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, 2015

 

      .  

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		(I.R.S. Employer Identification No.)
or organization)

 

275 N. York Street, Suite 201
Elmhurst, IL 60126		(855) 261-8370
(Address of principal executive offices,		(Registrant’s telephone number,
including zip code)		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, 2015 is as follows:

 

Class		Number of Shares
Common Stock: $0.001 Par Value		141,944,156

 

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RVUE HOLDINGS, INC.

TABLE OF CONTENTS

 

PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements.
	Condensed Consolidated Balance Sheets – June 30, 2015 and December 31, 2014	3
	Condensed Consolidated Statements of Operations – Three and Six Months Ended June 30, 2015 and 2014	4
	Condensed Consolidated Statements of Stockholders’ Equity (Deficit) – Six Months Ended June 30, 2015	5
	Condensed Consolidated Statements of Cash Flows –Six Months Ended June 30, 2015 and 2014	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	21
Item 4.	Controls and Procedures.	21
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings.	22
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.	23

 

 

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rVUE HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

		June 30,			December 31,
		2015			2014
		(unaudited)			(audited)
Assets
Current assets:
Cash and cash equivalents		$	267,590		$	418,803
Accounts receivable			19,020			332,563
Prepaid expenses			69,171			70,101
Total current assets			355,781			821,467
Property and equipment, net			81			662
Software development costs			127,237			136,717
Deposits			3,100			3,180
		$	486,199		$	962,026
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable		$	355,317		$	168,591
Accrued expenses			87,294			204,821
Note payable			46,269			-
Deferred revenue			10,500			10,500
Total current liabilities			499,380			383,912
Commitments and contingencies (Note 10)
Stockholders' equity (deficit):
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, 2015 and December 31, 2014;141,944,156 issued and outstanding at June 30, 2015 and 140,872,727 at December 31, 2014			141,944			140,873
Additional paid-in capital			13,217,767			13,105,717
Accumulated deficit			(13,372,892)			(12,668,476)
Total stockholders' equity (deficit)			(13,181)			578,114
		$	486,199		$	962,026

 

 

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rVUE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

		For the Three Months Ended June 30,						For the Six Months Ended June 30,
		2015			2014			2015			2014
Revenue
Core fees		$	542,903		$	199,508		$	616,038		$	392,172
Non-core fees			31,500			31,500			63,000			67,425
			574,403			231,008			679,038			459,597
Costs and expenses
Cost of revenue			501,764			175,078			566,310			344,837
Selling, general and administrative expenses			331,932			332,620			746,385			679,007
Depreciation and amortization			33,524			19,267			70,308			31,694
Interest expense			451			-			451			-
			867,671			526,965			1,383,454			1,055,538
Loss before provision for income taxes			(293,268)			(295,957)			(704,416)			(595,941)
Provision for income taxes			-			-			-			-
Net loss		$	(293,268)		$	(295,957)		$	(704,416)		$	(595,941)
Net loss per common share - basic and diluted		$	(0.00)		$	(0.00)		$	(0.00)		$	(0.00)
Shares used in computing net loss per share:
Basic and diluted			141,944,156			135,743,509			141,706,061			135,436,858

 

 

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rVUE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

FOR THE SIX MONTHS ENDED JUNE 30, 2015

(unaudited)

  

														Additional
		Preferred Stock						Common Stock						Paid-In			Accumulated
		Shares			Amount			Shares			Amount			Capital			Deficit			Total
Balance, December 31, 2014			-		$	-			140,872,727		$	140,873		$	13,105,717		$	(12,668,476)		$	578,114
Common stock issued			-			-			1,071,429			1,071			73,929			-			75,000
Stock based compensation expense			-			-			-			-			38,121			-			38,121
Net loss			-			-			-			-			-			(704,416)			(704,416)
Balance, June 30, 2015			-		$	-			141,944,156		$	141,944		$	13,217,767		$	(13,372,892)		$	(13,181)

 

 

5

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rVUE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

		For the Six Months Ended June 30,
		2015			2014
Operating activities
Net loss		$	(704,416)		$	(595,941)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			70,308			31,694
Stock-based compensation expense			38,121			30,177
Common stock issued for services			45,000			-
Changes in operating assets and liabilities:
Accounts receivable			313,544			(30,737)
Prepaid expenses			2,199			(8,915)
Accounts payable			186,726			(17,612)
Accrued expenses			(117,527)			35,965
Deferred revenue			-			10,500
Cash used in operating activities			(166,045)			(544,869)
Investing activities
Payments for property, equipment and software development			(60,248)			(81,913)
Change in deposits			80			5,950
Cash used in investing activities			(60,168)			(75,963)
Financing activities
Proceeds from the issuance of common stock			75,000			175,000
Cash provided by financing activities			75,000			175,000
Decrease in cash and cash equivalents			(151,213)			(445,832)
Cash and cash equivalents, beginning of period			418,803			844,589
Cash and cash equivalents, end of period		$	267,590		$	398,757

 

See supplemental non-cash information in Note 11.

