Loan advances to Shandong Media shareholders		(219,755	)		(582,476	)
Loan repayments from Shandong Media shareholders		-			573,328
Loan to related party		-			(4,536	)
Investment in unconsolidated entity		(46,411	)		(574,907	)
Investments in intangibles		(442,702	)		-
Loan to Shanghai Tianduo		(38,677	)		-
Net cash used in investing activities		(3,294,665	)		(2,022,678	)

Cash flows from financing activities
Proceeds from sale of equity securities		10,917,806			9,025,000
Proceeds from issuance of convertible notes payable		-			600,000
Costs associated with financings and share issuances		(822,167	)		(496,728	)
Capital contribution from Jinan Parent		151,759			-
Payments to Jinan Parent		-			(14,471	)
Net cash provided by financing activities		10,247,398			9,113,801

Effect of exchange rate changes on cash		(282,516	)		(261,983	)

Net increase in cash and cash equivalents		935,178			4,393,902
Cash and cash equivalents at beginning of period		6,584,396			2,190,494

Cash and cash equivalents at end of period	$	7,519,574		$	6,584,396


Supplemental Cash Flow Information:

Cash paid for taxes	$	-		$	-
Cash paid for interest	$	1,764		$	1,495
Value assigned to shares as payment for interest expense	$	-		$	132,635
Value of warrants issued for licensed content	$	676,462		$	-
Property and equipment included in accrued expenses	$	192,791		$	-
Intangible assets included in accounts payable	$	210,000		$	-
Cancellation of notes payable by issuance of common stock	$	-		$	20,000
Issuance of common stock through assignment of notes receivable	$	-		$	580,000
Common stock, warrants and stock options issued for Sinotop acquisition	$	-		$	8,582,933
Contingent consideration liabiltiy associated with earnout shares related to Sinotop acquisition	$	-		$	3,362,105
Value of warrants issued to placement agent	$	-		$	135,774
Deemed dividend on preferred stock	$	-		$	2,315,309
Value of common stock issued upon conversion of convertible notes	$	-		$	3,142,752
Value of preferred stock issued upon conversion of convertible notes	$	-		$	2,133,400
Amount due from noncontrolling interest	$	-		$	1,492,961

See notes to consolidated financial statements.

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YOU ON DEMAND HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

YOU On Demand Holdings, Inc., a Nevada corporation (“YOU On Demand”, “we”, “us”, or “the Company”) (formerly China Broadband, Inc.), operates in the Chinese media segment through our Chinese subsidiaries and variable interest entities (“VIEs”) (1) an integrated value-added service solutions business for the delivery of pay-per-view (“PPV”), video on demand (“VOD”), and enhanced premium content for cable providers, Beijing Sino Top Scope Technology Co., Ltd. (“Sinotop Beijing” or “Sinotop”), (2) a cable broadband business, Jinan Guangdian Jia He Broadband Co. Ltd. ( “Jinan Broadband”), based in the Jinan region of China through which we provide cable and wireless broadband services, principally internet services, Internet Protocol Point wholesale services, related network equipment rental and sales, and fiber network construction and maintenance and (3) a print based media and television programming guide publication, Shandong Lushi Media Co., Ltd. (“Shandong Media”).

2. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of YOU On Demand and (a) its wholly-owned subsidiary China Broadband, Ltd., ("CB Cayman"), (b) two wholly-owned subsidiaries of CB Cayman: Beijing China Broadband Network Technology Co, Ltd. (“WFOE”) and Sinotop Group Limited (“Sinotop Hong Kong”) and (c) six entities located in the PRC: Jinan Zhong Kuan, Jinan Broadband, Shandong Media, Sinotop, Zhong Hai Video, and YOU On Demand (Beijing) Technology Co, Ltd. (“YOD WFOE”), which are controlled by the Company through contractual arrangements, as if they are wholly-owned subsidiaries of the Company. The consolidated financial statements included the accounts of AdNet Media Technologies (Beijing) Co. Ltd (“AdNet”) through the third quarter of 2011 when it was deconsolidated as a result of the Company’s termination of control. All material intercompany transactions and balances are eliminated in consolidation. In addition, the Company presents non-controlling interests of less-than-wholly-owned subsidiaries or controlled entities within the equity section of its consolidated financial statements.

Investment in Unconsolidated Entities

The Company has a 39% interest in an entity in the PRC. The consolidated financial statements include our original investment in this entity plus our share of undistributed earnings or losses, in the account “Investment in unconsolidated entities.”

Basis of Presentation

The Company's policy is to use the accrual method of accounting to prepare and present financial statements, which conform to generally accepted accounting principles (GAAP).

The Company’s Board of Directors authorized a 75:1 reverse stock split on February 9, 2012, which took effect on February 9, 2012. All share and related option information presented in these consolidated financial statements and related notes has been retroactively adjusted to reflect the reduced number of shares resulting from this reverse stock split.

Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Accounts Receivable

Accounts receivable are recognized and carried at original invoiced amount less an allowance for any uncollectible accounts. As of December 31, 2011, the Company estimated the amount of uncollectible accounts receivable to be $142,000 and established a bad debt reserve for such amount.

Inventories

Inventories, consisting of cables, fiber, connecting material, power supplies and spare parts are stated at the lower of cost or market value. Cost is determined using the weighted average method.

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Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Expenditures for major renewals and betterments, which extend the original estimated economic useful lives or applicable assets, are capitalized. Expenditures for normal repairs and maintenance are charged to expense as incurred. The costs and related accumulated depreciation of assets sold or retired are removed from the accounts and any gain or loss thereon is reflected in operations. Depreciation is provided for on a straight-line basis over the estimated useful lives of the respective assets.

Intangible Assets

Intangible assets are stated at cost less accumulated amortization. The Company amortizes its intangible assets with definite lives over their estimated useful lives and reviews these assets for impairment. The Company is currently amortizing its intangible assets with definite lives over periods generally ranging between 2.5 to 20 years. The service agreement, publication rights, operating permits and charter/cooperation agreements are amortized over 20 years. Customer relationships, non-compete agreement, and software technology are amortized over 10 years, 2.5 years and 3 years, respectively. Software and licenses are amortized over 3 years and 5 years.

Website development costs

Website development costs are stated at cost less accumulated amortization. The Company capitalizes website development costs associated with graphics design and development of the website application and infrastructure. Costs related to planning, content input, and website operation are expensed as incurred. The Company amortizes website development costs over three years and reviews these costs for impairment.

Goodwill

In accordance with U.S. GAAP, the Company tests goodwill for impairment annually as of December 31 and whenever events or circumstances make it more likely than not that impairment may have occurred. The Company reviews goodwill for impairment based on its identified reporting units, which are defined as reportable segments or groupings of businesses one level below the reportable segment level. In September 2011, the FASB issued guidance on testing goodwill for impairment. The guidance provides entities with an option to perform a qualitative assessment to determine whether further quantitative impairment testing is necessary. The Compay has elected to early adopt the guidance.

In accordance with the guidance, the Company reviews goodwill for impairment by first assessing qualitative factors to determine whether the existence of events or circumstances made it more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company determines it is more likely than not that the fair value of a reporting unit is less than its carrying amount, goodwill is further tested for impairment by comparing the carrying value to the estimated fair value of its reporting units, determined using externally quoted prices (if available) or a discounted cash flow model and, when deemed necessary, a market approach. Significant assumptions inherent in the valuation methodologies for goodwill are employed and include, but are not limited to, such estimates as projected business results, growth rates, the Company’s weighted-average cost of capital, royalty and discount rates.

Impairment of Long-Lived Assets

Long-lived assets, including property, equipment, intangible assets, website development costs and goodwill, are 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 the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset.

Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposed group classified as held for sale are presented separately in the appropriate asset and liability sections of the balance sheet.

Income Taxes

The Company accounts for income taxes in accordance with the asset and liability method. Deferred taxes are recognized for the future tax consequences attributable to temporary differences between the carrying amounts of assets and liabilities for financial statement purposes and income tax purposes using enacted rates expected to be in effect when such amounts are realized or settled. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. A tax valuation allowance is established, as needed to reduce net deferred tax assets to the amount expected to be realized. The Company also follows applicable guidance for accounting for uncertainty in income taxes.

The evaluation of a tax position is a two-step process. The first step is to determine whether it is more-likely-than-not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.

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Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits and audits in the provision for income taxes in our consolidated statements of operation.

Revenue Recognition

Revenue is recorded as services are provided or publications are shipped to customers. The Company generally recognizes all revenues in the period in which the service is rendered or shipment is made, provided that persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collection is reasonably assured. The Company records deferred revenue for payments received from customers for the performance of future services and recognizes the associated revenue in the period that the services are performed. Provision for discounts, returns and rebates to customers and other adjustments, if any, are provided for in the same period the related sales are recorded.

Net Loss Per Share Attributable to YOU On Demand Shareholders

Basic and Diluted net loss per share attributable to YOU On Demand shareholders have been computed by dividing the net loss by the weighted average number of common shares outstanding. The assumed exercise of dilutive warrants, less the number of treasury shares assumed to be purchased from the proceeds of such exercises using the average market price of the Company’s common stock during each respective period, have been excluded from the calculation of diluted net loss per share as their effect would be antidilutive.

