Attached files
file | filename |
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EX-31.1 - RVUE HOLDINGS, INC. | v204421_ex31-1.htm |
EX-32 - RVUE HOLDINGS, INC. | v204421_ex32.htm |
EX-31.2 - RVUE HOLDINGS, INC. | v204421_ex31-2.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q/A
Amendment
No. 1
(Mark
One)
þ
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended September 30, 2010
Or
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the transition period from
to
Commission
File Number: 333-158117
RVUE
HOLDINGS, INC.
|
(Exact
name of registrant as specified in its
charter)
|
NEVADA
|
94-3461079
|
|
(State
or other jurisdiction of incorporation
or
organization)
|
(I.R.S.
Employer Identification No.)
|
|
100
N.E. 3rd
Avenue, Suite 200
Fort
Lauderdale, Florida 33301
|
(954)
525-6464
|
|
(Address
of principal executive offices,
including
zip code)
|
(Registrant’s
telephone number,
including
area code)
|
(Former
name, former address and former fiscal year, if changed since last
report)
|
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes þ No o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes o No o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer o
|
Accelerated
filer o
|
|
Non-accelerated
filer o
|
(Do
not check if a smaller reporting company)
|
Smaller
reporting company þ
|
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes o No þ
The
number of shares outstanding of each of the issuer’s classes of common stock as
of the close of business on November 11, 2010 is as follows:
Class
|
Number
of Shares
|
|
Common
Stock: $0.001 Par Value
|
28,648,730
|
RVUE
HOLDINGS, INC.
TABLE OF
CONTENTS
PART
I
|
FINANCIAL
INFORMATION
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
|
1
|
Forward
Looking Statements.
|
9
|
|
PART
II
|
OTHER
INFORMATION
|
|
Item
6.
|
Exhibits.
|
12
|
This
Amendment No.1 on Form 10-Q (the "Amendment") amends Part I – Item 2 and Part II
– Item 6 of the Quarterly Report for rVue Holdings, Inc. (the "Company") on Form
10-Q for the quarterly period ended September 30, 2010, filed with the
Securities and Exchange Commission (“Commission”) on November 12, 2010 (the
"Original Report"). The Company is filing this Amendment in response to comments
from the Staff of the Commission.
PART
I – FINANCIAL INFORMATION
Item
2.
|
Management’s
Discussion and Analysis Of Financial Condition And Results of
Operations.
|
The
following discussion and analysis of the Company’s financial condition and
results of operations should be read in conjunction with the unaudited condensed
financial statements and related notes included in Item 1 of the Original
Report, as well as our audited financial statements as of December 31, 2009 and
for the period from Inception (September 15, 2009) through December 31, 2009
included in Form 8-K/A filed with the Commission on August 17,
2010.
Overview
rVue is
an advertising exchange that connects advertisers and advertising agencies with
digital signage. We provide an online, internet based advertising
exchange that connects advertisers and advertising agencies with third party
Digital Out-Of-Home ("DOOH") media or networks, that allows the advertiser to
create a targeted advertising campaign and media plan, and negotiate that media
plan simultaneously with all the third-party networks selected. As of
November 11, 2010, 97 networks comprising approximately 348,000 screens
representing the top 50 Designated Market Area's ("DMA's") were accessible
through the rVue exchange, and rVue had relationships with over 90 advertising
agencies. For this service rVue receives a transaction fee of up to
4% of the gross advertising placed through rVue. As of the September
30, 2010, rVue had not generated significant revenues from advertisers utilizing
its DOOH platform or technologies.
In
connection with the Transaction, the Company acquired from Argo all of its
assets related to the rVue business, which included all of the common stock of
rVue, Inc. as well as software, contracts and technology. Such
software and technology included the rVue demand side platform software as well
as the rVue Client and Server Software which allows an end user to manage and
operate a DOOH network. The Client Software is used to manage each screen or
site and the Sever Software is used to manage the Client
Software. rVue has licensed the Client and Server Software to Levoip
Corporation for installation in Italy. Under the terms of the
contract, Levoip is required to pay rVue: (1) a one-time initial site
commissioning fee for first-time sites; (2) a recurring monthly license fee at a
fixed dollar per site for each month a site utilizes the software; and (3) a 25%
share of the gross third-party advertising displayed on the sites. We
do not expect to generate significant additional revenues from the Levoip
contract after September 30, 2010, inasmuch as we have recently been informed
that Levoip has suspended its installation of additional sites. As of
December 31, 2009 and as of September 30, 2010, the Company had generated $2,533
and $57,612 of revenue from the Levoip contract.
We provide Network and Administrative
Service and receive fees for producing programming in our studios or with
outside services for Mattress Firm and AutoNation. We also earn network and
administrative service revenue under contracts pursuant to which we provide
content production and technical services to Mattress Firm and Accenture on a
monthly basis for a fixed monthly payment resulting in total monthly revenue of
approximately $33,000. Through May 2010 we provided AutoNation with
oversight and management services and content production for their in-house
network. We monitored the network to ensure it was running at all
times and created custom content for display on such networks. Since
June 2010 we provide content creation services on an as needed basis for
AutoNation. Mattress Firm operates an in-store network. We
image computers to run the in-store network in each store location, and produce
and create custom content such as in store sales promotions to display on such
network. We assist Accenture with the maintenance and troubleshooting
of a private network they operate. We provide 24/7 services to ensure
that the network operates without interruption. We expect to continue
to receive revenue from these services to AutoNation, Mattress Firm and
Accenture during the next twelve months, but we do not intend to pursue
additional network related service opportunities as the focus of our business is
to earn transaction fees from rVue as discussed above.