 

 

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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, 2014, included in our Annual Report on Form 10-K (the “2014 Form 10-K”).

 

The unaudited condensed consolidated statement of operations for the three and six months ended June 30, 2015 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 $13,372,892 at June 30, 2015. 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.

We will continue to require substantial funds to continue development of our core businesses. Management’s plan in order to meet our operating cash flow requirements includes financing activities such as private placements of common stock and private issuances of debt and convertible instruments and the continued establishment of strategic relationships which we expect will lead to the generation of additional revenue opportunities.

 

While we believe that we will be successful in obtaining the necessary financing to fund our operations, there is no assurance that such additional funding will be achieved or that we will succeed in our future operations. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.

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, 2015 and 2014, 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, 2015 and 2014 since this would have an anti-dilutive effect. 

 

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RVUE HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

 

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,
		2015			2014			2015			2014
Numerator:
Net loss		$	(293,268)		$	(295,957)		$	(704,416)		$	(595,941)
Denominator:
Weighted-average shares outstanding			141,944,156			135,743,509			141,706,061			135,436,858
Effect of dilutive securities (1)			-			-			-			-
Weighted-average diluted shares			141,944,156			135,743,509			141,706,061			135,436,858
Basic and diluted loss per share		$	(0.00)		$	(0.00)		$	(0.00)		$	(0.00)

(1)

The following stock options and warrants outstanding as of June 30, 2015 and 2014 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,
		2015			2014
Stock options			-			-
Warrants			50,698			50,904
			50,698			50,904

Note 4 – Financial Instruments

 

Accounts Receivable

We sell our services directly to our customers. Accounts receivable from two of our customers accounted for 100% of total accounts receivable at June 30, 2015, and accounts receivable from three of our customers accounted for 99.4 % of total accounts receivable at December 31, 2014. We had no allowance for doubtful accounts at either June 30, 2015 or at December 31, 2014.

 

Note 5 – Fair Value Measurements

 

The carrying amounts of our financial instruments, including cash, accounts receivable, accounts payable and accrued liabilities, approximate fair value because of their generally short maturities. 

 

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RVUE HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

 

Note 6 – Condensed Consolidated Financial Statement Details

 

The following tables show the Company’s condensed consolidated financial statement details as of June 30, 2015 and December 31, 2014:

 

Prepaid expenses		June 30,  2015			December 31, 2014
Insurance		$	63,941			14,871
Other			5,230			55,230
		$	69,171			70,101

 

Property and Equipment		Estimated Useful Lives			June 30,			December 31,
		(Years)			2015			2014
Computers and software			2 - 5		$	91,083			91,083
Equipment			3			22,977			22,977
Gross property and equipment						114,060			114,060
Less accumulated depreciation						(113,979)			(113,398)
Net property and equipment					$	81			662

 

Depreciation expense was $580 and $1,251 for the six months ended June 30, 2015 and 2014, respectively.  Depreciation expense was $34 and $597 for the three months ended June 30, 2015 and 2014, respectively.

 

Software Development Costs		Estimated Useful Lives			June 30,			December 31,
		(Months)			2015			2014
Software development costs			18		$	1,354,168			1,293,920
Less accumulated amortization						(1,226,931)			(1,157,203)
Net software development costs					$	127,237			136,717

 

Amortization expense was $69,728 and $30,443 for the six months ended June 30, 2015 and 2014, respectively. Amortization expense was $33,490 and $18,670 for the three months ended June 30, 2015 and 2014, respectively.

  

Accrued Expenses		June 30,			December 31,
		2015			2014
Personnel costs		$	10,774			9,497
Network costs			31,213			166,211
Other			45,307			29,113
		$	87,294			204,821

 

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RVUE HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 7 – Note Payable

In May of 2015, the Company entered into a $57,600 financing agreement for the Company’s annual directors and officers insurance. The term of the financing agreement is ten months and the interest rate is 4.94%.  The first payment of $5,891 was made in June of 2015 and the final payment will be in March 2016.

Note 8 - Income Taxes

 

There is no income tax benefit for the losses for the six-month periods ended June 30, 2015 and 2014, 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, 2014, 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, 2015. We did not recognize any interest or penalties during 2014 related to unrecognized tax benefits, or through the period ended June 30, 2015.