Foreign Currency Translation

The Company’s subsidiaries and VIEs located in China use its local currency (RMB) as its functional currency. Translation adjustments are reported as gains or losses in other comprehensive income or loss on the statement of comprehensive income and accumulated as other comprehensive income in the equity section of the balance sheet. The financial information is translated into U.S. Dollars at prevailing or current rates respectively, except for revenue and expenses which are translated at average current rates during the reporting period.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of accounts receivable. The Company generally requires advance payments for internet services. Other concentrations of credit risk are limited due to the large customer base in Jinan, a sub-provincial city of Shandong province in the People’s Republic of China.

Fair value of Financial Instruments

The fair values of accounts receivable, prepaid expenses and accounts payable and accrued expenses are estimated to approximate the carrying values at December 31, 2011 due to the short maturities of such instruments.

Stock-Based Compensation

The Company awards stock options and other equity-based instruments to its employees, Directors and consultants (collectively “share-based payments”). Compensation cost related to such awards is measured based on the fair value of the instrument on the grant date and is recognized on a straight-line basis over the requisite service period, which generally equals the vesting period. All of the Company’s stock-based compensation is based on grants of equity instruments and no liability awards have been granted.

Reportable Segment

The Company operates under one reportable business segment, media, for which segment disclosure is consistent with the management decision-making process that determines the allocation of resources and the measuring of performance.

Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and marketable securities with original maturities of three months or less.

Licensed Content

The Company obtains content through content license agreements and revenue sharing agreements with studios and distributors. The license agreement may or may not be recognized in licensed content.

When the license fee is not known or reasonably determinable for a specific title, the title does not meet the criteria for recognition in licensed content in accordance with Financial Accounting Standards Boards (FASB) Accounting Standards Codification (ASC) Topic 920, Entertainment – Broadcasters . The license fee is not known or reasonably determinable for a specific title in content license agreements that do not specify the license fee per title. We expense as costs of revenues the greater of revenue sharing costs incurred through the end of the reporting period or the proportionate value of total minimum license fees expensed on a straight-line basis over the term of each license agreement. As the Company expenses license fees on a straight-line basis, it may result in deferred or prepaid license fees. Deferred license fees are classified on the consolidated balance sheets as “Other current liabilities”. Commitments for license agreements that do not meet the criteria for recognition in licensed content are included in Note 20 to the consolidated financial statements.

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Reclassifications

Certain prior year information has been reclassified to be comparable with the current year presentation.

In presenting the Company’s consolidated balance sheet at December 31, 2010, we recorded (1) approximately $144,000 of leasehold improvements and (2) approximately $12,000 of software costs to other assets. In presenting the Company’s consolidated balance sheet at December 31, 2011, we reclassified leasehold improvements to property and equipment and the software costs to intangibles.

In presenting the Company’s statement of cash flows for the year ended December 31, 2010, we presented accounts payable and accrued expenses as one line item. In presenting the Company’s statement of cash flow for the year ended December 31, 2011, we separated out the amounts into three categories: accounts payable, accrued expenses, and liabilities and other.

Recent Accounting Pronouncements

In June 2011, the FASB issued Accounting Standards Update (ASU) No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, (“ASU 2011-05”), which eliminates the option to present components of other comprehensive income as part of the statement of changes in shareholders’ equity and requires that all non-owner changes in shareholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present total other comprehensive income, the components of other comprehensive income, and the total of comprehensive income. ASU 2011-05 does not change the items that must be reported in other comprehensive income. ASU 2011-05 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, and the guidance of ASU 2011-05 must be applied retrospectively for all periods presented in the financial statements. We do not believe that our early adoption of ASU 2011-05 has had a material impact on our consolidated financial statements.

In September 2011, the FASB issued Accounting Standards Update (ASU) No. 2011-08, Intangibles—Goodwill and Other (Topic 350): Testing Goodwill for Impairment, (“ASU 2011-08”), which amends current guidance to allow a company to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. The amendment also improves previous guidance by expanding upon the examples of events and circumstances that an entity should consider between annual impairment tests in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. We do not believe that our early adoption of ASU 2011-08 has had a material impact on our consolidated financial statements.

3. Going Concern and Management’s Plans

The Company incurred significant continuing losses during 2011 and 2010 and has relied on debt and equity financings to fund operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company believes that the acquisition of Sinotop in 2010 and the launch of its PPV and VOD business in January of 2012 will generate positive cash flows for the business. However, we anticipate that we may need to raise additional funds to fully implement our business model and related strategies. The consolidated financial statements have been prepared assuming that the Company will continue as a going concern and, accordingly, do not include any adjustments that might result from the outcome of this uncertainty.

4. Sinotop Contingent Consideration

In connection with the acquisition of Sinotop on July 30, 2010, if specified performance milestones are achieved, Weicheng Liu (“Mr. Liu” or “the Seller”) will be entitled to earn up to (i) an additional 403,820 shares of common stock of the Company, (ii) three-year warrants to purchase 571,275 shares of the Company’s common stock, equivalent to 5.0% of the total number of shares of the Company’s common stock underlying all outstanding warrants as of immediately following the closing of the July 2010 financing and (iii) a four-year option to purchase a number of shares of the Company’s common stock that is equal to 5% of the total number of shares of the Company’s common stock underlying all outstanding options of the Company granted to individuals employed by the Company as of September 1, 2010 (collectively, the securities referred to in clauses (i), (ii) and (iii) are referred to herein as the “Earn-Out Securities”). The milestones are as follows: Sinotop will ensure that (i) at the end of the first earn-out year (July 1, 2012), at least 3 million homes will have access to the Company’s PPV services, (ii) at the end of the second earn-out year (July 1, 2013), at least 11 million homes will have access to the Company’s PPV services, and (iii) at the end of the third earnout year (July 1, 2014), at least 30 million homes will have access to the Company’s PPV services.

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Subsequent to the acquisition of Sinotop, the Company underwent a warrant exchange that converted the three-year warrants to be potentially earned under clause (ii) above to 332,002 shares of common stock. As such, the Earn-Out Securities subject to the achievement of the specified performance milestones are 735,822 shares of common stock and a four-year option to purchase a number of shares of the Company's common stock that is equal to 5% of the total number of shares of the Company's common stock underlying all options of the Company granted simultaneous with the adoption of the Equity Incentive Plan to individuals employed by the Company as of September 1, 2010.

The Company recorded a contingent consideration obligation related to the Earn-Out Securities at the time of acquisition which totaled $3,362,105 as of December 31, 2010, representing the fair value of the estimated payment of the full earn-out. The contingent consideration is classified as a liability because the earn-out securities do not meet the fixed-for-fixed criteria under ASC 815-40-15 for equity classification. Further ASC 815-40-15 requires us to re-measure the contingent consideration obligation at the end of every reporting period with the change in value reported in the consolidated statements of operations and, accordingly, we reported a gain of $3,016 for the twelve months ended December 31, 2011.

The following is a summary of the estimated fair value of contingent consideration obligation for the acquisition of Sinotop at December 31, 2010 and December 31, 2011.

Class of consideration	Number of Instruments		December 31, 2010 Fair Value		Change in Fair Value			December 31, 2011 Fair Value
Common shares		735,822	$	3,175,902	$	(28,793	)	$	3,147,109
Stock options		80,000		186,203		25,777			211,980
Total contingent consideration			$	3,362,105	$	(3,016	)	$	3,359,089

The following table represents the estimated fair value of the current and the noncurrent portion of the contingent consideration liability for the acquisition of Sinotop at December 31, 2011. The total contingent consideration liability of $3,362,105 was classified as noncurrent at December 31, 2010.

	As of December 31, 2011
	Number of Instruments		Current Liability		Noncurrent Liability		Total Liability
Shares July 2012		245,274	$	1,027,391	$	-	$	1,027,391
Shares July 2013		245,274		-		1,066,573		1,066,573
Shares July 2014		245,274		-		1,053,145		1,053,145
Total Common Shares		735,822	$	1,027,391	$	2,119,718	$	3,147,109

Options July 2012		26,667	$	64,180	$	-	$	64,180
Options July 2013		26,667		-		71,620		71,620
Options July 2014		26,667		-		76,180		76,180
Total Options		80,000	$	64,180	$	147,800	$	211,980

Total Shares and Options		815,822	$	1,091,571	$	2,267,518	$	3,359,089

5. Deconsolidation of AdNet

We acquired AdNet during the first half of 2009. Due to the shift of our business model to the PPV and VOD business, as of December 31, 2009 we permanently suspended day-to-day operations of AdNet. Subsequently, we continued to maintain the technology and assets of AdNet, which we planned to use in our PPV and VOD business.

Due to recent advancements in other advertising technologies, the Company determined that AdNet’s remaining assets would no longer be used to support the PPV and VOD business. As such, on August 3, 2011, the Company provided thirty-day notice of its termination of the VIE arrangement with AdNet, which served to relinquish the Company’s control and any right to economic benefit, as well as release the Company of any future liability, upon effectiveness of such termination on September 2, 2011. Accordingly, as of June 30, 2011, the Company recognized a loss on the impairment of AdNet’s remaining assets in the amount of $212,180. Upon the effectiveness of termination during the third quarter of 2011, the Company deconsolidated AdNet’s liabilities and recognized a gain of $470,041 in accordance with ASC 810-10-40, Deconsolidation of a Subsidiary .