1
Recent
Developments
On March
29, 2010, the Company filed an Amended and Restated Articles of Incorporation
to: (1) change our name from “Rivulet International, Inc.” to “Rvue Holdings,
Inc.”; (2) designate a resident agent and registered office; (3) increase the
number of authorized shares of capital stock from 75,000,000 shares to
150,000,000 shares, divided into two classes: 140,000,000 shares of common
stock, par value $.001 per share (the “Common Stock”), and 10,000,000 shares of
“blank check” preferred stock, par value $.001 per share (the “Preferred
Stock”); (4) set the number of directors of the Company at no less than 1; (5)
state the legal purpose of the Company; (6) provide for the limitation of
liability of directors of the Company to the fullest extent permitted by the
Nevada Revised Statutes; and (7) provide for the indemnification of officers and
directors of the Company to the fullest extent permissible under the laws of the
State of Nevada.
On May
13, 2010, we acquired all of the issued and outstanding capital stock and the
business of rVue, Inc., a Delaware corporation ("rVue, Inc.") from Argo Digital
Solutions, Inc., a Delaware corporation ("Argo"), as well as any and all assets
related to the rVue business held by Argo, pursuant to an asset purchase
agreement, dated as of May 13, 2010 (the "Asset Purchase Agreement"), by and
between Argo, rVue, Inc. and the Company (the “Transaction”), in exchange for
12,500,000 shares of our Common Stock, or approximately 67% of our outstanding
common shares upon the close of the asset sale (the “Transaction”). The
Transaction was completed on May 13, 2010, and rVue, Inc. became a wholly-owned
subsidiary of the Company. The Transaction is being accounted for as a reverse
recapitalization of rVue, Inc. For accounting and financial reporting purposes
rVue, Inc. is the acquiror and the Company is the acquired
company. The Company succeeded to the business of rVue, Inc. and
following the completion of the Transaction and Private Placement, disposed of
its pre-merger assets. Consequently, the assets and liabilities and the
operations that will be reflected in the historical financial statements of the
Company prior to the closing of the Transaction will be those of rVue, Inc., and
the consolidated financial statements after completion of the purchase and
closing will include the assets and liabilities of the Company and rVue, Inc.,
historical operations of rVue, Inc. and operations of the Company from the
closing date of the Transaction.
Results
of Operation
rVue,
Inc. commenced business operations on September 15, 2009 and has no comparative
operating history for the three or nine months ended September 30,
2009. For the period from September 15, 2009 through September 30,
2009, rVue, Inc. had operating expenses and a net loss of $6,500.
Three
Months Ended September 30, 2010
Revenue
We earned
revenue in three categories as follows:
Three
Months Ended
|
||||||||||||||||||||||||
September
30,
|
June
30,
|
|||||||||||||||||||||||
2010
|
%
|
2010
|
%
|
$
Change
|
%
Change
|
|||||||||||||||||||
License
Fees
|
$ | 24,175 | 15.4 | % | $ | 20,480 | 13.3 | % | $ | 3,695 | 18.0 | % | ||||||||||||
Network
and Administrative Services
|
129,504 | 82.5 | % | 133,877 | 86.7 | % | (4,373 | ) | --3.3 | % | ||||||||||||||
Transaction
Fees
|
3,257 | 2.1 | % | - | - | 3,257 | 100.0 | % | ||||||||||||||||
Total
Revenue
|
$ | 156,936 | 100.0 | % | $ | 154,357 | 100.0 | % | $ | 2,579 | 1.7 | % |
License
Fees.
We earn
revenue from the licensing of our Client and Server software and technology to
third parties, including DOOH networks. We have granted an exclusive
license for the use of our Client and Server software and technology in Italy to
Levoip Corporation and categorize this revenue as “License”
revenue. License revenue for the three month period ended September
30, 2010 was $24,175, compared to $20,480 for the three month period ended June
30, 2010, a $3,695 or 18.0% increase. The increase was attributable
to additional sites installed in the quarter. We do not expect to
generate significant additional revenues from the Levoip contract after
September 30, 2010, inasmuch as we have recently been informed that Levoip has
suspended its installation of additional sites.
2
Network and Administrative
Services.
Network
and Administrative Service revenue relate to fees we receive for producing
programming in our studios or with outside services for Mattress Firm and
AutoNation. We also earn network and administrative service revenue under
contracts pursuant to which we provide content production and technical services
to Mattress Firm and Accenture.
Effective
December 1, 2009, we entered into an agreement to license certain software to an
entity in Canada which was to build and operate a DOOH network. In
consideration for entering into the agreement we received a $50,000 fee which we
are recognizing over the 11-month period of the contract. Commencing
January 1, 2010, we assumed certain contract work from Argo for Accenture,
AutoNation and Mattress Firm which we consider to be network related
services.
