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EX-31.2 - EXHIBIT 31.2 SECTION 302 CERTIFICATION - RVUE HOLDINGS, INC.f10q063014_ex31z2.htm
EX-31.1 - EXHIBIT 31.1 SECTION 302 CERTIFICATION - RVUE HOLDINGS, INC.f10q063014_ex31z1.htm
EX-32.1 - EXHIBIT 32.1 SECTION 906 CERTIFICATION - RVUE HOLDINGS, INC.f10q063014_ex32z1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q


(Mark One)


  X .

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

For the quarterly period ended June 30, 2014


      .

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: 000-54348


 

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.)


275 N. York Street, Suite 201

 

 

Elmhurst, IL 60126

 

(855) 261-8370

(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  X . No      .


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  X . No      .


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

      .

Accelerated filer

      .

Non-accelerated filer

      . (Do not check if a smaller reporting company)

Smaller reporting company

  X .


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


The number of shares outstanding of each of the issuer’s classes of common stock as of the close of business on August 13, 2014 is as follows:


Class

 

Number of Shares

Common Stock:

$0.001 Par Value

 

140,222,189





RVUE HOLDINGS, INC.

TABLE OF CONTENTS


PART I

FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements.

 

 

Condensed Consolidated Balance Sheets – June 30, 2014 and December 31, 2013

3

 

Condensed Consolidated Statements of Operations – Three and Six Months Ended June 30, 2014 and 2013

4

 

Condensed Consolidated Statements of Stockholders’ Equity – Six Months Ended June 30, 2014

5

 

Condensed Consolidated Statements of Cash Flows –Six Months Ended June 30, 2014 and 2013

6

 

Notes to Condensed Consolidated Financial Statements

7

Item 2.

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

13

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

20

Item 4.

Controls and Procedures.

20

 

 

 

PART II

OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings.

21

Item 1A.

Risk Factors.

22

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

22

Item 3.

Defaults Upon Senior Securities.

22

Item 4.

Mine Safety Disclosures.

22

Item 5.

Other Information.

22

Item 6.

Exhibits.

22





2



rVUE HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


 

 

June 30,

 

December 31,

 

 

2014

 

2013

 

 

(unaudited)

 

(audited)

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

398,757

 

$

844,589

Accounts receivable

 

 

155,730

 

 

124,993

Prepaid expenses

 

 

19,772

 

 

10,856

 

 

 

 

 

 

 

Total current assets

 

 

574,259

 

 

980,438

 

 

 

 

 

 

 

Property and equipment, net

 

 

1,814

 

 

3,065

 

 

 

 

 

 

 

Software development costs

 

 

132,070

 

 

80,600

Deposits

 

 

4,730

 

 

10,680

 

 

 

 

 

 

 

 

 

$

712,873

 

$

1,074,783

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

72,509

 

$

132,121

Accrued expenses

 

 

137,950

 

 

113,384

Subscription investment payable

 

 

-

 

 

25,000

Deferred revenue

 

 

10,500

 

 

-

 

 

 

 

 

 

 

Total current liabilities

 

 

220,959

 

 

270,505

 

 

 

 

 

 

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Preferred stock, $0.001 par value per share; 10,000,000 shares authorized; none issued or outstanding

 

 

-

 

 

-

Common stock, $0.001 par value per share; 240,000,000 shares authorized at June 30, 2014 and December 31, 2013;135,793,618 issued and outstanding at June 30, 2014 and 132,221,476 at December 31, 2013

 

 

135,794

 

 

132,222

Additional paid-in capital

 

 

12,698,904

 

 

12,418,899

Accumulated deficit

 

 

(12,342,784)

 

 

(11,746,843)

 

 

 

 

 

 

 

Total stockholders' equity

 

 

491,914

 

 

804,278

 

 

 

 

 

 

 

 

 

$

712,873

 

$

1,074,783




3



rVUE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)


 

 

For the Three Months Ended

 

For the Six Months Ended

 

 

June 30,

 

June 30,

 

 

2014

 

2013

 

2014

 

2013

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

Core fees

 

$

199,508

 

$

167,040

 

$

392,172

 

$

246,329

Non-core fees

 

 

31,500

 

 

35,925

 

 

67,425

 

 

94,150

 

 

 

231,008

 

 

202,965

 

 

459,597

 

 

340,479

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

 

175,078

 

 

120,683

 

 

344,837

 

 

185,526

Selling, general and administrative expenses

 

 

332,620

 

 

413,583

 

 

679,007

 

 

1,724,713

Depreciation and amortization

 

 

19,267

 

 

10,075

 

 

31,694

 

 

23,548

Interest income

 

 

-

 

 

(90)

 

 

 

 

 

(314)

 

 

 

526,965

 

 

544,251

 

 

1,055,538

 

 

1,933,473

Loss before provision for income taxes

 

 

(295,957)

 

 

(341,286)

 

 

(595,941)

 

 

(1,592,994)

Provision for income taxes

 

 

-

 

 

-

 

 

-

 

 

-

Net loss

 

$

(295,957)

 

$

(341,286)

 

$

(595,941)

 

$

(1,592,994)

Net loss per common share - basic and diluted

 

$

$0.00

 

$

$0.00

 

$

$0.00

 

$

($0.01)

Shares used in computing net loss per share: Basic and diluted

 

 

135,743,509

 

 

115,488,620

 

 

135,436,858

 

 

112,244,805




4



rVUE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2014

(unaudited)


 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Preferred Stock

 

Common Stock

 

Paid-In

 

Accumulated

 

 

 

 

Shares

 

Amount

 

Shares

 

Amount

 

Capital

 

Deficit

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2013

 

-

 

$

-

 

132,221,476

 

$

132,222

 

$

12,418,899

 

$

(11,746,843)

 

$

804,278

Common stock issued for compensation and services

 

-

 

 

-

 

715,000

 

 

715

 

 

52,685

 

 

-

 

 

53,400

Common stock issued

 

-

 

 

-

 

2,857,142

 

 

2,857

 

 

197,143

 

 

 

 

 

200,000

Stock based compensation expense

 

-

 

 

-

 

-

 

 

-

 

 

30,177

 

 

 

 

 

30,177

Net loss

 

-

 

 

-

 

-

 

 

-

 

 

-

 

 

(595,941)

 

 

(595,941)

Balance, June 30, 2014

 

-

 

$

-

 

135,793,618

 

$

135,794

 