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Deconsolidation of AdNet

Accounts payable and accrued expenses	$	(171,081	)
Loan payable		(398,960	)
Due from shareholders		100,000
Gain on deconsolidation	$	(470,041	)

Cash	$	2,683
Net book value of equipment		5,920
Other assets		14,336
Software impairment		189,241
Impairment of assets	$	212,180

6. Shandong Media Joint Venture

In connection with the Shandong Newspaper Cooperation Agreement, based on certain financial performance thresholds we were required to make an additional payment of RMB 5,000,000 (approximately US $781,800) to Shandong Media. In 2008, we recorded the additional payment due as an increase to our Shandong Media non-controlling interest account.

During January 2012, the Company, via Jinan Zhong Kuan, signed a Memorandum of Understanding (“MOU”) with Shandong Broadcast and Modern Movie whereby upon execution of a formal agreement the Company will be relieved of its obligation to make the additional payment of RMB 5,000,000 (approximately US $781,800) described above in exchange for payment of RMB 1,000,000 (approximately US $157,270) to Shandong Media and the transfer of 20% of the Company’s 50% ownership interest in Shandong Media to Shandong Broadcast and Modern Movie.

As of the date of this report, a formal agreement to transfer 20% of the Company’s 50% ownership interest in Shandong Media to Shandong Broadcast and Modern Movie had not been executed and the VIE structure under which the Company controls Shandong Media remains in place. As such, the RMB 5,000,000 additional payment due remains recorded as an increase to our Shandong Media non-controlling interest account and the Company continues to control and consolidate Shandong Media at December 31, 2011.

7. Fair Value Measurements

Accounting standards require the categorization of financial assets and liabilities, based on the inputs to the valuation technique, into a three-level fair value hierarchy. The various levels of the fair value hierarchy are described as follows:

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

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

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

Accounting standards require the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.

Common stocks are valued at closing price reported on the active market on which the individual securities are traded.

The fair value of the contingent purchase consideration liabilities at December 31, 2011 was valued using the Monte Carlo simulation method, which is based on valuation theories underlying the Black-Scholes Merton model. Estimated probabilities related to achieving the earn-out milestones were incorporated into our valuation. In addition, our valuation incorporates the following assumptions: risk-free interest rate of 0.41%, expected volatility of 75% based on the (High – Low) / (High + Low) method, expected life of 1 to 3 years and expected dividend yield of 0%.

The fair value of the contingent purchase liabilities at December 31, 2010 was valued using the Black-Scholes Merton model which incorporates the following assumptions: risk-free interest rate of 0.6% to 1.7%, expected volatility of 60% based on the (High – Low) / (High + Low) method, expected life of 2.0 to 4.5 years and expected dividend yield of 0%.

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The following tables present the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis at December 31, 2011 and December 31, 2010:

	December 31, 2011
	Fair Value Measurements
	Level 1		Level 2		Level 3		Total Fair Value
Assets
Available-for-sale securities	$	2,229	$	-	$	-	$	2,229
Liabilities
Contingent purchase consideration	$	-	$	-	$	3,359,089	$	3,359,089

	December 31, 2010
	Fair Value Measurements
	Level 1		Level 2		Level 3		Total Fair Value
Assets
Available-for-sale securities	$	9,433	$	-	$	-	$	9,433
Liabilities
Contingent purchase consideration	$	-	$	-	$	3,362,105	$	3,362,105

The following table summarizes the activity for financial liabilities utilizing Level 3 fair value measurements:

	December 31, 2011			December 31, 2010
	Contingent Purchase Consideration			Contingent Purchase Consideration
Fair value at January 1,	$	3,362,105		$	-
Purchases, sales and issuances and settlements		-			2,860,978
Realized losses		-			-
Unrealized (gains) losses		(3,016	)		501,127
Transfers to equity		-			-
	$	3,359,089		$	3,362,105

8. Related Party Transactions

Shandong Media

Loan Receivable

During the year ended December 31, 2011, the Company’s loan receivable from Music Magazine increased approximately $12,000, due to currency fluctuations. At December 31, 2011 and December 31, 2010, approximately $317,000 and $305,000, respectively, is due the Company from Music Magazine. The Company advanced funds in the form of a loan to Music Magazine to fund its operations. The loan is unsecured, interest-free and is due on December 31, 2012. Music Magazine is an affiliate of Modern Movie & TV Biweekly Press, our partner in our Shandong Media joint venture company. Pursuant to the Memorandum of Understanding, we will be working with our related party to setttle this loan.

Prepaid Expense

As of December 31, 2011 and December 31, 2010, Shandong Media prepaid $193,000 and $240,000, respectively, to Modern Movie for rental of space for company functions.

Amounts due from Shareholders

As of December 31, 2011 and December 31, 2010, amounts due from shareholders include approximately $415,000 and $184,000, respectively, advanced to both Shandong Broadcast and to Modern Movie. All of the parties are our partners in our Shandong Media joint venture company. The amount due of approximately $103,000 and $95,000 at December 31, 2011 and December 31, 2010, respectively, from Shandong Broadcast is unsecured, interest free and has no fixed repayment terms. The amount due of approximately $312,000 and $89,000 at December 31, 2011 and December 31, 2010, respectively, from Modern Movie is unsecured, interest free and is due on December 31, 2012. Pursuant to the Memorandum of Understanding, we will be working with our related party to setttle this loan.

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Other Payable

As of December 31, 2011 and December 31, 2010, Shandong Media had a payable of approximately $27,000 and $22,000, respectively, related to a vehicle usage agreement with Shandong Broadcast & TV Weekly Press, our partner in our Shandong Media joint venture and a payable of approximately $56,000 and $31,000, respectively, related to office rent with Modern Movie & TV Biweekly Press, our other partner in our Shandong Media joint venture.

Jinan Broadband

Payable to Jinan Parent

During the year ended December 31, 2011, our payable to Jinan Parent increased approximately $5,000, due to currency fluctuations. At December 31, 2011 and December 31, 2010, approximately $143,000 and $138,000, respectively, remained due to Jinan Parent. This amount represents the remaining balance due from the initial acquisition which is unsecured, interest free and has no fixed repayment terms.

Revenue

During the years ended December 31, 2011 and 2010, Jinan Broadband generated $158,000 and $397,000 of value-added service revenue from an affiliate, Jinan Radio and Television Networks Center (“Networks Center”). Jinan Networks Center is the owner of Jinan GuangdianJiahe Digital Television Co., Ltd. (“Jinan Parent”), our partner in our Jinan joint venture company, Jinan Broadband. Jinan Parent has a 49% ownership interest in Jinan Broadband.

Cost of Revenue

During the years ended December 31, 2011 and 2010, Jinan Broadband incurred service fees to Networks Center of approximately $47,000 and $44,000, respectively. To minimize administrative fees and maintain a low headcount at Jinan Broadband, Networks Center collects customer payments on behalf of Jinan Broadband and then remits the funds to Jinan Broadband. Networks Center charges Jinan Broadband a 2% service fee on the payments collected.

General and Administrative Expense

During the years ended December 31, 2011 and 2010, Jinan Broadband paid sales agency fees of approximately $31,000 and $44,000 related to revenue collection on behalf of Jinan Broadband and network maintenance.

Accounts Payable

As of December 31, 2011 and December 31, 2010, Jinan Broadband had accounts payable to Networks Center of approximately $268,000 and $258,000, respectively, relating to maintenance, network leasing and facility rental fees. Jinan Broadband’s operation is located in a building that is owned by Networks Center. As such, Jinan Broadband shares the cable network usage with Networks Center. Additionally, Jinan Broadband utilizes Networks Center’s staff to provide cable network maintenance support to their customers. As such Network Center charges Jinan Broadband fees for these services and usage of their facility.

Amount due from Non-controlling Interest

Subsequent to our acquisition of Sinotop in July 2010, Sinotop and Hua Cheng entered into a variable interest entity agreement to form and operate Zhong Hai Video with equity ownership interests of 80% and 20%, respectively, on total registered capital of RMB 50 million. Sinotop has contributed RMB 10 million and has a commitment to fund the remaining RMB 30 million. As of December 31, 2011, Hua Cheng has not made its capital contribution of RMB 10 million. Accordingly, we recorded an amount due from non-controlling interest in the amount of $1,572,699.

Receivable from Trustee

At the time we acquired Sinotop Hong Kong, one of the bank accounts acquired was in Zhang Yan’s name, our PRC trustee in the VIE agreements. At December 31, 2010 this account remained open with a $172,000 balance and the amount was reported in other current assets in the consolidated balance sheet at December 31, 2010. During the first quarter of 2011, the account was settled in full.

Other Revenue

During the quarter ended December 31, 2011, Zhong Hai Video, our 80% owned subsidiary, provided to Hua Cheng Film and Television Digital Program Co., Ltd. (“CHC”) consulting services for consideration of $23,000. The Company recognized this amount as other revenue. CHC is the 51% owner of Hua Cheng which in turns holds 20% ownership in Zhong Hai Video. In addition, our subsidiary, Sinotop Beijing holds 39% ownership in Hua Cheng and 80% ownership in Zhong Hai Video.