Network
and Administrative Services revenue was $129,504 for the three month period
ended September 30, 2010, compared to $133,877 for the three month period ended
June 30, 2010, a $4,373 or 3.3% decrease. Network and Administrative
Services revenue was comprised as follows:
Three
Months Ended
|
||||||||||||||||
September
30,
|
June
30,
|
|||||||||||||||
2010
|
2010
|
$
Change
|
%
Change
|
|||||||||||||
Mattress
Firm Contract Services
|
$ | 60,000 | $ | 60,000 | $ | - | - | |||||||||
AutoNation
Contract Services
|
- | 17,500 | (17,500 | ) | -100 | % | ||||||||||
AutoNation
Production Services
|
9,915 | 6,815 | 3,100 | 45.5 | % | |||||||||||
Accenture
Contract Services
|
35,925 | 35,925 | - | - | ||||||||||||
Canada
License Fee
|
13,637 | 13,637 | - | - | ||||||||||||
Other
|
10,027 | - | 10,027 | 100.0 | % | |||||||||||
Total
|
$ | 129,504 | $ | 133,877 | $ | (4,373 | ) | -3.3 | % |
The
decrease in Network and Administrative Services revenue of $4,373 was
attributable to the cancellation of the AutoNation contract in May 2010,
resulting in no contract service revenue in the current quarter, partially
offset by increases in AutoNation Production Services revenue and other
fees.
Mattress
Firm operates an in-store network. We image computers to run the
in-store network in each store location, and produce and create the custom
content that they display on such networks, such as in store sales
promotions.
Through
May 2010 we provided AutoNation with oversight and management services and
content production for their in-house network. We monitored the
network to ensure it was running at all times and created custom content for
display on such networks. Since June 2010 we provide content creation
services on an as needed basis for AutoNation, primarily producing in-house
broadcast messages from management to staff.
We assist
Accenture with the maintenance and troubleshooting of a private network they
operate. We provide 24/7 services to ensure that the network operates
without interruption.
We expect
to continue to receive revenue from these services to AutoNation, Mattress Firm
and Accenture during the next twelve months, but we do not intend to pursue
additional network related service opportunities as the focus of our business is
to complete the development of the rVue platform throughout 2010. As the rVue
platform gains traction among advertisers and agencies, we expect to earn
transaction fees from rVue related transactions in 2011.
Transaction
Fees.
rVue
Transactions fees were $3,257 in the three month period ended September 30,
2010. We had no rVue Transaction Fees in the three month period ended
June 30, 2010. The transaction fee is a percentage of the advertising
dollars spent on campaigns, which varies based upon the level of targeting,
reporting and other assistance we provide.
3
While the
majority of our revenue has been from Network and Administrative Services, the
development of the rVue platform and generating transaction fees is the focus of
our business. As the rVue platform gains traction with advertisers
and agencies, we may generate additional transaction fees in 2011 from
advertisers and agencies for placing advertising with DOOH networks through
rVue, but we do not expect to earn significant additional transaction fees in
the last quarter of 2010. Also, we cannot assure you that advertisers
or agencies will accept the rVue platform as their platform of choice for
placing advertising with DOOH networks.
Cost of
Revenue for the three month period ended September 30, 2010 was $43,691 of which
$30,574 was payroll, benefits and temporary labor, $8,865 related to rVue
operations and $3,829 related to network services costs. Cost of Revenue
represents the costs to deliver services and the cost of production. Cost of
revenue increased by $6,093, or 16.2% over cost of revenue of $37,598 for the
three month period ended June 30, 2010.
Selling
general and administrative expenses (“SG&A”) were $934,898 for the three
month period ended September 30, 2010. SG&A increased by
$481,588, or 106.2%, from the $453,310 of SG&A for the three month period
ended June 30, 2010. Changes by major component of SG&A between the three
month period ended September 30, 2010 and the three month period ended June
30, 2010 are:
Three
Months Ended
|
||||||||||||||||
September
30,
|
June
30,
|
|||||||||||||||
2010
|
2010
|
$
Change
|
%
Change
|
|||||||||||||
Payroll
and benefits (excluding stock option expense)
|
$ | 286,792 | $ | 260,117 | $ | 26,675 | 10.3 | % | ||||||||
Stock
option expense
|
87,166 | 43,901 | 43,265 | 98.6 | % | |||||||||||
Facility
expenses
|
80,336 | 40,840 | 39,496 | 96.7 | % | |||||||||||
Communications
expenses
|
18,994 | 13,696 | 5,298 | 38.7 | % | |||||||||||
Travel
expense
|
6,574 | 8,922 | (2,348 | ) | -26.3 | % | ||||||||||
Marketing
|
58,982 | 692 | 58,290 | 8423.4 | % | |||||||||||
Investor
relations expenses
|
149,072 | 20,000 | 129,072 | 645.4 | % | |||||||||||
Placement
agent fees
|
100,000 | - | 100,000 | 100.0 | % | |||||||||||
Professional
and consulting fees
|
74,556 | 44,631 | 29,925 | 67.1 | % | |||||||||||
Office
support and supply expenses
|
34,775 | 20,511 | 14,264 | 69.5 | % | |||||||||||
Bad
debt expense
|
37,651 | - | 37,651 | 100.0 | % | |||||||||||
Total
|
$ | 934,898 | $ | 453,310 | $ | 481,588 | 106.2 | % |
%
Allocation
|
||||||||
rVue
|
Argo
|
|||||||
Payroll
and benefits
|
80 | % | 20 | % | ||||
Facility
costs
|
50 | % | 50 | % | ||||
Communications
expense
|
63 | % | 37 | % | ||||
Office
support and supply expense
|
39 | % | 61 | % |
Commencing
in May 2010, rVue ramped up its infrastructure, including its staff of engineers
and support staff, and hired a new Chief Financial Officer. These costs are
reflected in the increased payroll and benefit costs for the three month period
ended September 30, 2010, compared to the three month period ended June 30,
2010.