$

12,698,904

 

$

(12,342,784)

 

$

491,914






5



rVUE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


 

 

For the Six Months Ended

 

 

June 30,

 

 

2014

 

2013

Operating activities

 

 

 

 

 

 

Net loss

 

$

(595,941)

 

$

(1,592,994)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

31,694

 

 

23,548

Stock-based compensation expense

 

 

30,177

 

 

748,000

Common stock issued for services

 

 

-

 

 

40,833

 

 

 

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(30,737)

 

 

80,959

Prepaid expenses

 

 

(8,915)

 

 

28,778

Accounts payable

 

 

(17,612)

 

 

(32,436)

Accrued expenses

 

 

35,965

 

 

(25,457)

Deferred revenue

 

 

10,500

 

 

-

 

 

 

 

 

 

 

Cash used in operating activities

 

 

(544,869)

 

 

(728,769)

Investing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

Payments for property, equipment and software development

 

 

(81,913)

 

 

(23,015)

Change in deposits

 

 

5,950

 

 

(2,100)

Cash used in investing activities

 

 

(75,963)

 

 

(25,115)

Financing activities

 

 

 

 

 

 

Proceeds from the issuance of common stock

 

 

175,000

 

 

316,500

 

 

 

 

 

 

 

Cash provided by financing activities

 

 

175,000

 

 

316,500

Decrease in cash and cash equivalents

 

 

(445,832)

 

 

(437,384)

Cash and cash equivalents, beginning of period

 

 

844,589

 

 

848,174

Cash and cash equivalents, end of period

 

$

398,757

 

$

410,790


See supplemental non-cash information in Note 10.




6



RVUE HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)


NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


rVue Holdings, Inc., formerly known as Rivulet International, Inc. (“We”, “rVue” or the “Company”), was incorporated in the State of Nevada on November 12, 2008. We are an advertising technology company that has developed and operates an integrated advertising exchange and digital distribution platform – rVue – for the Digital Out-of-Home (“DOOH”) industry.


Basis of Presentation and Preparation


The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated. The preparation of these condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires us to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ materially from these estimates. On an ongoing basis, we evaluate our estimates, including those related to accounts receivable, fair values of financial instruments, useful lives of capitalized software development costs and property and equipment, fair values of stock-based awards, income taxes, and contingent liabilities, among others. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. In the opinion of the Company’s management, all adjustments (including normal recurring adjustments) considered necessary to present fairly the unaudited condensed consolidated financial statements have been made.


The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. These condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual consolidated financial statements and the notes thereto for the year ended December 31, 2013, included in our Annual Report on Form 10-K (the “2013 Form 10-K”).


The unaudited condensed consolidated statement of operations for the three and six months ended June 30, 2014 are not necessarily indicative of the results that may be expected for the entire year.


NOTE 2 – GOING CONCERN


The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We have sustained losses and experienced negative cash flows from operations since inception, and have an accumulated deficit of $12,342,784 at June 30, 2014. These factors raise substantial doubt about our ability to continue to operate in the normal course of business. We have funded our activities to date almost exclusively from equity and debt financings.


At December 31, 2013 our registered independent public accounting firm expressed substantial doubt as to our ability to continue as a going concern because, since inception, we have incurred substantial losses and negative cash flows from operations. This concern will be addressed by focusing on revenue growth in the coming months. In addition, we raised $1,004,000 in the last two months of 2013 and an additional $200,000 through March of 2014 through the issuance of Common Stock to investors.


Subsequent to June 30, 2014, the Company raised an additional $310,000 through the issuance of Common Stock to investors. We believe the $310,000 capital raised along with continued operations will provide a sufficient amount of cash to continue through year-end. The Company may issue additional shares of Common Stock to investors throughout the remainder of 2014. However, no assurance can be given that such expectations will materialize or on what terms.



7



RVUE HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)


NOTE 3 - LOSS PER COMMON SHARE


Basic and diluted loss per common share is computed by dividing the loss by the weighted average number of common shares outstanding for the period. Since the Company incurred losses attributable to common stockholders during the three and six months ended June 30, 2014 and 2013, diluted loss per common share has not been computed by giving effect to all potentially dilutive common shares that were outstanding during the three and six months ended June 30, 2014 and 2013 since this would have an anti-dilutive effect.


The following table sets forth the computation of basic and diluted loss per common share:


 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2014

 

2013

 

2014

 

2013

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(295,957)

 

$

(341,286)

 

$

(595,941)

 

$

(1,592,994)

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding

 

 

135,743,509

 

 

115,488,620

 

 

135,436,858

 

 

112,244,805

Effect of dilutive securities (1)

 

 

-

 

 

-

 

 

-

 

 

-

Weighted-average diluted shares

 

 

135,743,509

 

 

115,488,620

 

 

135,436,858

 

 

112,244,805

Basic and diluted loss per share

 

$

$0.00

 

$

$0.00

 

$

$0.00

 

$

($0.01)


(1)

The following stock options, warrants and convertible notes outstanding as of June 30, 2014 and 2013 were not included in the computation of dilutive loss per share because the net effect would have been anti-dilutive:


 

 

Three Months Ended

 

 

June 30,

 

 

2014

 

2013

Stock options

 

-

 

-

Warrants

 

50,904

 

-

 

 

50,904

 

-


NOTE 4 – FINANCIAL INSTRUMENTS


Accounts Receivable


We sell our services directly to our customers. Accounts receivable from one of our customers accounted for 87.9% of total accounts receivable at June 30, 2014, and accounts receivable from three of our customers accounted for 80.9 % of total accounts receivable at December 31, 2013. We had no allowance for doubtful accounts at either June 30, 2014 or at December 31, 2013.



8



RVUE HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)


NOTE 5 – FAIR VALUE MEASUREMENTS


Fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following fair value hierarchy is used in selecting inputs, with the highest priority given to Level 1, as these are the most transparent or reliable:


Level 1 - Quoted prices for identical instruments in active markets.


Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable directly or indirectly.


Level 3 - Valuations derived from valuation techniques in which one or more significant inputs are unobservable.


We are responsible for the valuation process and as part of this process we used data from an outside source to establish fair value. We performed due diligence to understand the inputs used or how the data was calculated or derived, and we corroborated the reasonableness of external inputs in the valuation process.