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9. Property and Equipment

During 2010, the Company analyzed for impairment the equipment at its Jinan Broadband subsidiary, as the equipment was taken out of service in July 2010 due to changes in customer needs. As of December 31, 2010, the Company determined there were no other uses for the equipment and that the equipment cannot be sold. As such, the Company recorded a total equipment impairment charge of approximately $1,505,000 in 2010 which was allocated to headend facilities and machinery. In 2011, the Company recorded impairment charges of $39,000 related to furniture and office equipment at Sinotop and AdNet. After settlement with the vendor we recorded a net impairment expense of approximately $33,000 related to the faulty equipment at Sinotop.

Property and equipment approximated the following:

	December 31,			December 31,
	2011			2010

Furniture and office equipment	$	2,088,000		$	1,241,000
Headend facilities and machinery		16,724,000			14,257,000
Leasehold improvements		310,000			144,000
Vehicles		30,000			30,000
Total property and equipment		19,152,000			15,672,000
Less: accumulated depreciation		(14,053,000	)		(11,064,000	)
Net carrying value	$	5,099,000		$	4,608,000

We recorded depreciation expense of approximately $2,505,000 and $2,899,000 for the years ended December 31, 2011 and 2010, respectively.

10. Goodwill and Intangible Assets

The Company has intangible assets primarily relating to the acquisitions of its Jinan Broadband subsidiary, Shandong Media joint venture and Sinotop. The Company amortizes its intangible assets that have finite lives. As discussed in Note 5, the Company determined during 2011 that AdNet’s remaining assets would no longer be used. As such, the Company recognized an impairment loss related to AdNet’s software technology in the amount of $189,241 during the quarter ended June 30, 2011.

A roll forward of our intangible assets activity from December 31, 2010 to December 31, 2011 follows:

	Balance at December 31, 2010		Additions		Amortization Expense			Impairment Charge			Foreign Currency Transl Adj		Balance at December 31, 2011
Amortized intangible assets:
Service agreement	$	1,397,042	$	-	$	(86,150	)	$	-		$	-	$	1,310,892
Publication rights		425,253		-		(24,300	)		-			-		400,953
Customer relationships		88,359		-		(11,780	)		-			-		76,579
Operating permits		636,519		-		(36,372	)		-			-		600,147
Software technology		315,403		-		(126,162	)		(189,241	)		-		-
Charter / Cooperation agreements		2,698,408		-		(137,792	)		-			-		2,560,616
Noncompete agreement		3,031,260		-		(1,455,004	)		-			-		1,576,256
Software and licenses		12,555		268,412		(41,437	)		-			485		240,015
Website development		-		384,290		-			-			-		384,290
Total amortized intangible assets	$	8,604,799	$	652,702	$	(1,918,997	)	$	(189,241	)	$	485	$	7,149,748

Unamortized intangible assets:
Goodwill		6,105,478		-		-			-			-		6,105,478
Total unamortized intangible assets	$	6,105,478	$	-	$	-		$	-		$	-	$	6,105,478

In accordance with ASC 250, we recorded amortization expense related to our intangible assets of $1,918,997 and $1,102,645 during 2011 and 2010, respectively. The website was placed in service in January 2012 at which time we began amortizing the cost over a period of three years.

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The following table outlines the amortization expense for the next five years and thereafter:

	Jinan		Shandong				Zhong Hai
Years ending December 31,	Broadband		Media		Sinotop		Video		Total
2012		85,961		76,388		1,592,796		199,344		1,954,489
2013		85,961		74,421		259,041		199,344		618,767
2014		85,961		72,454		137,791		215,575		511,781
2015		85,961		72,454		137,791		2,485		298,691
2016		85,961		72,454		137,791		1,656		297,862
Thereafter		881,088		715,408		1,871,662		-		3,468,158
Total amortization to be recognized	$	1,310,893	$	1,083,579	$	4,136,872	$	618,404	$	7,149,748

11. Accrued Expenses and Liabilities

Accrued expenses and liabilities consist of the following:

	December 31,		December 31,
	2011		2010

Accrued expenses and liabilities	$	613,000	$	720,000
Accrued payroll		249,000		84,000
	$	862,000	$	804,000

12. Private Financings, July 2010

In connection with our July 2010, Private Financing, we entered into a Registration Rights Agreement with the investors under which we agreed to use commercially reasonable efforts to file a registration statement with the Securities and Exchange Commission, registering the shares of common stock and the shares of common stock underlying the Series A and Series B Preferred Stock and the Warrants. The Agreement required us to file the registration statement within 45 days of the closing (by September 13, 2010) and to have it effective within 180 days (by January 26, 2011). The registration statement which was initially filed on October 7, 2010, and amended thereafter on May 10, 2011, became effective on May 13, 2011. The agreement did not provide for any specific penalties for non-performance and we did not record any liability for any penalties

13. Private Financings, June 2011

On June 3, 2011, we completed a private placement transaction with FIL Investment Management (Hong Kong) Limited (“Fidelity”), professional fiduciary for various accounts from time to time. Pursuant to a securities purchase agreement between us and Fidelity, we issued to funds managed by Fidelity and its affiliates an aggregate of 979,213 shares of our common stock at a per share price of $6.60, resulting in aggregate gross proceeds to the Company of $6,462,806. Pursuant to the securities purchase agreement with Fidelity, we could not, during the six month period following the closing, without the prior written consent of Fidelity, issue any shares of our common stock, including securities that were exercisable or convertible into common stock except for (i) up to 1,958,426 shares of our common stock at a per share price equal to or greater than US$6.60, (ii) shares of our common stock upon the exercise, exchange or conversion of our securities which were outstanding prior to the closing, (iii) shares of our common stock upon the exercise, exchange or conversion of callable warrants to purchase up to 666,667 shares of our common stock, with a per share exercise price equal to or greater than US$6.60, and (iv) pursuant to our 2010 Equity Incentive Plan, options to purchase up to an aggregate of 440,000 shares of our common stock to new and existing employees in the normal course of business.

In connection with the private placement transaction with Fidelity, we entered into a registration rights agreement with Fidelity pursuant to which we are obligated to file a registration statement with the U.S. Securities and Exchange Commission within thirty days following the closing to register the shares of common stock issued to Fidelity. The registration statement was filed on June 29, 2011 and declared effective on July 8, 2011.

On June 7, 2011, we completed a private placement transaction with a group of twenty-seven accredited investors. Pursuant to a securities purchase agreement between us and the investors, we issued to the investors an aggregate of 675,000 shares of our common stock at a per share price of $6.60, resulting in aggregate gross proceeds of $4,455,000. The offer and sale of the shares to the accredited investors was made in compliance with the securities purchase agreement with Fidelity.

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The Company paid issuance costs of $822,167 related to the June 2011 financings.

Stock Purchase Right

In connection with the June 3, 2011 private placement, we granted to Fidelity a right of first refusal during the six month period following the closing to purchase up to ten percent of the number of shares of common stock offered to other investors, as permitted in the securities purchase agreement, at a per share price of $6.60 and on identical terms as set forth in the securities purchase agreement.

In connection with the June 7, 2011 private placement, Fidelity had the right to purchase up to 75,000 shares of our common stock, or up to ten percent of the number of shares sold to the accredited investors, at a per share price of $6.60. On June 7, 2011, we agreed to modify the right with Fidelity to extend the right to purchase these shares until December 3, 2011 at a price of $6.60 per share. We valued this right at approximately $155,000 based on the Black-Scholes Merton model and recorded it as a right to purchase shares expense in connection with the placement. On December 4, 2011, we granted Fidelity an extension of this right to purchase for an additional six months. We valued this right at approximately $39,000 based on the Black-Scholes Merton model and recorded it as a right to purchase shares expense in connection with the placement.

14. Net Loss Per Common Share Attributable to YOU On Demand Shareholders

Basic net loss per common share attributable to YOU On Demand shareholders is calculated by dividing the net loss attributable to YOU On Demand shareholders by the weighted average number of outstanding common shares during the period. Diluted net loss per common share includes the weighted average dilutive effect of stock options, warrants and series preferred stocks.

For the years ended December 31, 2011 and 2010, the number of securities not included in diluted EPS because the effect would have been anti-dilutive was 4,122,052 and 3,739,719, respectively.

	2011		2010
Warrants		358,579		151,912
Stock purchase right		75,000		-
Options		1,386,233		1,285,567
Series A Preferred Stock		933,333		933,333
Series B Preferred Stock		1,368,907		1,368,907
Total		4,122,052		3,739,719

15. Interest Expense and Share Issuance

In connection with the convertible notes issued in 2008 and 2009, note holders converted 100% of the outstanding principal and interest owing on such notes into shares of common stock and warrants in connection with the closing of the financings on July 30, 2010 and pursuant to a Waiver and Agreement to Convert, dated May 20, 2010. The Company incurred $439,000 of interest expense related to the notes in the year ended December 31, 2010. This amount includes the balance of the unamortized amount that was remaining on the original issue discount due to the conversion of the notes into shares and common stock.

Also, as set forth in the related documents and with the consent of the note holders, we issued 8,708 shares to the note holders as payment for convertible note interest of approximately $133,000 for the year ended December 31, 2010 (none in 2011).

16. Content Accounting

The Company obtains content through content license agreements and revenue sharing agreements with studios and distributors. The license agreement may or may not be recognized in licensed content.