Note 9 - Stockholders’ Equity and Stock Based Compensation

 

Stock Option Activity

 

A summary of the Company’s stock option activity for the six month period ended June 30, 2015 is as follows:

 

		Number of Options			Weighted Average Exercise Price Per Share			Weighted Average Remaining Contractual Term			Aggregate Intrinsic Value
Balance at December 31, 2014			2,340,000		$	0.16			7.55		$	-
Options granted			850,000		$	0.10			9.55
Options exercised			-		$	-			-
Options forfeited			150,000		$	0.10			9.55
Balance at June 30, 2015			3,040,000		$	0.15			7.63		$	-
Exercisable at June 30, 2015			1,476,474		$	0.18			7.17		$	-
Expected to vest after June 30, 2015			1,563,526		$	0.12			8.07		$	-

 

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.

 

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.

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RVUE HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

 

On January 12, 2015, 850,000 stock options were granted to current employees and a contractor of the Company.  We did not grant any options during the six-month period ended June 30, 2014.  As of June 30, 2015 there was approximately $110,000 of total unrecognized compensation cost related to stock options outstanding.  This cost is expected to be recognized over a period of three years.

Stock based compensation expense was $19,060 and $15,088 for the three months ended June 30, 2015 and 2014, respectively.  Stock based compensation expense was $38,121 and $30,177 for the six months ended June 30, 2015 and 2014, respectively.

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, 2015 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 10 – Commitments and Contingencies

 

Other Off-Balance Sheet Commitments

Our corporate headquarters is in 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.

 

Contract with Consultant

In November 2014, rVue entered into an eight month consulting agreement that compensated the consultant with 483,871 restricted shares of rVue common stock. The agreement requires rVue to provide price protection on the shares which may result in the Company issuing additional shares to the consultant if the share price at the time of the removal of restriction on resale of such restricted shares falls below the share price at issuance.

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 11 – Supplemental Non-Cash Information

 

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 lawsuit.  At December 31, 2014, the Company had $45,000 of prepaid consulting services that was paid via the issuance of common stock in 2014.  During the six months ended June 30, 2015, the Company recognized consulting expenses of $45,000 related to the arrangement.  In May of 2015, the Company entered into a $57,600 financing agreement for the Company’s annual directors and officers insurance.

 

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RVUE HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

 

Note 12 – 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.

Typenex Convertible Note Financing

On July 8, 2015 (the “Closing Date”), the Company entered into a Securities Purchase Agreement dated July 7, 2015 but effective July 8, 2015 (the “Typenex SPA”) with Typenex Co-Investment, LLC (“Typenex”).  Pursuant to the Typenex SPA, the Company issued to Typenex a convertible promissory note (the “Typenex Note”) in the principal amount of $252,500, deliverable in four tranches as described below.

The Typenex Note has a term of 17 months, an interest rate of 10% per annum and an original issue discount (OID) of $22,500.   The net proceeds to the Company from the Typenex Note were $225,000, in the form of: (a) an initial tranche of $75,000 in cash (gross proceeds of $87,500, less $7,500 in OID and $5,000 in expense reimbursements), and (b) three promissory notes of $55,000 each (each consisting of $55,000 in gross proceeds, less $5,000 in OID) (the “Investor Notes”).  Typenex may elect, in its sole discretion, to fund one or more of the Investor Notes.  Absent such an election by Typenex, the Investor Notes will not result in cash proceeds to, or an obligation to repay on the part of, the Company.

Beginning on the date that is six (6) months after the Closing Date and on the same day of each month thereafter until the maturity date, so long as any amount is outstanding under the Typenex Note, the Company is required to pay to Typenex installments of principal equal to $21,041 (or such lesser principal amount is then outstanding), plus the sum of any accrued and unpaid interest. Payments of each installment amount may be made in cash.  Alternatively, Typenex or the Company may elect to convert an installment amount into Common Stock as described below.

Beginning six (6) months after the Closing Date, Typenex may convert the balance of the Typenex Note, or any installment or portion thereof, utilizing the conversion price calculation set forth below.  Generally, the conversion price will be equal to the lower of (a) $0.08 per share and (b) the “Market Price.”  The “Market Price” is calculated by applying a discount of 30% to the average of the three (3) lowest closing bid prices during the twenty (20) trading days immediately preceding the applicable conversion.  The Company may also elect to make payment of installments in the form of equity on substantially the same terms, subject to the terms and conditions of the Typenex Note.

Carebourn Convertible Note Financing

On July 30, 2015 (the “Closing Date”), the Company entered into a Securities Purchase Agreement dated July 30, 2015 (the “Carebourn SPA”) with Carebourn Capital, L.P. (“Carebourn”).  Pursuant to the Carebourn SPA, the Company issued to Carebourn a convertible promissory note (the “Carebourn Note”) in the principal amount of $115,000.