NOTE 6 – CONDENSED CONSOLIDATED FINANCIAL STATEMENT DETAILS


The following tables show the Company’s condensed consolidated financial statement details as of June 30, 2014 and December 31, 2013:


Prepaid expenses

 

June 30,

2014

 

December 31,

2013

Insurance

 

$

16,542

 

$

8,510

Other

 

 

3,230

 

 

2,346

 

 

$

19,772

 

$

10,856


Property and Equipment

 

Estimated Useful Lives

(Years)

 

June 30,

2014

 

December 31,

2013

Computers and software

 

2 - 5

 

$

91,083

 

$

91,083

Furniture and equipment

 

3

 

 

22,977

 

 

22,977

Gross property and equipment

 

 

 

 

114,060

 

 

114,060

Less accumulated depreciation

 

 

 

 

(112,246)

 

 

(110,995)

Net property and equipment

 

 

 

$

1,814

 

$

3,065


Depreciation expense was $1,251 and $7,891 for the six months ended June 30, 2014 and 2013, respectively. Depreciation expense was $597 and $3,210 for the three months ended June 30, 2014 and 2013, respectively.


Software Development Costs

 

Estimated Useful Lives

(Months)

 

June 30,

2014

 

December 31,

2013

Software development costs

 

18

 

$

1,230,626

 

$

1,148,713

Less accumulated amortization

 

 

 

 

(1,098,556)

 

 

(1,068,113)

Net software development costs

 

 

 

$

132,070

 

$

80,600


Amortization expense was $30,443 and $15,658 for the six months ended June 30, 2014 and 2013, respectively. Amortization expense was $18,670 and $6,865 for the three months ended June 30, 2014 and 2013, respectively.



9



RVUE HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)


Accrued Expenses

 

June 30,

2014

 

December 31,

2013

Personnel costs

 

$

15,134

 

$

18,966

Professional fees

 

 

-

 

 

39,000

Network costs

 

 

105,316

 

 

37,918

Other

 

 

17,500

 

 

17,500

 

 

 

137,950

 

 

113,384


NOTE 7 - INCOME TAXES


There is no income tax benefit for the losses for the six-month periods ended June 30, 2014 and 2013, since management has determined that the realization of the net deferred tax asset is not more likely than not to be realized and has created a valuation allowance for the entire amount of such benefit.


Our policy is to record interest and penalties associated with unrecognized tax benefits as additional income taxes in the statement of operations. At December 31, 2013, we had no unrecognized tax benefits, or any tax related interest or penalties. There were no changes in unrecognized tax benefits during the period ended June 30, 2014. We did not recognize any interest or penalties during 2013 related to unrecognized tax benefits, or through the period ended June 30, 2014.


NOTE 8 - STOCKHOLDERS’ EQUITY AND STOCK BASED COMPENSATION


Equity Awards


Stock Option Activity


A summary of the Company’s stock option activity for the six month period ended June 30, 2014 is as follows:


 

 

 

 

Weighted

 

Weighted

 

 

 

 

 

 

 

Average

 

Average

 

 

 

 

 

 

 

Exercise

 

Remaining

 

Aggregate

 

 

Number of

 

Price Per

 

Contractual

 

Intrinsic

 

 

Options

 

Share

 

Term

 

Value

Balance at December 31, 2013

 

2,640,000

 

$

0.17

 

8.41

 

 

-

Options granted

 

-

 

 

-

 

 

 

 

 

Options exercised

 

-

 

 

-

 

 

 

 

 

Options forfeited

 

(200,000)

 

$

0.30

 

-

 

 

-

Balance at June 30, 2014

 

2,440,000

 

$

0.16

 

8.10

 

$

-

Exercisable at June 30, 2014

 

920,000

 

$

0.22

 

6.25

 

$

-

Expected to vest after June 30, 2014

 

1,520,000

 

$

0.13

 

9.22

 

$

-


Aggregate intrinsic value represents the value of the Company’s closing stock price on the last trading day of the fiscal period in excess of the weighted-average exercise price multiplied by the number of options outstanding or exercisable. The aggregate intrinsic value excludes the effect of stock options that have a zero or negative intrinsic value.



10



RVUE HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)


Stock-Based Compensation


Stock-based compensation cost for stock options is estimated at the grant date based on the fair-value as calculated by the Black-Scholes Merton (“BSM”) option-pricing model. The BSM option-pricing model incorporates various assumptions including expected volatility, expected life and interest rates. The Company’s computation of expected life is determined based on the simplified method as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term due to the limited period of time its equity shares have been publicly traded. The interest rate is based on the U.S. Treasury Yield curve in effect at the time of grant. The Company’s computation of expected volatility is based on comparable companies’ average historical volatility. The Company does not expect to pay dividends. While the Company believes these estimates are reasonable, the estimated compensation expense would increase if the expected life was increased or a higher expected volatility was used. The Company recognizes stock-based compensation cost as expense on a straight-line basis over the requisite service period.


We did not grant any options during the six-month period ended June 30, 2014 or during the six-month period ended June 30, 2013.


Stock based compensation expense was $15,088 and $0 for the three months ended June 30, 2014 and 2013, respectively. Stock based compensation expense was $30,177 and $748,000 for the six months ended June 30, 2014 and 2013, respectively.


On March 29, 2013, the Board approved payment of 4.4 million shares to Michael Mullarkey, a director at the time, as compensation for serving as CEO and CFO after the prior CEO and CFO both left the Company in 2012. Mr. Mullarkey held those temporary positions until April 11, 2013, when a CEO was appointed. Mr. Mullarkey resigned from the Company’s board of directors effective May 31, 2013. The share award was contingent upon the accomplishment of certain objectives set by the board of directors. The accomplishment of the objectives was determined in the first quarter of 2013, and the resulting expense of $748,000 was recorded during the three months ended March 31, 2013.


In addition, the Company issued an aggregate of 816,667 shares to officers and directors in lieu of cash compensation resulting in additional director fee expense of $40,833 during the six months ended June 30, 2013.


The Company entered into an employment agreement with Mark Pacchini, our CEO, on July 1, 2013. The agreement term is three years and includes mandatory bonuses payable in the Company’s common stock if specific revenue goals are achieved in a twelve month period. On January 1, 2014, the revenue goals for this employment agreement were amended. As of June, 30, 2014 it did not appear probable that any of the required goals in the agreement will be achieved. As a result, there was no stock based compensation expense recognized related to this agreement. The Company will reassess the probability of the Company achieving the revenue goals included in the agreement on a quarterly basis.