When the license fee is not known or reasonably determinable for a specific title, the title does not meet the criteria for recognition in licensed content in accordance with ASC 920-350-25-2. The license fee is not known or reasonably determinable for a specific title in content license agreements that do not specify the license fee per title. We expense as costs of revenues the greater of revenue sharing costs incurred through the end of the reporting period or the proportionate value of total minimum license fees expensed on a straight-line basis over the term of each license agreement. As the Company expenses license fees on a straight-line basis, it may result in deferred or prepaid license fees. Deferred license fees are classified on the consolidated balance sheets as “Other current liabilities”. Commitments for license agreements that do not meet the criteria for recognition in licensed content are included in Note 20 to the consolidated financial statements.

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17. Warner Bros. License Agreement

On June 15, 2011, the Company, through its Chinese joint ventures Hua Cheng Hu Dong (Beijing) Film and Television Communication Co., Ltd. (“Hua Cheng”) and Zhong Hai Shi Xun Information Technology Co., Ltd. (“Zhong Hai Video”) entered into a Transactional Video on Demand and Pay-Per-View License Agreement (the “WB Agreement”) with CAV Warner Home Entertainment Co., Ltd. (“CAVW”), Warner Bros. Home Entertainment Group’s joint venture in China. Pursuant to the WB Agreement, Hua Cheng was granted a license under copyright for a total term of fifty-four months beginning on July 1, 2011. The contract is subject to annual minimum payments.

In connection with the WB Agreement, the Company issued 200,000 warrants to Warner Bros. Entertainment Inc. exercisable at a price per share of $6.60 for a term of five years beginning on May 12, 2011. These warrants are subject to a right of redemption exercisable by the Company in the event the closing price of the Company's common stock shall equal or exceed $13.20 per share for twenty consecutive trading days. In accordance with ASC 505-50, Equity-based Payments to Non-employees , the fair value of equity instruments issued in the acquisition of goods or services should be recognized in the same manner as if an enterprise had paid cash. As such, the Company estimated the fair value of the warrants granted using the Black-Scholes Merton model at $676,462 and capitalized the amount as licensed content. Further, we initially classified the portion of total licensed content that we expect to amortize over the next twelve months in the amount of $150,325 as current licensed content with the remaining portion classified as non-current licensed content in the amount of $526,137. At December 31, 2011, the non-current licensed content was in the amount of $450,975. The Black-Scholes Merton model incorporated the following assumptions: risk-free interest rate of 1.89%, expected volatility of 60.0%, expected life of 5.0 years and expected dividend yield of 0%. The Company began amortizing this asset during the third quarter of 2011 and accordingly recognized $75,000 during the year ended December 31, 2011.

18. Share-Based Payments

Stock Options

Through December 31, 2011, the Company has 1,386,233 options and 433,579 warrants outstanding to purchase shares of our common stock.

The following table provides the details of the approximate total share based payments expense during the years ended December 31, 2011 and 2010:

	2011		2010
Stock option amortization	$	599,000	$	503,000
Stock issued as payment for interest		-		133,000
Stock issued for services		10,000		255,000
Stock warrants issued for service		25,000		-
Stock issuance right of purchase		194,000		-
	$	828,000	$	891,000

The Company accounts for its stock option awards pursuant to the provisions of ASC 718, Stock Compensation . The fair value of each option award is estimated on the date of grant using the Black-Scholes Merton valuation model. The Company recognizes the fair value of each option as compensation expense ratably using the straight-line attribution method over the service period, which is generally the vesting period. The Black-Scholes Merton model incorporated the following assumptions for the options granted in 2011 and 2010: risk-free interest rate of 1.82% to 3.43%, expected volatility of 60% and 75%, expected life of 10.0 years and expected dividend yield of 0%.

Common shares were also issued to pay for consulting services and were recorded at the closing price of $3.75 per share on the issue date and expensed in an amount of $10,000 for the year ended December 31, 2011.

Effective as of December 3, 2010, our Board of Directors approved the YOU On Demand Holdings, Inc. 2010 Stock Incentive Plan (“the Plan”) pursuant to which options or other similar securities may be granted. The maximum aggregate number of shares of our common stock that may be issued under the Plan is 4,000,000 shares.

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Stock option activity at December 31, 2011 and 2010 is summarized as follows:

	December 31, 2011								December 31, 2010
	Shares			Weighted Average Exercise Price		Aggregate Intrinsic Value			Shares		Weighted Average Exercise Price		Aggregate Intrinsic Value
Options outstanding at beginning of year		1,285,567		$	3.00	$	1,922,000			4,233	$	49.50	$	-
Granted		114,000			4.91		37,000			1,281,333		3.00		1,922,000
Exercised		-			-		-			-		-		-
Cancelled/expired		(13,333	)		3.00		(20,000	)		-		-		-
Options outstanding at end of period		1,386,234		$	3.32	$	1,939,000			1,285,567	$	3.00	$	1,922,000

Options exercisable at end of period		735,025		$	3.28	$	1,089,031			418,344	$	3.75	$	621,667

Options available for issuance		2,613,767								2,714,433

As of December 31, 2011, there were 1,386,233 options outstanding with 735,025 options exercisable at a weighted average exercise price of $3.28 with a weighted average remaining contractual life of 8.89 years.

As of December 31, 2011 the Company had total unrecognized compensation expense related to options granted of approximately $1,527,000 which will be recognized over a remaining service period of 4.0 years.

Warrants

In connection with the Company’s Share Exchange, capital raising efforts in 2007, the Company’s January 2008 Financing of Convertible Notes and Class A Warrants, the April 2010 Convertible Note, the July 2010 and June 2011 financings, the WB Agreement and a service agreement, the Company issued warrants to investors and service providers to purchase common stock of the Company. As of December 31, 2011, the weighted average exercise price was $36.21 and the weighted average remaining life was 2.49 years. The following table outlines the warrants outstanding as of December 31, 2011 and December 31, 2010:

	2011		2010
Warants Outstanding	Number of Warrants Outstanding		Number of Warrants Outstanding		Exercise Price		Expiration Date
Share Exchange Consulting Warrants ($45.00 exercise price)		59,664		59,664	$	45.00	1/11/2013
2007 Private Placement Broker Warrants ($45.00 exercise price)		8,533		8,533	$	45.00	1/11/2013
2007 Private Placement Investor Warrants ($150.00 exercise price)		53,333		53,333	$	150.00	1/11/2013
July 2010 Sinotop Acquisition Warrants ($45.00 exercise price)		17,049		17,049	$	45.00	1/11/2013
July 2010 Sinotop Acquisition Warrants ($150.00 exercise price)		13,333		13,333	$	150.00	1/11/2013
May 2011 Warner Brothers Warrants ($6.60 excercise price)		200,000		-	$	6.60	5/11/2016
June 2011 Fidelity Right to Purchase ($6.60 exercise price)		75,000		-	$	6.60	6/3/2012
2011 Service Warrants ($7.20 exercise price)		6,667		-	$	7.20	6/15/2016
		433,579		151,912

The Company accounts for its stock warrant issuances pursuant to the provisions of ASC 505-50, Equity-based Payments to Nonemployees . The fair value of each warrant issued is estimated on the date of grant using the Black-Scholes Merton valuation model. The Black-Scholes Merton model incorporated the following assumptions for the warrants issued in 2011: risk-free interest rate of 0.05% to 1.89%, expected volatility of 60.0% to 75%, expected life of 6 months to 5.0 years and expected dividend yield of 0%.

19. Income Taxes

Deferred taxes are recognized for the future tax consequences attributable to temporary differences between the carrying amounts of assets and liabilities for financial statement purposes and income tax purposes using enacted rates expected to be in effect when such amounts are realized or settled. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. The income tax benefit for the years ended December 31, 2011 and 2010 results from changes in calculated deferred taxes, particularly liabilities associated with intangible assets. Deferred tax assets associated with net operating losses have a full valuation allowance recorded against them except to the extent that they are able to offset deferred tax liabilities that arise from temporary differences that are expected to reverse prior to the expiration of the availability of the net operating loss carryovers.

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The Company’s current management does not believe that YOU On Demand Holdings, Inc. has filed United States corporate income tax returns for several years prior to the January 23, 2007 merger transaction and accompanying change in management. Management believes that because of the lack of taxable income there will be no material penalties resulting from any previous non-compliance.

Management believes that it has $6,706,453 of net operating loss carryovers from prior to 2006, when the corporate entity was under the control of different management in other lines of business. These carryovers expire in various years through 2025. Since Management has not been able to determine whether income tax returns were filed prior to the January 23, 2007 merger transaction by which the Company first became public and may not be able to recreate the records to file them if they have not they may be unable to claim the pre-exchange transaction net operating loss carryovers. In addition, even if the net operating loss carryovers were to be properly established, the future use of any pre-exchange transaction net operating loss carryovers will be significantly limited under section 382 of the internal revenue code because of the change of control in January 2007 as well as by previous changes in the control of the Corporate entity. The extent of these limitations has not yet been determined.

As of December 31, 2011, the Company has available additional U.S. net operating loss carryovers of $9,897,671 which equals $11,616,645 shown on the tax returns less $1,718,974 resulting from the non-recognition for financial reporting purposes of the tax benefits of certain a tax position taken by the Company because of the uncertainty of the position being sustained. The net operating loss carryovers expire in the years 2027 through 2031. The non-recognition of the tax benefits, while reducing the net operating loss carryovers, gives rise to a capital loss carryover of $1,420,289 and an AMT credit of $17,952. The Company also has a charitable contributions carryover of $2,000 at December 31, 2011.