Stock
option expense was $87,166 for the three month period ended September 30, 2010
compared to $43,901 for the three month period ended June 30, 2010, a $43,265,
or 98.6% increase. Options were granted on May 13, 2010 and September
17, 2010.
Facility
cost increases were $2,153 for rent and associated expenses and $37,343 of
non-recurring relocation expenses incurred in moving to new leased premises in
July 2010.
4
Marketing
expenses included $45,000 paid to a consultant in the three month period ended
September 30, 2010 and $13,982 of general marketing expenses.
Investor
relations expenses for the three month period ended September 30, 2010
consisted of $119,040 paid to investor relations consultants, and $30,032 for
investor meetings, conferences and communication expenses, compared to $20,000
paid to investor relations consultants in the three month period ended June
30, 2010.
Placement
agent fees for the three month period ended September 30, 2010 consisted of
a fee of $100,000 paid to placement agents and in shares of the Company’s Common
Stock in connection with the Private Placement.
Professional
fees for the three month period ended September 30, 2010 consisted of
$67,517 for legal, accounting and recruiting fees, and $5,164 for consulting and
other fees, compared to $31,325 for legal, accounting and recruiting fees, and
$13,306 for consulting and other fees, in the three month period ended June
30, 2010.
Bad debt
expense was $37,651 for the three month period ended September 30, 2010 and
represented amounts from two customers for which collection appears
unlikely.
Depreciation
and amortization was $35,784 for the three month period ended September 30, 2010
compared to $30,279 for the three month period ended June 30, 2010, a $5,505, or
18.2% increase. Depreciation expense is mainly for software development
costs.
Interest
income was $5,824 for the three months ended September 30, 2010, compared to $60
for the three month period ended June 30, 2010, a $5,764
increase. Interest income included $5,671 of interest due from Argo.
Interest expense was $789 for the three months ended September 30, 2010,
compared to interest expense of $64,425 for the three months ended June 30,
2010, a decrease of $63,636. During the three month period ended June 30,
2010 we redeemed our Bridge Loans and incurred $1,650 of interest on Bridge
Loans and $62,248 attributable to the Bonus Shares issued in connection with the
Bridge Loans which was treated as interest expense, and a reduction of capital
lease interest of $262.
The
Company’s results of operations for the three month period ended September
30, 2010 did not contain any unusual gains or losses from transactions not in
the Company’s ordinary course of business.
Nine
months Ended September 30, 2010
Revenue
for the period was $461,261, of which $58,312 was from license fees, $399,692
was from network services and $3,257 was from rVue transactions
fees.
License
Fees.
We earn
revenue from the licensing of our Client and Server software and technology to
third parties, including DOOH networks. We have granted an exclusive
license for the use of our Client and Server software and technology in Italy to
Levoip Corporation and categorize this revenue as “License”
revenue. License revenue for the nine month period ended September
30, 2010 was $58,312. We had no license fee revenue in the period
ended September 30, 2009. We do not expect to generate significant
additional revenues from the Levoip contract after September 30, 2010, inasmuch
as we have recently been informed that Levoip has suspended its installation of
additional sites.
Network and Administrative
Services.
Network
and Administrative Service revenue relate to fees we receive for producing
programming in our studios or with outside services for Mattress Firm and
AutoNation. We also earn network and administrative service revenue under
contracts pursuant to which we provide content production and technical services
to Mattress Firm and Accenture.
Effective
December 1, 2009, we entered into an agreement to license certain software to an
entity in Canada which was to build and operate a DOOH network. In
consideration for entering into the agreement we received a $50,000 fee which we
are recognizing over the 11-month period of the contract. Commencing
January 1, 2010, we assumed certain contract work from Argo for Accenture,
AutoNation and Mattress Firm which we consider to be network related
services.
5
Network
and Administrative Services revenue was $399,692 for the nine month period ended
September 30, 2010 and was comprised as follows:
Mattress
Firm Contract Services
|
$ | 180,000 | ||
AutoNation
Contract Services
|
43,750 | |||
AutoNation Production
Services
|
16,730 | |||
Accenture
Contract Services
|
107,775 | |||
Canada
License Fee
|
45,199 | |||
Other
|
6,238 | |||
$ | 399,692 |
Mattress
Firm operates an in-store network. We image computers to run the
in-store network in each store location, and produce and create custom content
such as in store sales promotions to display on such network.
Through
May 2010 we provided AutoNation with oversight and management services and
content production for their in-house network. We monitored the
network to ensure it was running at all times and created custom content for
display on such networks. Since June 2010 we provide content creation
services on an as needed basis for AutoNation.