NOTE 9 – COMMITMENTS AND CONTINGENCIES


Other Off-Balance Sheet Commitments


We leased our Ft. Lauderdale, Florida office space for our corporate headquarters and technology group under a non-cancelable operating lease which expired June 30, 2013. On July 1, 2013 we moved to a smaller space in Fort Lauderdale - approximately 600 square feet – which we leased at a rate of approximately $2,200 a month. On November 1, 2013 we moved to a smaller space – approximately 140 square feet within the same facility – which we lease at a rate of approximately $1,300 a month. By mid-2014 we intend to move our Fort Lauderdale operations into a less expensive leased space.


On October 4, 2013 we moved our corporate headquarters to Elmhurst, Illinois, where we lease approximately 2,700 square feet of office space from Real Capital, LLC under a lease contract that expires on September 30, 2015. Lease payments are approximately $3,100 a month through September 30, 2014 increasing to $3,193 a month through September 30, 2015. This facility accommodates our principal sales, marketing, operations, finance and administrative activities.



11



RVUE HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)


Contingencies


We are subject to certain legal proceedings that have not been adjudicated, which are discussed in Part II, Item 1 of this Form 10-Q under the heading “Legal Proceedings”. In the opinion of management, the Company does not have probable liability related to these legal proceedings that would materially adversely affect our financial condition or operating results. However, the results of legal proceedings cannot be predicted with certainty. If we fail to prevail in any of these legal matters, the operating results of a particular reporting period could be materially adversely affected.


NOTE 10 – SUPPLEMENTAL NON-CASH INFORMATION


During the six months ended June 30, 2013, the Company accrued for fees associated with the equity raised in 2013 which will be paid in the future issuance of common stock totaling $42,000 and issuance of warrants totaling $27,000. Additionally, in 2013, the Company reversed the accrued director fees balance of $81,667 upon the issuance of shares to officers and directors in lieu of cash compensation.


During the six months ended June 30, 2014, the Company issued common stock totaling $42,000 to Ken Dvorak for accounting services performed in 2013 and issued common stock totaling $11,400 in the settlement of a law suit.


NOTE 11 – SUBSEQUENT EVENTS


In preparing these condensed consolidated financial statements, we have evaluated events and transactions for potential recognition or disclosure through the date of filing.



12



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


This section and other parts of this Form 10-Q contain forward-looking statements that involve risks and uncertainties. Forward-looking statements can be identified by words such as “anticipates,” “expects,” “believes,” “plans,” “predicts,” and similar terms. Forward-looking statements are not guarantees of future performance and the Company’s actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those Risk Factors discussed in Part I, Item 1A, “Risk Factors,” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 (the “2013 Form 10-K”) filed with the U.S. Securities and Exchange Commission (“SEC”). The following discussion should be read in conjunction with the 2013 Form 10-K and the Condensed Consolidated Financial Statements and notes thereto included elsewhere in this Form 10-Q. The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.


Available Information


The Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”) are filed with the SEC. Such reports and other information filed by the Company with the SEC are available on the Company’s website at www.rvue.com when such reports are available on the SEC website. The public may read and copy any materials filed by the Company with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy, and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov. The contents of these websites are not incorporated into this filing. Further, the Company’s references to the URLs for these websites are intended to be inactive textual references only.


Executive Overview


We are an advertising technology company and operate rVue, a demand-side platform (“DSP”) for planning, buying and managing digital place-based media advertising (“DpbM”). We provide media services, including an online, Internet based DSP that connects advertisers and/or advertising agencies with third party DpbM 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. Through our strategic media services group, we execute complete campaigns on behalf of advertising clients or their agencies.


The rVue DSP is accessible via the Internet. Through rVue, once an advertising campaign has been agreed to between the advertiser and the DpbM network owner, the DpbM networks receive the display advertising to be shown on their installed base of digital media displays. rVue allows programming and advertising to be customized for display in specific venues, at specific times, and for demographic targeting. We provide the tools for advertisers and advertising agencies to customize campaigns for details as specific as location, customer preference, product availability, current events and other needs. We provide Proof-of-Play analytics and the network statistics necessary to monitor advertising on the networks and assist in evaluating the performance or refinements required for an advertising campaign, in some cases real time. Furthermore, rVue’s integrated analytics provide insight and opportunities for advertisers and agencies to extend the reach, impact and engagement of future campaigns.


As of June 30, 2014, approximately 190 networks comprising approximately 1,000,000 screens and delivering over 250 million daily impressions representing the top 50 market areas were accessible through rVue. Through our strategic media services group, we execute complete campaigns on behalf of advertising clients or their agencies.


We believe that consumers who are mobile are increasingly difficult to reach via traditional analog media platforms such as television, print and radio. Interaction with these consumers via multiple DpbM platforms has advantages. Advertisers desire, for example, to send pre-programmed, customized messages to specific geographic or demographic targets throughout the life of an advertising campaign. This can be achieved via the Internet, and we believe will increasingly be achieved through digital displays located along roadsides, on trains and buses and train platforms and bus stations, in elevators, in government offices, schools, restaurants and bars. All of these DpbM platforms are aggregated for advertiser and advertising agencies via the rVue DSP.



13



Similar models have been successfully deployed for Internet DSP’s, through Internet ad networks and exchanges that utilize similar services to sell banner and other advertising by websites and Internet publishers with excess inventory to monetize their assets. For example, Yahoo's Right Media Exchange leverages Yahoo's advertisers to assist publishers in monetizing available Internet advertising inventory. Our services provide a digital advertising solution that streamlines the process of planning, buying and optimizing display advertising on DpbM display networks. rVue is designed to simplify the process of buying and selling digital display ads while connecting all the market players — networks, advertisers, agencies, partners and developers — from a unified platform to do business more efficiently and effectively.


Under a contractual arrangement with a large advertiser we provide technical services on a monthly basis for a fixed monthly payment resulting in total monthly revenue of approximately $10,000. Under these arrangements, we provide technical services, including network monitoring, troubleshooting and maintenance, among other services. See the Revenue section for more information.


Critical Accounting Policies and Estimates


The preparation of financial statements and related disclosures in conformity with GAAP and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions, and estimates that affect the amounts reported in its condensed consolidated financial statements and accompanying notes. Note 1, “Summary of Significant Accounting Policies” of this Form 10-Q and in the Notes to Consolidated Financial Statements in the Company’s 2013 Form 10-K describes the significant accounting policies and methods used in the preparation of the Company’s condensed consolidated financial statements. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates and such differences may be material.