In addition to the U.S. net operating losses, Jinan Broadband, Shandong Media, AdNet, Sinotop Hong Kong and Sinotop Beijing have the following estimated Chinese (Hong Kong in the case of Sinotop) net operating loss carryovers at December 31, 2011 with the expiration dates as shown:

	Jinan		Shandong		Sinotop		Zhong Hai		YOD				Total
Expiring	Braodband		Media		Hong Kong		Video		WFOE		Other		Foreign
2013	$	-		14,567	$	-	$	-	$	-	$	103,498	$	118,065
2014		-		91,999		-		-	$	-		48,480		140,479
2015		-		383,185		354,077		382,992	$	-		18,344		1,138,598
2016		493,283		516,876		417,358		1,782,591		329,672		16,076		3,555,856
Total	$	493,283	$	1,006,627	$	771,435	$	2,165,583	$	329,672	$	186,398	$	4,952,998

The estimation of the income tax effect of any future repatriation of the Company’s 51% share of any profits generated by its interests in the Chinese and Hong Kong companies is not practicable. This is because it may involve additional Chinese taxation on the distributions. China Broadband Ltd. is not subject to Cayman Islands taxation.

The Company has not recognized deferred tax assets relating to the excess of its income tax bases in its non-U.S. subsidiaries over their financial statement carrying value because the Company expects to hold the investments and reinvest future earnings indefinitely.

The Company’s income tax benefit for the years ended December 31, 2011 and 2010 consisted entirely of foreign deferred taxes arising from net operating loss carryforwards.

The Company’s United States income tax returns are subject to examination by the Internal Revenue Service (“IRS”) for at least 2008 and later years. Because of the uncertainty regarding the filing of tax returns for earlier years it is possible that the Company is subject to examination by the IRS for earlier years. All of the Chinese tax returns for the Chinese operating companies are subject to examination by the Chinese tax authorities for all periods from each companies’ inception in 2007 through 2010 as applicable.

The following is a reconciliation of the beginning and ending amounts of unrecognized tax benefits for the years ended December 31, 2011 and 2010:

	2011		2010
Balance, beginning of year	$	20,255	$	18,577
Increase from prior years' tax positions		1,620		1,678
Balance, end of year	$	21,875	$	20,255

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Included in the determination of income tax expense (benefit) for the years ended December 31, 2011 and 2010 were estimated interest and penalties of $1,620 and $1,678 respectively.

The Company's deferred tax assets and liabilities at December 31, 2011 and 2010 consisted of:

	2011			2010
Deferred tax assets

U.S. NOL - pre-stock exchange transaction	$	2,280,194		$	2,280,194
U.S. NOL - subsequent to stock exchange transaction		3,365,208			1,451,778
Foreign NOL		1,064,145			468,588
Deferred revenue		439,521			391,068
Reserve for returns		21,502			-
Fixed assets cost basis		1,468,092			1,222,181
Accrued payroll		8,500			-
Inventory reserves		150,927			150,927
Allowance for doubtful accounts		34,090			22,500
Equity method investee		4,927			-
Nonqualified options		109,214			9,214
Marketable securities		100,795			98,346
AMT credits		17,952			17,952
Capital loss carryover		482,898			482,898
Charitable contribution carryover		680			-
Total deferred tax assets		9,548,645			6,595,646

Less: valuation allowance		(9,057,657	)		(6,094,672	)

Deferred tax liabilities

Intangible assets		(1,279,729	)		(1,661,041	)

Net deferred tax liability	$	(788,741	)	$	(1,160,068	)

The Company’s income tax expense (benefit) for the years ended December 31, 2011 and 2010 consisted of the following:

	2011			2010

Benefit of operating loss carryforwards	$	(177,546	)	$	(198,065	)
Other deferred benefits		(193,782	)		(321,330	)
Unrecognized tax positions		1,620			1,672
	$	(369,707	)	$	(517,723	)

A reconciliation of the expected income tax derived by the application of the 34% U.S. corporate income tax rate to the Company's loss before income tax benefit is as follows:

	2011			2010

Net loss before income taxes	$	(13,011,772	)	$	(16,037,729	)

Expected income tax benefit at 34%		(4,424,002	)		(5,452,828	)

Nondeductible expenses		379,915			2,690,131
Rate-differential on foreign income invested indefinitely		1,180,646			679,548
Nontaxable gain on the disposal of AdNet		(563,319)			-
Increase in valuation allowance		2,960,535			1,177,951
Change in estimates - offset by changes in valuation allowance above		63,661			331,457
Other changes in estimates		94,898			44,346
Unrecognized tax benefits		1,620			1,672
Other		-			10,000

Income tax expense (benefit)	$	(369,707	)	$	(517,723	)

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The changes in estimates in 2010 related principally to reduce Chinese NOL carryovers as a result of the disallowance of certain expense deductions by tax authorities.

YOD’s senior management, consisting of its Chairman and CEO, and its President and CFO, resides in the United States. The Executive offices are in New York metropolitan area where both reside. The books and records of the non-PRC entities are maintained by an individual in Colorado. Because of this, we think that it would be unlikely that the non-PRC entities would be classified as PRC “resident enterprises.”

For the year ended December 31, 2011, there is no additional unrecognized tax benefit. Management does not anticipate any potential future adjustments in the next twelve months which would result in a material change to its financial tax position. As of December 31, 2011 and 2010, the Company accrued interest and penalties of $1,620 as shown above.

If the EIT Law were to be applied to YOU On Demand, Inc., (the Nevada Corporation itself) and/or to China Broadband Cayman those entities would be subject to Chinese corporate income tax, currently at a rate of 25%. To date, these two entities have generated no net income so there would be no Chinese tax liability even if the EIT Law were to apply to them.

20. Commitments and Contingencies

The Company has employment agreements with certain employees that provide severance payments upon termination of employment under certain circumstances, as defined in the applicable agreements. As of December 31, 2011, the Company's potential minimum cash obligation to these employees was approximately $818,000.

The Company is committed to paying leased property costs related to our Sinotop office during 2012, 2013, 2014 and 2015 in the amounts of RMB 2,441,299 (USD 383,943), RMB 2,134,244 (USD 335,652), RMB360,000 (USD56,617) and RMB120,000 (USD18,872), respectively.

The Company is committed to paying product related costs during 2012, 2013, 2014, and 2015 in the amounts of RMB 1,462,511 (USD 230,009), RMB 2,925,022 (USD 460,018), RMB 5,850,044 (USD 920,035), and RMB 5,850,044 (USD 920,035), respectively.

According to the purchase agreement with “Shandong Fu Ren”, Zhong Hai Video was obligated to pay RMB 1,000,000 (USD 157,270) to acquire 51% ownership of Shanghai Tianduo, of which RMB 700,000 (USD 110,089) remains.

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.

21. Defined Contribution Plan

During 2011, the Company began sponsoring a 401(k) defined contribution plan ("401(k) Plan") that provides for a 100% employer matching contribution of the first 3% and a 50% employer matching contribution of each additional percent contributed by an employee up to 5% of each employee’s pay. Employees become fully vested in employer matching contributions after six months of employment. Company 401(k) matching contributions were approximately $46,000 for the year ended December 31, 2011. In 2011 employees were able to defer up to $16,500 (plus $5,500 for employees over the age of 50) of their yearly pay as a pre-tax investment in the 401(k) Plan, in accordance with limits set by the IRS. (Those limits will increase to $17,000 (plus an additional $5,500 for employees over the age of 50) in 2012.)