We assist
Accenture with the maintenance and troubleshooting of a private network they
operate. We provide 24/7 services to ensure that the network operates
without interruption.
We expect
to continue to receive revenue from these services to AutoNation, Mattress Firm
and Accenture during the next twelve months, but we do not intend to pursue
additional network related service opportunities as the focus of our business is
to complete the development of the rVue platform throughout 2010. As the rVue
platform gains traction among advertisers and agencies, we expect to earn
transaction fees from rVue related transactions in 2011.
Transaction
Fees.
rVue
transactions fees were $3,257 in the nine month period ended September 30,
2010. The transaction fee is a percentage of the advertising dollars
spent on campaigns, which varies based upon the level of targeting, reporting
and other assistance we provide.
While the
majority of our revenue has been from Network and Administrative Services, the
development of the rVue platform and generating transaction fees is the focus of
our business. As the rVue platform gains traction with advertisers
and agencies, we may generate additional transaction fees in 2011 from
advertisers and agencies for placing advertising with DOOH networks through
rVue, but we do not expect to earn significant additional transaction fees in
the last quarter of 2010. Also, we cannot assure you that advertisers
or agencies will accept the rVue platform as their platform of choice for
placing advertising with DOOH networks.
We expect
to earn transaction fees from advertisers and agencies for placing advertising
with networks through rVue. This is the focus of our business and the
area in which we expect to generate the majority of our revenue in 2011 and
beyond. We do not expect that we will earn significant transaction
fees in 2010. The transaction fee is a percentage of the advertising
dollars spent on campaigns, which varies based upon the level of targeting,
reporting and other assistance we provide.
Cost of
revenue for the period was $119,067, of which $100,782 was payroll, benefits and
temporary labor, $8,865 was related to rVue operations and $8,453 related to
network service costs and $967 was for other costs. Cost of Revenue
represents the costs to deliver rVue services and production costs.
6
SG&A
were $1,545,471 for the nine month period ended September 30, 2010 compared to
$6,500 for the period from Inception (September 15, 2009) through September 30,
2009. Changes by major component of SG&A between the nine month
period ended September 30, 2010 and the period from Inception (September
15, 2009) through September 30, 2009 are:
Nine
Months Ended
|
Inception
(September 15, 2009) through
|
|||||||||||
September
30, 2010
|
September
30, 2009
|
$
Change
|
||||||||||
Payroll
and benefits (including temporary labor)
|
$ | 658,765 | $ | 1,401 | $ | 657,364 | ||||||
Stock
option expense
|
131,067 | - | 131,067 | |||||||||
Facility
expenses
|
140,842 | 1,250 | 139,592 | |||||||||
Communications
expenses
|
38,603 | 737 | 37,866 | |||||||||
Travel
expense
|
19,017 | - | 19,017 | |||||||||
Marketing
|
59,777 | - | 59,777 | |||||||||
Investor
relations expenses
|
169,072 | - | 169,072 | |||||||||
Placement
agent fees
|
100,000 | - | 100,000 | |||||||||
Professional
and consulting fees
|
130,255 | - | 130,255 | |||||||||
Office
support and supply expenses
|
60,422 | 3,112 | 57,310 | |||||||||
Bad
debt expense
|
37,651 | - | 37,651 | |||||||||
Total
|
$ | 1,545,471 | $ | 6,500 | $ | 1,538,971 |
Depreciation
and amortization was $85,996, interest income was $5,884, and interest expense
was $65,815. Net loss was $1,349,204.
The
Company’s results of operations for the nine month period ended September 30,
2010, and for the period from September 15, 2009 (inception) through September
30, 2009, did not contain any unusual gains or losses from transactions not in
the Company’s ordinary course of business.
Liquidity And Capital
Resources
Our
business is still in the early stages, having commenced operations on September
15, 2009. As of December 31, 2009 and September 30, 2010, we had cash and
cash equivalent balances of $117 and $625,662, respectively. Since our
inception through September 30, 2010, we have incurred net losses, and at
September 30, 2010 we had an accumulated deficit of $1,409,469 and total
stockholders’ equity of $779,592. We expect to incur losses for the next
six to nine months as we complete the roll out of rVue. There is no
guarantee that we will ultimately be able to generate sufficient revenue or
reduce our costs in the anticipated time frame to achieve and maintain
profitability and have sustainable cash flows.
We did
not have any material commitments for capital expenditures at September 30, 2010
and do not expect to have any during the next twelve months. Any required
expenditure will be completed through internally generated funding or from
proceeds from the sale of common or preferred stock, or borrowings.
We did
not have any significant elements of income or loss not arising from continuing
operations in either the three or nine month periods ended September 30, 2010,
and do not expect any in the remainder of fiscal 2010. While our business
is marginally seasonal, we do not expect this seasonality to have a material
adverse affect on our results of operations or cash flows.