Management believes the Company’s critical accounting policies and estimates are those related to software development costs, derivative instruments, revenue recognition, stock-based compensation and income taxes. Management considers these policies critical because they are both important to the portrayal of the Company’s financial condition and operating results, and they require management to make judgments and estimates about inherently uncertain matters. The Company’s senior management has reviewed these critical accounting policies and related disclosures with the Audit Committee of the Company’s Board of Directors.


Results of Operations


Three Months Ended June 30, 2014 and 2013:


Our unaudited results of operations for the three-month periods ended June 30, 2014 and 2013 were as follows:


 

 

For the Three Months Ended

 

 

June 30,

 

 

2014

 

2013

Revenue

 

 

 

 

 

 

Core fees

 

$

199,508

 

$

167,040

Non-core fees

 

 

31,500

 

 

35,925

 

 

 

231,008

 

 

202,965

Costs and expenses

 

 

 

 

 

 

Cost of revenue

 

 

175,078

 

 

120,683

Selling, general and administrative expenses

 

 

332,620

 

 

413,583

Depreciation and amortization

 

 

19,267

 

 

10,075

Interest income

 

 

-

 

 

(90)

 

 

 

526,965

 

 

544,251

Loss before provision for income taxes

 

 

(295,957)

 

 

(341,286)

Provision for income taxes

 

 

-

 

 

-

Net loss

 

$

(295,957)

 

$

(341,286)

Net loss per common share - basic and diluted

 

$

(0.00)

 

$

(0.00)

Shares used in computing net loss per share:

 

 

 

 

 

 

Basic and diluted

 

 

135,743,509

 

 

115,488,620




14



Revenue


Revenue was $231,008 for the three-month period ended June 30, 2014 compared to $202,965 for the three-month period ended June 30, 2013, a $28,043 increase, or 13.8%. We earned revenue as follows:


 

 

Three Months ended

 

 

 

 

 

 

 

June 30,

 

 

 

 

Revenue Category

 

2014

 

2013

 

$ Change

 

% Change

Core fees

 

$

199,508

 

$

167,040

 

$

32,468

 

0.19%

Non-core fees

 

 

31,500

 

 

35,925

 

 

(4,425)

 

(0.12)%

Total Revenue

 

$

231,008

 

$

202,965

 

$

28,043

 

0.14%


Core fees


We earn transaction fees from advertisers and agencies for placing advertising with networks through rVue and generate advertising revenue from advertisers who engage us to execute campaigns through managed services. 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. We act, in certain transactions, as a principal to purchase advertising on behalf of a client who issues a purchase order for the strategic media services we provide. We contract in our name with the networks to purchase the necessary space and time to execute the campaign. In these instances, we assume the full financial risk of the campaign and are liable to the networks for the cost of network space and time.


Core fees were $199,508 for the three-month period ended June 30, 2014, a $32,468 improvement over the $167,040 Core fees for the three-month period ended June 30, 2013. While the majority of our revenue historically has been from network services and license fees, the development of the rVue platform and generating revenue and fees is the focus of our business. As the rVue platform gains traction with advertisers and agencies, we expect to generate additional revenue and fees in the second half of 2014 and into 2015 from advertisers and agencies for placing advertising within the DpbM category. This is the focus of our business and the area in which we expect to generate the majority of our revenue in 2015 and beyond. We cannot assure you that advertisers or agencies will accept the rVue platform as their platform of choice for placing advertising with DpbM networks.


Non-core fees


Non-core fees were $31,500 for the three-month period ended June 30, 2014, a $4,425, or 12.3%, decrease compared to the $35,925 for the three-month period ended June 30, 2013. During the first quarter of 2014 we earned fixed monthly fees of $11,975, which changed to $10,500 per month in the second quarter, from one client. We expect to continue to receive revenue in the amount of $10,500 monthly from these services to this client for the remainder of 2014, but we do not intend to pursue additional network-related service opportunities as the focus of our business is the rVue platform.


Cost of Revenue


Cost of revenue consists primarily of expenses for the purchase of advertising impressions from third-party networks, the cost to deliver network services and the cost of producing content for our network clients.


Cost of revenue was $175,078 for the three-month period ended June 30, 2014 compared to $120,683 for the three-month period ended June 30, 2013, a $54,395 increase, or 45.1%, and was comprised of:


 

 

Three Months ended

 

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

2014

 

2013

 

$ Change

 

% Change

Temporary labor

 

$

2,890

 

$

983

 

$

1,907

 

194.0%

Network services

 

 

180

 

 

200

 

 

(20)

 

(10.0)%

rVue operations

 

 

172,008

 

 

119,500

 

 

52,508

 

43.9%

Total

 

$

175,078

 

$

120,683

 

$

54,395

 

45.1%




15



Selling, general and administrative expenses


Selling, general and administrative expenses (“SG&A”) were $332,620 for the three-month period ended June 30, 2014, compared to $413,583 for the three-month period ended June 30, 2013 a $80,963 decrease, or 19.6%. Changes by major component of SG&A are:


 

 

Three Months ended

 

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

2014

 

2013

 

$ Change

 

% Change

Compensation and benefits

 

$

141,008

 

$

145,782

 

$

(4,774)

 

(3.3)%

Stock-based compensation expense

 

 

15,088

 

 

-

 

 

15,088

 

100.0%

Facility expense

 

 

17,400

 

 

32,851

 

 

(15,451)

 

(47.0)%

Communications expense

 

 

17,703

 

 

27,527

 

 

(9,824)

 

(35.7)%

Travel expense

 

 

5,892

 

 

23,231

 

 

(17,339)

 

(74.6)%

Advertising and marketing expense

 

 

14,724

 

 

8,906

 

 

5,818

 

(65.3)%

Investor relations and investment banking fees

 

 

-

 

 

553

 

 

(553)

 

(100.0)%

Professional and consulting fees

 

 

59,203

 

 

145,465

 

 

(86,262)

 

(59.3)%

Office support and supply expense

 

 

61,602

 

 

29,268

 

 

32,334

 

110.5%

Total

 

$

332,620

 

$

413,583

 

$

(80,963)

 

(19.6)%


Compensation and benefits decreased $4,774, or 3.3% for the three months ended June 30, 2014 when compared to the three months ended June 30, 2013. This change was due to a $42,491 increase in salary and payroll related expenses offset by a $37,492 increase in the amount of payroll costs being capitalized for software development, and a $9,773 decrease in the vacation accrual.