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EXHIBIT INDEX

Exhibit No.		Description
2.1		Share Exchange Agreement, dated as of January 23, 2007, by and among the Company, China Broadband, Ltd. and its shareholders. [incorporated by reference to Exhibit 2.1 to the Company’s Annual Report on Form 10-KSB filed May 25, 2007]
3.1*		Articles of Incorporation of the Company, as amended to date.
3.2		Amended and Restated Bylaws of the Company. [incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q filed August 23, 2010]
3.3		Certificate of Designation of Series A Preferred Stock [incorporated by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q filed August 23, 2010]
3.4		Certificate of Designation of Series B Preferred Stock [incorporated by reference to Exhibit 3.3 to the Company’s Quarterly Report on Form 10-Q filed August 23, 2010]
4.1		Form of Warrant issued pursuant to the Securities Purchase Agreement dated May 20, 2010 [incorporated by reference to Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q filed August 23, 2010]
4.2		Form of Warrant issued on July 30, 2010 to Shane McMahon. [incorporated by reference to Exhibit 4.2 to the Company’s Quarterly Report on Form 10-Q filed August 23, 2010]
4.3		Form of Warrant issued on July 30, 2010 to Steven Oliveira. [incorporated by reference to Exhibit 4.3 to the Company’s Quarterly Report on Form 10-Q filed August 23, 2010]
4.4		Form of Registration Rights Agreement, dated July 30, 2010, pursuant to the Securities Purchase Agreement dated May 20, 2010. [incorporated by reference to Exhibit 4.4 to the Company’s Quarterly Report on Form 10-Q filed August 23, 2010]
4.5		Registration Rights Agreement, dated July 30, 2010, between the Company and Shane McMahon. [incorporated by reference to Exhibit 4.5 to the Company’s Quarterly Report on Form 10-Q filed August 23, 2010]
4.6		Registration Rights Agreement, dated July 30, 2010, between the Company and Steven Oliveira. [incorporated by reference to Exhibit 4.6 to the Company’s Quarterly Report on Form 10-Q filed August 23, 2010]
4.7		Form of Note Purchase Agreement, dated June 30, 2009, among the Company and certain investors. [Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on July 6, 2009]
4.8		Form of 5% Convertible Promissory Note, issued as of June 30, 2009. [Incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on July 6, 2009]
4.9		Form of 5% Convertible Promissory Note, issued as of January 11, 2008. [Incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on January 17, 2008]
4.10		Form of Class A Warrant, issued as of January 11, 2008. [Incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on January 17, 2008]
4.11		Form of Broker’s Common Stock Warrant, issued as of January 11, 2008. [Incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on January 17, 2008]
4.12		Form of Warrant Amendment, dated March 2008 [Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on May 8, 2008]
4.13		Form of 7% Convertible Promissory Note issued by China Broadband, Ltd. and assumed by the Company. [incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed March 20, 2007]
4.14		Form of Warrant, issued as of January 23, 2007. [incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed March 20, 2007]
4.15		Form of Warrant, issued as of January 23, 2007 to Maxim Financial Corporation. [incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed March 20, 2007]
4.16		Form of Warrant, issued as of January 23, 2007 to BCGU, LLC. [incorporated by reference to Exhibit 10.10 to the Company’s Annual Report on Form 10-KSB filed May 25, 2007]
4.17		Form of Registration Rights Agreement, dated as of January 23, 2007 [incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed March 20, 2007]
10.1		Form of Securities Purchase Agreement dated May 20, 2010. [incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed August 23, 2010]
10.2		Form of Series A Securities Purchase Agreement, dated May 20, 2010. [incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed August 23, 2010]
10.3		First Amendment to Series A Securities Purchase Agreement, dated July 30, 2010. [incorporated by reference to Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q filed August 23, 2010]
10.4		Form of Series B Securities Purchase Agreement dated May 20, 2010. [incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed August 23, 2010]

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10.5		Form of Waiver and Agreement to Convert, dated May 20, 2010. [incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed August 23, 2010]
10.6		Form of Waiver and Agreement to Convert, dated May 20, 2010. [incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q filed August 23, 2010]
10.7		Loan Cancellation Agreement, dated May 20, 2010, between the Company and Steven Oliveira [incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q filed August 23, 2010]
10.8		Loan Cancellation and Note Assignment Agreement, dated June 24, 2010, between the Company and Chardan SPAC Asset Management LLC. [incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q filed August 23, 2010]
10.9		Form of Stock Purchase Agreement, dated as of June 30, 2009, among the Company and certain investors [Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on July 6, 2009]
10.10		Form of Waiver Letter, dated as of June 30, 2009, between the Company and certain existing note holders [Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 6, 2009]
10.11		Form of Subscription Agreement, dated as of January 11, 2008, between the Company and certain investors. [Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on January 17, 2008]
10.12		Form of Funds Escrow Agreement, dated January 11, 2008, by and among the Company, Grushko and Mittman, P.C., and investors. [Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on January 17, 2008]
10.13		Settlement Agreement, dated January 11, 2008, by and among the Company, China Broadband Ltd., Stephen Cherner, Maxim Financial Corporation, Mark L. Baum, BCGU, LLC, Mark I Lev, Wellfleet Partners, Inc., Pu Yue, Clive Ng, Chardan Capital Markets, LLC, Jaguar Acquisition Corporation, and China Cablecom Holdings, Ltd. [Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 17, 2008]
10.14		Form of Subscription and Release Agreement, dated March 2008 [Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 8, 2008]
10.15		Form of Release Agreement, dated March 2008 [Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on May 8, 2008]
10.16		Form of Subscription Agreement, dated January 23, 2007, by and among the Company and certain investors. [incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed March 20, 2007]
10.17		Ordinary Share Purchase Agreement, dated July 30, 2010, among the Company, China Broadband Ltd. and Weicheng Liu. [incorporated by reference to Exhibit 10.13 to the Company’s Quarterly Report on Form 10-Q filed August 23, 2010]
10.18		Cooperation Agreement dated as of December 26, 2006 between China Broadband, Ltd. and Jianan Guangdian Jiahe Digital Television Co., Ltd. [incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 20, 2007]
10.19		Exclusive Service Agreement, dated December, 2006, by and among Beijing China Broadband Network Technology Co., Ltd., Jinan Guangdian Jiahe Digital Television Co., Ltd. and Jinan Broadcast &Televison Information Network Center. [incorporated by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K filed June 11, 2007]
10.20		Cooperation Agreement, dated March 7, 2008, by and among Ji’Nan Zhongkuan Dian Guang Information Technology Co., Shandong Broadcast & TV Weekly Press and Modern Movie & TV Biweekly Press. [incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 13, 2008]
10.21		Share Issuance Agreement, dated April 7, 2009 between the Company, China Broadband, Ltd., Waanshi Wangjing Media Technologies (Beijing) Co., Ltd. and its shareholders. [incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed April 14, 2009]
10.22		Loan Agreement, dated as of April 7, 2009, between China Broadband, Ltd. and Wangjing Media Technologies (Beijing) Co., Ltd. [incorporated by reference to Exhibit 10.13 to the Company’s Annual Report on Form 10-K filed April 15, 2010]
10.23		Equity Option Agreement, dated as of April 7, 2009, between China Broadband, Ltd. and Wangjing Media Technologies (Beijing) Co., Ltd. [incorporated by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K filed April 15, 2010]
10.24		Pledge Agreement, dated as of April 7, 2009, between China Broadband, Ltd. and Wangjing Media Technologies (Beijing) Co., Ltd. [incorporated by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K filed April 15, 2010]

Table of Contents

10.25		Trustee Appointment Letter, dated as of April 7, 2009, by China Broadband, Ltd., appointing Mr. Wang Yingqi as trustee on its behalf [incorporated by reference to Exhibit 10.16 to the Company’s Annual Report on Form 10-K filed April 15, 2010]
10.26		Employment Agreement, dated July 30, 2010 between the Company and Shane McMahon. [incorporated by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q filed August 23, 2010]
10.27		Employment Agreement, dated July 30, 2010 between the Company and Marc Urbach. [incorporated by reference to Exhibit 10.11 to the Company’s Quarterly Report on Form 10-Q filed August 23, 2010]
10.28		Employment Agreement, dated July 30, 2010 between the Company and Clive Ng. [incorporated by reference to Exhibit 10.12 to the Company’s Quarterly Report on Form 10-Q filed August 23, 2010]
10.29		Employment Agreement, dated July 30, 2010 between the Company and Weicheng Liu. [incorporated by reference to Exhibit 10.10 to the Company’s Quarterly Report on Form 10-Q filed August 23, 2010]
10.30		Employment Agreement Amendment, dated January 11, 2008, between China Broadband, Ltd. and Pu Yue. [Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on January 17, 2008]
10.31		Consulting Agreement, dated January 24, 2007, between the Company and Maxim Financial Corporation. [incorporated by reference to Exhibit 10.9 to the Company’s Amended Current Report on Form 8-K/A filed June 4, 2007]
10.32		Form of Warrant Exchange Agreement, dated October 20, 2010, between the Company and the holders of Warrants dated July 30, 2010 [incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 22, 2010]
10.33		Form of Warrant Exchange Agreement, dated October 20, 2010, between the Company and the holders of Warrants dated January 11, 2010 [incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on October 22, 2010]
10.34		Letter Agreement between China Broadband, Inc. and Clive Ng, effective November 29, 2010 [incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 3, 2010]
31.1		Certifications of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2		Certifications of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1		Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2		Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

*Filed herewith

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

Large Accelerated Filer o	Accelerated Filer o

Non-Accelerated Filer o (Do not check if a smaller reporting company)	Smaller reporting company x

PART I
		Page
Item 1.	Business	1
Item 1A.	Risk Factors	10
Item 1B.	Unresolved Staff Comments	19
Item 2.	Properties	19
Item 3.	Legal Proceedings	19
Item 4.	Mine Safety Disclosures	19

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	19
Item 6.	Selected Financial Data	20
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 8.	Financial Statements and Supplementary Data	28
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	29
Item 9A.	Controls and Procedures	29
Item 9B.	Other Information	30

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	30
Item 11.	Executive Compensation	35
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	37
Item 13.	Certain Relationships and Related Transactions, and Director Independence	39
Item 14.	Principal Accounting Fees and Services	39

PART IV

Item 15.	Exhibits, Financial Statement Schedules	40

Description		License/Permit
Internet Multi-media Content Transmission		License No. 1502005
Radio & Television Program Transmission & Operation Business		Permit Shandong No. 1552013
Radio & TV Program Production & Operation License		Shandong No. 46
PR China Value-added Telecom Service License		Shandong No. B2-20050002
PR China Value-added Telecom Service License		Shandong B2-20051013