Cash Flows Provided by (Used In)
Operating Activities
Net cash
provided by (used in) operating activities totaled ($671,932) for the nine
months ended September 30, 2010 compared to $44,645 for the period from
inception (September 15, 2009) through September 30, 2009. In the nine month
period ended September 30, 2010, cash was used to fund a net loss of $1,349,204,
reduced by non cash depreciation of $85,996, stock compensation expense of
$131,067, bridge loan interest settled in shares of common stock of $64,746,
investor relations expense settled in shares of common stock of $80,000,
placement agent fees settled in shares of common stock of $100,000, and net
changes in components of working capital totaling $215,463. In the period from
inception (September 15, 2009) through September 30, 2009, cash was provided by
changes in components of working capital totaling $51,145, reduced by cash used
to fund a net loss of $6,500.
Cash Flows From Investing
Activities
Net cash
used in investing activities totaled $325,272 for the nine months ended
September 30, 2010 compared to $44,545 for the period from inception (September
15, 2009) through September 30, 2009. In the nine month period ended
September 30, 2010 cash used in investing activities was comprised of $158,224
for software development costs and $167,048 advanced to Argo. In the
period from inception (September 15, 2009) through September 30, 2009, cash used
in investing activities was comprised of $10,590 for software development costs
and $33,955 advanced to Argo.
7
Cash Flows From Financing
Activities
Net cash
provided by financing activities totaled $1,622,749 for the nine months ended
September 30, 2010, and was comprised of $1,478,533 of net proceeds from the
sale of common stock and $150,000 from investment subscriptions received,
reduced by $5,784 used to repay capital lease obligations.
Financial
Condition
As of
September 30, 2010, we had working capital of $387,687, an accumulated deficit
of $1,409,469 and total stockholders’ equity of $779,592, compared to a working
capital deficit of $111,717, an accumulated deficit of $60,265 and total
stockholders’ equity of $192,199 as of December 31, 2009. The increase in
working capital was as a result of the sale of common stock under the
Transaction described above.
We
believe that with the cash we have on hand, cash generated through our
operations, and cash we may raise through debt or equity issuances, we will have
sufficient funds available to cover our cash requirements through the next
twelve months.
Off-Balance
Sheet Arrangements
Since our
inception, except for standard operating leases, we have not engaged in any
off-balance sheet arrangements, including the use of structured finance, special
purpose entities or variable interest entities.
Critical
Accounting Policies
Management
is responsible for the integrity of the financial information presented
herein. Our financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of
America. Where necessary, they reflect estimates based on
management's judgment. When selecting or evaluating accounting
alternatives, management focuses on those that produce from among the available
alternatives information most useful for decision-making. We believe
that the critical accounting policies discussed below involve additional
management judgment due to the sensitivity of the methods, assumptions and
estimates necessary in determining the related asset, liability, revenue and
expense amounts.
Software
Development Costs
Our
software development costs are being capitalized or expensed as required by ASC
340-40-05, “Internal Use Software". Costs incurred in the planning
stage have been expensed. Costs incurred in the website application
and infrastructure development stage are being capitalized or expensed in
accordance with ASC 340-40-50. Costs incurred in the operating stage
will be expensed as incurred; however costs incurred for upgrades or
enhancements that provide added functionality or features will be expensed or
capitalized as required by ASC 340-40-50.
Revenue
Recognition
Our
revenues are derived from the maintenance of certain private networks, the
production and distribution of network programming, transaction fees from
advertising campaigns placed through rVue, and the licensing of proprietary
software.
·
|
Revenue
from the maintenance of private networks, and the production and
distribution of network programming content, is recognized ratably over
the term of the related service period.
|
|
·
|
Transaction
fee revenue is recognized once the advertisements have aired and the
advertising campaign is completed in accordance with the advertising
campaigns contractual terms.
|
|
·
|
Software
license revenue is accounted for in accordance with ASC 985-605, "Software
Revenue Recognition". Software license revenue is recognized
when there is pervasive evidence of an arrangement, the fees are fixed and
determinable, the software product has been delivered, there are no
uncertainties surrounding product acceptance and collection is considered
probable. Initial site fees are recognized over the estimated period the
sites will be in use.
|
Deferred
revenue consists of payments received in advance of revenue
recognition.
8
Impact
Of Recently Issued Accounting Standards
In
January 2010, the Financial Accounting Standard Board (“FASB”) issued ASU
2010-06, Improving Disclosures about Fair Value Measurements. The ASU requires
disclosing the amounts of significant transfers in and out of Level 1 and 2 fair
value measurements and to describe the reasons for the transfers. The
disclosures are effective for reporting periods beginning after December 15,
2009. Additionally, disclosures of the gross purchases, sales, issuances and
settlements activity in Level 3 fair value measurements will be required for
fiscal years beginning after December 15, 2010.
In
January 2010, the FASB issued Accounting Standards Update 2010-01, Equity (Topic
505): Accounting for Distributions to Shareholders with Components of Stock and
Cash (A Consensus of the FASB Emerging Issues Task Force). This amendment to
Topic 505 clarifies that the stock portion of a distribution to shareholders
that allows them to elect to receive cash or stock with a limit on the amount of
cash that will be distributed is not a stock dividend for purposes of applying
Topics 505 and 260. ASU 2010-01 is effective for interim and annual periods
ending on or after December 15, 2009, and would be applied on a retrospective
basis. The Company does not expect the provisions of ASU 2010-01 to have a
material effect on the financial position, results of operations or cash flows
of the Company.