Stock-based compensation expense varies depending on the term over which the options vest. Options were granted in the third and fourth quarter of 2013 resulting in stock-based compensation expense of $15,088 for the three-month period ended June 30, 2014.


Facility expense decreased $15,451 or 47.0% due to the move from the Fort Lauderdale, Florida offices to the Elmhurst, Illinois offices.


Advertising and marketing expense increased $5,818 or 65.3% due to $8,000 being paid for upgrades to the Company’s website in 2014 that was not incurred in 2013.


Professional and consulting fees for the three-month period ended June 30, 2014 were down $86,262, or 59.3%, compared to the three-month period ended June 30, 2013. Consulting fees were down $54,289 due to a consulting agreement with the former CEO of the Company expiring in 2013, and director fees were down $25,375 due to the elimination of director fees in the third quarter of 2013.


Depreciation and amortization


Depreciation and amortization was $19,267 for the three-month period ended June 30, 2014 compared to $10,075 for the three-month period ended June 30, 2013, a $9,192 increase, or 91.2%. For the three-month period ended June 30, 2014, the large increase in depreciation and amortization expense for software development costs is due to the increase in the amount of software development being capitalized over the last twelve months.



16



Six Months Ended June 30, 2014 and 2013:


Our unaudited results of operations for the six month periods ended June 30, 2014 and 2013 were as follows:


 

 

For the Six Months Ended

 

 

June 30,

 

 

2014

 

2013

Revenue

 

 

 

 

 

 

Core fees

 

$

392,172

 

$

246,329

Non-core fees

 

 

67,425

 

 

94,150

 

 

 

459,597

 

 

340,479

Costs and expenses

 

 

 

 

 

 

Cost of revenue

 

 

344,837

 

 

185,526

Selling, general and administrative expenses

 

 

679,007

 

 

1,724,713

Depreciation and amortization

 

 

31,694

 

 

23,548

Interest income

 

 

-

 

 

(314)

 

 

 

1,055,538

 

 

1,933,473

Loss before provision for income taxes

 

 

(595,941)

 

 

(1,592,994)

Provision for income taxes

 

 

-

 

 

-

Net loss

 

$

(595,941)

 

$

(1,592,994)

Net loss per common share - basic and diluted

 

$

$0.00

 

$

(0.01)

Shares used in computing net loss per share:

 

 

 

 

 

 

Basic and diluted

 

 

135,436,858

 

 

112,244,805


Revenue


Revenue was $459,597 for the six-month period ended June 30, 2014 compared to $340,479 for the six-month period ended June 30, 2013, a $119,118 increase, or 35.0%. We earned revenue as follows:


 

 

Six Months ended

 

 

 

 

 

 

 

June 30,

 

 

 

 

Revenue Category

 

2014

 

2013

 

$ Change

 

% Change

 

 

 

 

 

 

 

 

 

 

 

 

Core Fees

 

$

392,172

 

$

246,329

 

$

145,843

 

59.2%

 

 

 

 

 

 

 

 

 

 

 

 

Non-Core Fees

 

 

67,425

 

 

94,150

 

 

(26,725)

 

(28.4)%

Total Revenue

 

$

459,597

 

$

340,479

 

$

119,118

 

35.0%


Core fees


We earn transaction fees from advertisers and agencies for placing advertising with networks through rVue and generate advertising revenue from advertisers who engage us to execute campaigns through managed services. 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. We act, in certain transactions, as a principal to purchase advertising on behalf of a client who issues a purchase order for the strategic media services we provide. We contract in our name with the networks to purchase the necessary space and time to execute the campaign. In these instances, we assume the full financial risk of the campaign and are liable to the networks for the cost of network space and time.


Core fees were $392,172 for the six month period ended June 30, 2014, a $145,843 or 59.2% improvement over the $246,329 rVue fees for the six-month period ended June 30, 2013. While the majority of our revenue historically has been from network services and license fees, the development of the rVue platform and generating revenue and fees from the rVue platform is the focus of our business. As the rVue platform gains traction with advertisers and agencies, we expect to generate additional revenue and fees in the second half of 2014 and into 2015 from advertisers and agencies for placing advertising with DpbM 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 2014 and beyond. We cannot assure you that advertisers or agencies will accept the rVue platform as their platform of choice for placing advertising with DpbM networks.



17



Non-core fees


Non-core fees were $67,425 for the six-month period ended June 30, 2014, a $26,725, or 28.4%, decrease compared to the $94,150 for the six-month period ended June 30, 2013. During the first quarter of 2014 we earned fixed monthly fees of $11,975, which changed to $10,500 per month in the second quarter, from one client. We expect to continue to receive revenue in the amount of $10,500 monthly from these services to this client for the remainder of 2014, but we do not intend to pursue additional network-related service opportunities as the focus of our business is the rVue platform.


Cost of Revenue


Cost of revenue consists primarily of expenses for the purchase of advertising impressions from third-party networks, the cost to deliver network services and the cost of producing content for our network clients.


Cost of revenue was $344,837 for the six-month period ended June 30, 2014 compared to $185,526 for the six-month period ended June 30, 2013, a $159,311 increase, or 85.9%, and was comprised of:


 

 

Six Months ended

 

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

2014

 

2013

 

$ Change

 

% Change

Compensation and benefits

 

$

4,932

 

$

2,331

 

$

2,601

 

111.6%

Network services

 

 

365

 

 

5,496

 

 

(5,131)

 

(93.4)%

rVue operations

 

 

339,540

 

 

177,699

 

 

161,841

 

91.1%

Total

 

$

344,837

 

$

185,526

 

$

159,311

 

85.9%


The increase in cost of revenue is attributable to a $145,843 increase in rVue revenue and network mix compared to June 30, 2013. The increase in core related revenues increases the cost of network expenses which are recorded in rVue operations.