Description		License/Permit
PRC Newspaper Publication License for Shandong Broadcast & TV Weekly		National Unified Publication CN 37-0014
PRC Magazine Publication License for View Weekly		Ruqichu Nor:1384
PRC Magazine Publication License for Modern Movie & TV Biweekly		Ruqichu No:1318
Advertising License for Shandong Broadcast & TV Weekly		3700004000093
Advertising License for View Weekly		3700004000186
Advertising License for Modern Movie & TV Biweekly		3700004000124

	(212) 206-1216
	(Registrant’s telephone number, including area code)

Title of each class		Name of each exchange on which registered
None		None

Function	Number of Employees
Sales and Marketing		39
Technical		44
Research and Development		3
Operating		91
Financial		17
Administrative		23
TOTAL		217

	Closing Bid Prices (1)
	High		Low
Year Ended December 31, 2011
1st Quarter	$	6.750	$	3.750
2nd Quarter		9.000		3.750
3rd Quarter		9.000		3.750
4th Quarter		5.250		3.750

Year Ended December 31, 2010
1st Quarter	$	15.000	$	6.000
2nd Quarter		12.000		5.250
3rd Quarter		8.250		3.750
4th Quarter		5.625		2.250

	Year Ended
	December 31,			December 31,			Amount			%
	2011			2010			Change			Change

Revenue	$	7,868,000		$	7,649,000		$	219,000			3	%
Cost of revenue		5,526,000			4,722,000			804,000			17	%
Gross profit		2,342,000			2,927,000			(585,000	)		-20	%

Selling, general and adminstrative expenses		8,801,000			3,919,000			4,882,000			125	%
Professional fees		2,115,000			1,240,000			875,000			71	%
Depreciation and amortization		4,424,000			4,283,000			141,000			3	%
Impariments of long-lived assets		244,000			2,405,000			(2,161,000	)		-90	%

Loss from operations		(13,242,000	)		(8,920,000	)		(4,322,000	)		48	%

Interest & other income / (expense)
Interest income		11,000			8,000			3,000			38	%
Interest expense		(2,000	)		(554,000	)		552,000			-100	%
Stock purchase right		(194,000	)		-			(194,000	)		-
Inducement to convert and reduction in conversion price of convertible notes		-			(6,706,000	)		6,706,000			-100	%
Change in fair value of warrant liabilities and modification to certain warrants		-			669,000			(669,000	)		-100	%
Change in fair value of contingent consideration		3,000			(501,000	)		504,000			-101	%
Loss on sale of marketable equity securities		-			(15,000	)		15,000			-100	%
Loss on equity investment		(14,000	)		(15,000	)		1,000			-7	%
Gain on deconsolidation of AdNet		470,000			-			470,000			-
Other		(44,000	)		(4,000	)		(40,000	)		975	%

Net loss before income taxes and noncontrolling interests		(13,012,000	)		(16,038,000	)		3,026,000			-14	%

Income tax benefit		370,000			518,000			(148,000	)		-29	%

Consolidated net loss		(12,642,000	)		(15,520,000	)		2,878,000			-14	%

Net loss attributable to noncontrolling interests		1,372,000			2,616,000			(1,244,000	)		-34	%

Net loss attributable to YOU On Demand shareholders		(11,270,000	)		(12,904,000	)		1,634,000			-10	%

Dividends on preferred stock		-			(2,315,000	)		2,315,000			-100	%

Net loss attributable to YOU On Demand common shareholders	$	(11,270,000	)	$	(15,219,000	)	$	3,949,000			-24	%

NAME	AGE	POSITION
Shane McMahon	42	Chairman and Chief Executive Officer
Marc Urbach	39	President, Chief Financial Officer and Director
Weicheng Liu	54	Senior Executive Officer and Director
James Cassano	65	Director

Name and Principal Position	Year	Salary ($)		Bonus ($)		Stock Awards ($)		Option Awards ($)		All Other Compensation ($) (1)		Total ($)
Shane McMahon	2011		251,875	-		-		-			-		251,875
Chief Executive Officer	2010		83,333		-		-		1,137,601		-		1,220,934
Weicheng Liu	2011		266,411		-		-		-		-		266,411
China Chief Executive Officer	2010		83,333		-		-		83,333		-		83,333
Marc Urbach	2011		216,875		35,000		-		-		-		251,875
President and Chief Financial Officer	2010		159,583		-		-		568,800		9,013		737,396

	Option Awards						Stock Awards
Name	Number of securities underlying unexercised options (#) exercisable	Number of securities underlying unexercised options (#) unexercisable	Equity incentive plan awards: Number of s ecurities underlying unexercised unearned options (#)		Option exercise price ($)		Number of shares or u nits of stock that have not vested (#)	Market value of shares of units of stock that have not vested ($)		Equity incentive plan awards: Number of unearned shares, units or o ther rights that have not v ested (#)		Equity incentive plan awards: Market or p ayout value of unearned shares, units or other rights that have not vested ($)
Shane McMahon	533,333	533,333		-		3.00	-		-		-	-
Marc Urbach	266,667	266,667		-		3.00	-		-		-	-
Marc Urbach	1,333	-		-		75.00	-		-		-	-

		Shares Beneficially Owned(1)
		Common Stock(2)						Series A Preferred Stock(3)					Series B Preferred Stock(4)					% Total Voting Power(5)

Name and Address of Beneficial Owner	Office, If Any	Shares			% of Class			Shares		% of Class			Shares		% of Class
Directors and Officers
Shane McMahon	Chairman and CEO		2,566,667	(6)		23.62	%		7,000,000		100	%		0		*			58.91	%
Marc Urbach	President and CFO		466,667	(7)		4.35	%		0		*			0		*			2.33	%
Weicheng Liu	Senior Executive Officer and Director		2,477,681	(8)		23.07	%		0		*			0		*			12.34	%
James Cassano	Director		10,667	(9)		*			0		*			0		*			*
All officers and directors as a group (4 persons named above)			5,521,682			48.36	%		7,000,000		100	%		0		*			71.59	%

5% Security Holders
Shane McMahon	Chairman and CEO		2,566,667	(6)		23.62	%		7,000,000		100	%		0		*			58.91	%
Weicheng Liu	Senior Executive Officer and Director		2,477,681	(8)		23.07	%		0		*			0		*			12.34	%
Oliveira Capital, LLC 18 Fieldstone Ct. New City, NY 10956			857,680	(10)		8.19	%		0		*			9,066,800		88.31	%		9.99	%
Steven Oliveira 18 Fieldstone Ct. New City, NY 10956			857,680	(10)		8.19	%		0		*			10,266,800		100	%		9.99	%
FMR LLC 82 Devonshire St. Boston, MA 02109			984,440	(11)		9.40	%		0		*			0		*			4.97	%

Plan category	Number of securities to be issued upon exercise of outstanding options, restricted stock, warrants and rights (a)		Weighted-average exercise price of o utstanding options, restricted stock, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders		-		-		-
Equity compensation plans not approved by security holders (1)		4,000,000	$	3.32		2,613,767
Total		4,000,000	$	3.32		2,613,767

	Year Ended December 31,
	2011		2010
Audit Fees	$	265,199	$	417,150
Audit-Related Fees		-		-
Tax Fees		-		-
All Other Fees		-		-
TOTAL	$	265,199	$	417,150

Exhibit No.		Description
2.1		Share Exchange Agreement, dated as of January 23, 2007, by and among the Company, China Broadband, Ltd. and its shareholders. [incorporated by reference to Exhibit 2.1 to the Company’s Annual Report on Form 10-KSB filed May 25, 2007]
3.1*		Articles of Incorporation of the Company, as amended to date.
3.2		Amended and Restated Bylaws of the Company. [incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q filed August 23, 2010]
3.3		Certificate of Designation of Series A Preferred Stock [incorporated by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q filed August 23, 2010]
3.4		Certificate of Designation of Series B Preferred Stock [incorporated by reference to Exhibit 3.3 to the Company’s Quarterly Report on Form 10-Q filed August 23, 2010]
4.1		Form of Warrant issued pursuant to the Securities Purchase Agreement dated May 20, 2010 [incorporated by reference to Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q filed August 23, 2010]
4.2		Form of Warrant issued on July 30, 2010 to Shane McMahon. [incorporated by reference to Exhibit 4.2 to the Company’s Quarterly Report on Form 10-Q filed August 23, 2010]
4.3		Form of Warrant issued on July 30, 2010 to Steven Oliveira. [incorporated by reference to Exhibit 4.3 to the Company’s Quarterly Report on Form 10-Q filed August 23, 2010]
4.4		Form of Registration Rights Agreement, dated July 30, 2010, pursuant to the Securities Purchase Agreement dated May 20, 2010. [incorporated by reference to Exhibit 4.4 to the Company’s Quarterly Report on Form 10-Q filed August 23, 2010]
4.5		Registration Rights Agreement, dated July 30, 2010, between the Company and Shane McMahon. [incorporated by reference to Exhibit 4.5 to the Company’s Quarterly Report on Form 10-Q filed August 23, 2010]
4.6		Registration Rights Agreement, dated July 30, 2010, between the Company and Steven Oliveira. [incorporated by reference to Exhibit 4.6 to the Company’s Quarterly Report on Form 10-Q filed August 23, 2010]
4.7		Form of Note Purchase Agreement, dated June 30, 2009, among the Company and certain investors. [Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on July 6, 2009]
4.8		Form of 5% Convertible Promissory Note, issued as of June 30, 2009. [Incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on July 6, 2009]