Forward
Looking Statements
This
Quarterly Report on Form 10-Q and other written and oral statements made from
time to time by us may contain so-called “forward looking statements” within the
meaning of the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995,” all of which are subject to risks and uncertainties.
Forward looking statements can be identified by the use of words such as
“expects,” “plans,” “will,” “forecasts,” “projects,” “intends,” “estimates,” and
other words of similar meaning. One can identify them by the fact that they do
not relate strictly to historical or current facts. The statements contained in
this Quarterly Report on Form 10-Q that are not purely historical are forward
looking statements. Forward looking statements give the Company’s current
expectations or forecasts of future events. Such statements are subject to risks
and uncertainties that are often difficult to predict and beyond the Company’s
control, and could cause the Company’s results to differ materially from those
described. The risks, uncertainties and other factors that our
shareholders and prospective investors should consider include the
following:
|
We
have a limited operating history, incurred losses and past performance is
no guarantee of future performance;
|
|
·
|
We
depend upon our senior management and our business may be adversely
affected if we cannot retain them;
|
|
·
|
Our
Chief Executive Officer has no experience running a public
company;
|
|
·
|
If
we fail to increase the number of our advertising clients or participating
DOOH networks and if we fail to retain those clients, our revenues and our
business will be harmed;
|
|
·
|
The
market for advertising is highly competitive and we may be unable to
compete successfully;
|
|
·
|
The
effects of the recent and ongoing global economic crisis may adversely
impact our business, operating results or financial
condition;
|
|
·
|
Our
limited operating history makes it difficult for us to accurately forecast
revenues and appropriately plan our
expenses;
|
|
·
|
We
expect a number of factors to cause our operating results to fluctuate on
a quarterly and annual basis, which may make it difficult to predict our
future performance;
|
|
·
|
Growth
may place significant demands on our management and our
infrastructure;
|
|
·
|
We
may be unable to successfully execute our business strategy if we fail to
continue to provide our customers with a high-quality customer
experience;
|
|
·
|
Future
acquisitions could disrupt our business and harm our financial condition
and operating results;
|
9
|
·
|
We
rely on our marketing efforts to attract new customers and must do so in a
cost-effective manner; otherwise our operations will be
harmed;
|
|
·
|
Misappropriation
of our proprietary software and technology could materially affect our
competitive position;
|
|
·
|
Our
business relies heavily on our technology systems, and any failures or
disruptions may materially and adversely affect our
operations;
|
|
·
|
Our
technology may infringe on rights owned by others, which may interfere
with our ability to provide services, and our rVue web site may expose us
to increased liability or expense under intellectual property, privacy or
other law;
|
|
·
|
We
may be unsuccessful in expanding our operations internationally, which
could harm our business, operating results and financial
condition;
|
|
·
|
Confidentiality
agreements with employees and others may not adequately prevent disclosure
of trade secrets and other proprietary
information;
|
|
·
|
Our
business is subject to the risks of hurricanes, fires, floods and other
natural catastrophic events and to interruption by man-made problems such
as computer viruses or terrorism;
|
|
·
|
As
a public company, we incur significant increased costs which may adversely
affect our operating results and financial
condition;
|
|
·
|
We
will need additional capital to fund ongoing operations and to respond to
business opportunities, challenges, acquisitions or unforeseen
circumstances. If such capital is not available to us, our
business, operating results and financial condition may be
harmed;
|
|
·
|
A
further tightening of the credit markets may have an adverse effect on our
ability to obtain short-term debt
financing;
|
|
·
|
If
we fail to establish and maintain an effective system of internal control,
we may not be able to report our financial results accurately or to
prevent fraud. Any inability to report and file our financial
results accurately and timely could harm our reputation and adversely
impact the trading price of our Common
Stock;
|
|
·
|
If
use of the Internet, particularly with respect to the placement of online
advertising, does not increase as rapidly as we anticipate, our business
will be harmed;
|
|
·
|
Government
regulation of the Internet is evolving, and unfavorable changes could
substantially harm our business and operating
results;
|
|
·
|
Seasonality
may cause fluctuations in our financial
results;
|
|
·
|
We
may be unable to register for resale all of the shares of common stock and
shares of common stock underlying the warrants included within the units
sold in the Private Placement, in which case purchasers in the Private
Placement will need to rely on an exemption from the registration
requirements in order to sell such
shares;
|
|
·
|
Because
we became public by means of a reverse merger, we may not be able to
attract the attention of major brokerage
firms;
|
|
·
|
Following
the Transaction, our stock price may be
volatile;
|
|
·
|
We
have not paid dividends in the past and do not expect to pay dividends in
the future and any return on investment may be limited to the value of our
Common Stock;
|
|
·
|
There
is currently a very limited liquid trading market for our Common Stock and
we cannot ensure that one will ever develop or be
sustained;
|
|
·
|
Following
the Transaction, our Common Stock may be deemed a "penny stock," which
would make it more difficult for our investors to sell their
shares;
|
|
·
|
Offers
or availability for sale of a substantial number of shares of our Common
Stock may cause the price of our Common Stock to
decline;
|
|
·
|
Investor
Relations Activities, Nominal “Float” and Supply and Demand Factors May
Affect the Price of our Stock;
|
|
·
|
We
may apply the proceeds of the Private Placement to uses that ultimately do
not improve our operating results or increase the value of your
investment;
|
|
·
|
Because
our directors and executive officers are among our largest stockholders,
they can exert significant control over our business and affairs and have
actual or potential interests that may depart from those of subscribers in
the Private Placement;
|
|
·
|
Exercise
of options may have a dilutive effect on our common stock;
and
|
10
|
·
|
Our amended
and restated articles of incorporation allows for our board to create
new series of preferred stock without further approval by our
stockholders, which could adversely affect the rights of the holders of
our common stock.