Selling, general and administrative expenses


SG&A were $679,007 for the six-month period ended June 30, 2014, compared to $1,724,713 for the six month period ended June 30, 2013, a $1,045,706 decrease, or 60.6%. Changes by major component of SG&A are:


 

 

Six Months ended

 

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

2014

 

2013

 

$ Change

 

% Change

Compensation and benefits

 

$

294,615

 

$

281,220

 

$

13,395

 

4.8%

Stock-based compensation expense

 

 

30,177

 

 

748,000

 

 

(717,823)

 

(96.0)%

Facility expense

 

 

35,342

 

 

67,914

 

 

(32,570)

 

(48.0)%

Communications expense

 

 

33,898

 

 

59,142

 

 

(25,244)

 

(42.7)%

Travel expense

 

 

10,789

 

 

43,007

 

 

(32,218)

 

(74.9)%

Advertising and marketing expense

 

 

17,004

 

 

74,811

 

 

(57,807)

 

(77.3)%

Investor relations and investment banking fees

 

 

-

 

 

1,260

 

 

(1,260)

 

(100.0)%

Professional and consulting fees

 

 

154,207

 

 

392,793

 

 

(238,586)

 

(60.7)%

Office support and supply expense

 

 

102,975

 

 

56,566

 

 

46,409

 

82.0%

Total

 

$

679,007

 

$

1,724,713

 

$

(1,045,706)

 

(60.6)%


Compensation and benefits increased $13,395, or 4.8% for the six months ended June 30, 2014 when compared to the six months ended June 30, 2013. This change was due to a $49,440 increase in salary and payroll related expenses and a $27,362 increase in the vacation accrual, offset by a $63,407 increase in the amount of payroll costs being capitalized for software development.



18



The stock-based compensation expense decrease for the six months ended June 30, 2014 relates to a board approved one-time $748,000, performance based payment in 2013 to a former director who served as the interim CEO and CFO for approximately one year. Stock-based compensation expense for the six months ended June 30, 2014 relates to options granted in the second half of 2013.


Advertising and marketing expense decreased by $57,807 or 77.3%, in the six-month period ended June 30, 2014, when compared to the six-month period ended June 30, 2013. This decrease is a result of rVue’s continued cost reduction decisions.


Professional and consulting fees for the six-month period ended June 30, 2014 decreased $238,586, or 60.7%, compared to the six-month period ended June 30, 2013. Consulting fees decreased approximately $171,289 due to the expiration of a consulting agreement with former CEO Jason Kates, and directors’ fees decreased $91,983 while legal, accounting and other fees increased $24,686.


Depreciation and amortization


Depreciation was $1,251 for the six-month period ended June 30, 2014 compared to $7,891 for the six-month period ended June 30, 2013, a $6,640 decline, or 84.1%. For the six-month period ended June 30, 2014, amortization expense for software development was $30,443, compared to $15,658 for the six-month period ended June 30, 2013, a $14,785 increase, or 94.4%. The large increase in amortization expense for software development costs is due to the increase in software development by rVue.


Liquidity and Capital Resources


As of June 30, 2014, we had cash and cash equivalents totaling $398,757. Since our inception, we have incurred net losses, and at June 30, 2014, we had an accumulated deficit of $12,342,784 and total stockholders’ equity of $491,914. We expect to continue to incur losses in fiscal 2014. 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.


Subsequent to June 30, 2014, the Company raised an additional $310,000 through the issuance of Common Stock to investors. We believe the $310,000 capital raised along with continued operations will provide a sufficient amount of cash to continue through year-end. The Company may issue additional shares of Common Stock to investors throughout the remainder of 2014. However, no assurance can be given that such expectations will materialize or on what terms.


We did not have any material commitments for capital expenditures at June 30, 2014. We have budgeted capital expenditures of approximately $200,000 for fiscal 2014, primarily capitalized labor for software development. 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 the six-month periods ended June 30, 2014 and 2013. While our business is marginally seasonal, we do not expect this seasonality to have a material adverse effect on our results of operations or cash flows.


Cash used in operating activities


Net cash used in operating activities totaled $544,869 for the six-month period ended June 30, 2014 compared to $728,769 for the six-month period ended June 30, 2013. In the six-month period ended June 30, 2014, cash was used to fund a net loss of $595,941, reduced by depreciation of $31,694, stock-based compensation expense of $30,177 and increased by changes in operating assets and liabilities totaling $10,799.


In the six-month period ended June 30, 2013, cash was used to fund a net loss of $1,592,994, reduced by depreciation of $23,548, stock-based compensation expense of $748,000, common stock issued for services valued at $40,833, and changes in operating assets and liabilities totaling $51,844.


Cash used in investing activities


Net cash used in investing activities totaled $75,963 for the six-month period ended June 30, 2014 compared to $25,115 of net cash used in investing activities in the six-month period ended June 30, 2013. In the six-month period ended June 30, 2014, cash used in investing activities consisted of $81,913 for fixed asset purchases and that amount was offset by a decrease in deposits of $5,950. In the six-month period ended June 30, 2013, cash used in investing activities consisted of $23,015 for software development costs and $2,100 for deposits.



19



Cash from financing activities


Net cash provided by financing activities totaled $175,000 for the six-month period ended June 30, 2014 which were the proceeds from the sale of common stock. For the six-month period ended June 30, 2013, net cash provided by financing activities totaled $316,500 which were the proceeds from the sale of common stock


Financial condition


As of June 30, 2014, we had a working capital surplus of $353,300, an accumulated deficit of $12,342,784 and total stockholders’ equity of $491,914, compared to a working capital surplus of $709,933, an accumulated deficit of $11,746,843 and total stockholders’ equity of $804,278 at December 31, 2013.


We believe that with the cash we have on hand and the cash we expect to raise through future securities issuances, that we will have sufficient funds available to cover our cash requirements through the next twelve months. We further expect that key strategic relationships that we have entered into and that we expect to enter into will lead to additional revenue opportunities. However, no assurance can be given that such expectations will materialize.


At December 31, 2013 our registered independent public accounting firm expressed substantial doubt as to our ability to continue as a going concern because, since inception, we have incurred substantial losses and negative cash flows from operations. This concern will be addressed by focusing on revenue growth in the coming months. In addition, management will review projected second half (2014) losses against cash on hand and consider raising capital if required.


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.


Item 3. Quantitative And Qualitative Disclosures About Market Risk.


Not applicable.


Item 4. Controls and Procedures.


Evaluation of Disclosure Controls and Procedures


Based on an evaluation under the supervision and with the participation of the Company’s management, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act were effective as of June 30, 2014, to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.


Inherent Limitations Over Internal Controls


The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. The Company’s internal control over financial reporting includes those policies and procedures that:


(i)

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the Company’s assets;

(ii)

provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with GAAP, and that the Company’s receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and

(iii)

provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.