|
Additional
information concerning these and other risks and uncertainties is contained in
our filings with the Securities and Exchange Commission, including the section
titled “Risk Factors” in our Current Report on Form 8-K/A filed with the
Securities and Exchange Commission on October 27, 2010. The Company
is providing this information as of the date of this Quarterly Report on Form
10-Q and does not undertake any obligation to update any forward looking
statements contained in this Quarterly Report on Form 10-Q as a result of new
information, future events or otherwise. We have based these forward
looking statements largely on our current expectations and projections about
future events and financial trends affecting the financial condition of our
business. Forward looking statements should not be read as a
guarantee of future performance or results, and will not necessarily be accurate
indications of the times at, or by, which such performance or results will be
achieved. No forward looking statement can be guaranteed and actual
future results may vary materially.
11
PART
II – OTHER INFORMATION
Exhibits.
|
We have
listed the exhibits by numbers corresponding to the Exhibit Table of Item 601 in
Regulation S-K on the Exhibit list attached to this report.
12
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
rVue
Holdings, Inc.
(Registrant)
|
||
Date:
December 3, 2010
|
By:
|
/s/
David A. Loppert
|
Chief
Financial Officer
|
||
(Duly
Authorized Officer and
Principal
Financial Officer)
|
13
Exhibit Index
Exhibit No.
|
Description
|
|
2.1
|
Asset
Purchase Agreement, dated as of May 13, 2010, by and between Argo Digital
Solutions, Inc., rVue, Inc. and rVue Holdings Inc. (2)
|
|
3.1
|
Amended
and Restated Articles of Incorporation (1)
|
|
3.2
|
Amended
and Restated Bylaws (2)
|
|
10.1
|
Form
of Subscription Agreement (2)
|
|
10.2
|
Form
of Registration Rights Agreement (2)
|
|
10.3
|
Form
of Lockup Agreement (2)
|
|
10.4
|
Placement
Agent Agreement, dated May 1, 2010, between rVue, Inc. and RAMPartners SA
(2)
|
|
10.5
|
Form
of Directors and Officers Indemnification Agreement (2)
+
|
|
10.6
|
Agreement
of Conveyance, Transfer and Assignment of Assets and Assumption
of Obligations dated as of May 13, 2010, by and between rVue Holdings,
Inc. and Rivulet International Holdings, Inc. (2)
|
|
10.7
|
Stock
Purchase Agreement dated as of May 13, 2010, by and between rVue Holdings,
Inc., and the Buyers listed therein (2)
|
|
10.8
|
Employment
Agreement between the Company and Jason M. Kates (2) +
|
|
10.9
|
Employment
Agreement between the Company and David A. Loppert (2)
+
|
|
10.10
|
rVue
Holdings, Inc. 2010 Equity Incentive Plan (2) +
|
|
10.11
|
Form
of Incentive Stock Option Grant (2) +
|
|
10.12
|
Form
of Non-Qualified Stock Option Grant (2) +
|
|
10.16
|
Form
of Bridge Loan Note Purchase Agreement (3)
|
|
10.17
|
Form
of Bridge Loan Secured Promissory Note (3)
|
|
10.18
|
Form
of Bridge Loan Security Agreement (3)
|
|
10.19
|
Agreement
between RMS Networks, Inc. and Mattress Firm, Inc. dated November 15, 2005
(4)
|
|
10.20
|
Services
Agreement between Accenture LLP and RMS Networks, Inc. effective as of
April 26, 2006, as amended (4)
|
|
10.21
|
rVue
Services and License Agreement by and between Argo Digital Solutions, Inc
and Levoip Corporation dated as of May 5, 2009 (4)
|
|
31.1
|
Certification
by Chief Executive Officer, pursuant to Exchange Act Rules 13A-14(a)
and 15d-14(a) *
|
|
31.2
|
Certification
by Chief Financial Officer, pursuant to Exchange Act Rules 13A-14(a)
and 15d-14(a) *
|
|
32
|
Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 **
|
|
* Filed
herewith
**
Furnished herewith
+ Management
contract or compensatory plan or arrangement
|
||
(1)
Incorporated by reference to the copy of such document included as an
exhibit to our Current Report on Form 8-K filed on April 21,
2010.
|
||
(2)
Incorporated by reference to the copy of such document included as an
exhibit to our Current Report on Form 8-K filed on May 19,
2010.
|
||
(3)
Incorporated by reference to the copy of such document included as an
exhibit to our Current Report on Form 8-K/A filed on October 27,
2010.
|
||
(4)
Incorporated by reference to the copy of such document included as an
exhibit to our Current Report on Form 8-K/A filed on December 3,
2010.
|