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Management, including the Company’s principal executive officer and principal financial officer, does not expect that the Company’s internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies and procedures may deteriorate.


Changes in Internal Control Over Financial Reporting


There were no changes in the Company’s internal control over financial reporting during the three-month period ended June 30, 2014 which were identified in connection with management’s evaluation required by paragraph (d) of Rule 13a-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.


PART II – OTHER INFORMATION


Item 1. Legal Proceedings.


From time to time, we may become involved in litigation relating to claims arising out of our operations in the normal course of business.


On or about September 14, 2012, Casville Investments, Ltd, MBC Investment, SA, and Watkins International, Ltd., shareholders of Argo Digital Solutions, Inc., asserted claims individually and derivatively on behalf of Argo against the Company, Jason M. Kates, Richard J. Sullivan, David A. Loppert, World Capital Markets, Inc., and Solutions, Inc. in the United States District Court for the Southern District of New York. The plaintiffs alleged that they were injured as a result of the alleged mismanagement of Argo and the May 2010 asset purchase transaction between Argo, rVue, Inc. and the Company. At all times, we denied any wrongdoing. This case was subsequently transferred to the United States District Court for the Southern District of Florida. Following the transfer, the parties entered into a Settlement Agreement whereby all parties acknowledged and agreed that the consideration exchanged in connection therewith was being exchanged solely to avoid the costs of further litigation and that same was not an acknowledgment or admission of any wrongdoing on the part of the Company or any other party. The material terms of the Settlement Agreement included the transfer of cash and common stock of the Company from various defendants, including the Company, to the plaintiffs to be distributed in accordance with the terms of Settlement Agreement. In exchange for that transfer, the plaintiffs agreed to voluntarily dismiss all claims asserted against the defendants, including those asserted against the Company, with prejudice, as well as exchange of mutual general releases with all of the defendants. With respect to the Company’s portion of the funds and common stock to be transferred, the Company agreed to transfer a total of $20,000.00 and 190,000 shares of common stock to the plaintiffs. The Settlement Agreement was subject to the approval of the Court. On May 5, 2014, following the Court’s approval of the Settlement Agreement, the Court entered the Final Order of Dismissal with Prejudice, dismissing the claims asserted with prejudice and closing the case.


On or about March 8, 2011, Viewpoint Securities, Inc. commenced an action in the Circuit Court of the 17th Judicial District in Broward County, Florida, alleging that we owe them a placement agent fee of $210,000 and warrants to purchase 175,167 shares of our common stock for purported services rendered in connection with our December 2010 private placement. On July 29, 2011, we answered their Second Amended Complaint and asserted various defenses to the claims asserted therein. Additionally, we filed a Counterclaim for rescission of the Agreement. On January 9, 2012, Viewpoint filed an amended answer to our counterclaim. We believe the case is without merit and are vigorously defending ourselves in connection therewith. In the opinion of management, we do not believe that we have a probable liability related to this legal proceeding that would materially adversely affect our financial condition or operating results. However, the results of legal proceedings cannot be predicted with certainty. If we fail to prevail in this legal matter, the operating results of a particular reporting period could be materially adversely affected.



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On June 4, 2014, rVue, Inc. filed suit against former rVue director and officer Michael Mullarkey, who left the company on May 31, 2013. This suit was filed in the Circuit Court of the Nineteenth Judicial Circuit, Lake County, Illinois. The complaint alleges claims of fraud, constructive fraud and conversion. The factual bases alleged to underlie these claims are Mr. Mullarkey’s submission of expenses for reimbursement from rVue for services rendered to Mr. Mullarkey’s other businesses and Mr. Mullarkey’s payment of consulting fees and directors fees to himself that were not authorized by rVue’s board of directors. The relief sought is compensatory damages in the amount of $250,459, as well as punitive damages. The reason for the delay in filing the suit was due to management’s internal review and investigation. Prior to filing, the Company requested Mr. Mullarkey, on numerous occasions, to provide back-up to the various questionable items that management uncovered, but despite promises to deliver such proof, the documentation was never delivered. When it became clear that Mr. Mullarkey would not cooperate, the suit was filed. It should be noted that this lawsuit will have no negative impact on the Company’s previously disclosed financial statements. The expenses in question have already been paid for by the Company. A positive outcome of this claim would result in an increase in cash and reported income.


Item 1A. Risk Factors.


Not applicable.


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


None.


Item 3. Defaults Upon Senior Securities.


None.


Item 4. Mine Safety Disclosures.


Not applicable.


Item 5. Other Information.


None.


Item 6. Exhibits.


(a) Index to Exhibits


Exhibit No.

 

Exhibit Description

31.1*

 

Rule 13a-14(a) Certification of Chief Executive Officer.

31.2*

 

Rule 13a-14(a) Certification of Chief Financial Officer.

32.1**

 

Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer.

EX-101.INS *

 

XBRL Instance Document

EX-101.SCH *

 

XBRL Taxonomy Extension Schema Document

EX-101.CAL *

 

XBRL Taxonomy Extension Calculation Linkbase Document

EX-101.DEF *

 

XBRL Taxonomy Extension Definition Linkbase Document

EX-101.LAB *

 

XBRL Taxonomy Extension Label Linkbase Document

EX-101.PRE *

 

XBRL Taxonomy Extension Presentation Linkbase Document

 

 

 

* Filed herewith.

** Furnished herewith.




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SIGNATURE


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: August 13, 2014

By:

/s/ Mark P. Pacchini

 

 

Acting Chief Financial Officer

 

 

(Duly Authorized Officer and

 

 

Principal Financial Officer)




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EXHIBIT INDEX


Exhibit No.

 

Exhibit Description

 

31.1*

 

Rule 13a-14(a) Certification of Chief Executive Officer.

31.2*

 

Rule 13a-14(a) Certification of Chief Financial Officer.

32.1**

 

Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer.

EX-101.INS *

 

XBRL Instance Document

EX-101.SCH *

 

XBRL Taxonomy Extension Schema Document

EX-101.CAL *

 

XBRL Taxonomy Extension Calculation Linkbase Document

EX-101.DEF *

 

XBRL Taxonomy Extension Definition Linkbase Document

EX-101.LAB *

 

XBRL Taxonomy Extension Label Linkbase Document

EX-101.PRE *

 

XBRL Taxonomy Extension Presentation Linkbase Document

 

 

 

* Filed herewith.

** Furnished herewith.



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