The Carebourn Note has a term of 9 months and an interest rate of 10% per annum. The net proceeds to the Company from the Carebourn Note were $100,000, consisting of gross proceeds of $115,000, less $10,000 in OID and $5,000 in expense reimbursements.  The entire principal balance of the Carebourn Note, together with all accrued interest, is due and payable on April 30, 2016.

Beginning on the date that is ninety (90) days after the Closing Date, so long as any amount is outstanding under the Carebourn Note, Carebourn may convert all or any portion of the balance of the Carebourn Note into shares of the Company’s common stock (“Common Stock”).  Generally, the conversion price will be calculated by applying a discount of 40% to the average of the three (3) lowest closing bid prices for the Common Stock during the twenty (20) trading days immediately preceding the applicable conversion. Carebourn is generally prohibited from acquiring more than 4.99% of the Company’s outstanding shares pursuant to the Carebourn Note.

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RVUE HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

CEO Employment Agreement

The Company entered into an employment agreement with Mark Pacchini, our CEO, on August 4, 2015.  The agreement term is three years and includes mandatory bonuses payable in stock options if specific revenue goals are achieved in the Company’s fiscal year. As of the date of this agreement, the July 1, 2013 employment agreement between the Company and Mr. Pacchini was terminated.

Incentive Stock Plan Amendment

In July 2015, the Company increased the number of shares available under the Company’s 2010 Incentive Stock Plan by an additional 15,000,000 shares.

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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, 2014 (the “2014 Form 10-K”) filed with the U.S. Securities and Exchange Commission (“SEC”). The following discussion should be read in conjunction with the 2014 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, 2015, 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.

 

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.

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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 $10,500. 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” in the Notes to Consolidated Financial Statements of this Form 10-Q and in the Notes to the Consolidated Financial Statements in the Company’s 2014 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. 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, 2015 and 2014:

 

Our unaudited results of operations for the three-month periods ended June 30, 2015 and 2014 were as follows:

 

		For the Three Months Ended
		June 30,
		2015			2014
Revenue
Core fees		$	542,903		$	199,508
Non-core fees			31,500			31,500
			574,403			231,008
Costs and expenses
Cost of revenue			501,764			175,078
Selling, general and administrative expenses			331,932			332,620
Depreciation and amortization			33,524			19,267
Interest expense			451			-
			867,671			526,965
Loss before provision for income taxes			(293,268)			(295,957)
Provision for income taxes			-			-
Net loss		$	(293,268)		$	(295,957)
Net loss per common share - basic and diluted		$	(0.00)		$	(0.00)
Shares used in computing net loss per share:
Basic and diluted			141,944,156			135,743,509

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Revenue

 

Revenue was $574,403 for the three-month period ended June 30, 2015 compared to $231,008 for the three-month period ended June 30, 2014, a $343,395 increase, or 148.7%. We earned revenue as follows:

 

		Three Months ended
		June 30,
Revenue Category		2015			2014			$ Change			% Change
Core fees		$	542,903		$	199,508		$	343,395			172.1%
Non-core fees			31,500			31,500			-			-
Total Revenue		$	574,403		$	231,008		$	343,395			148.7%

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 $542,903 for the three-month period ended June 30, 2015, a $343,395 improvement over the $199,508 core fees for the three-month period ended June 30, 2014. 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 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 provide assurance 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, 2015, and $31,500 for the three-month period ended June 30, 2014.  We expect to have $31,500 of revenue in this category each quarter in 2015.

 

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 $501,764 for the three-month period ended June 30, 2015 compared to $175,078 for the three-month period ended June 30, 2014, a $326,686 increase, or 186.6%, and was comprised of:

 

		Three Months Ended
		June 30,
		2015			2014			$ Change			% Change
Temporary labor		$	3,220		$	2,890		$	330			11.4%
Network services			180			180			-			-%
rVue operations			498,364			172,008			326,356			189.7%
Total		$	501,764		$	175,078		$	326,686			186.6%

 

The increase in cost of revenue is attributable to a $343,395 increase in rVue revenue and network mix compared to June 30, 2014. The increase in core related revenues increases the cost of network expenses which are recorded in rVue operations.

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Selling, general and administrative expenses

 

Selling, general and administrative expenses (“SG&A”) were $331,932 for the three-month period ended  June 30, 2015, compared to $332,620 for the three-month period ended  June 30, 2014 a $5,438 decrease, or 1.6%. Changes by major component of SG&A are:

 

		Three Months Ended
		June 30,
		2015			2014			$ Change			% Change
Compensation and benefits		$	90,722		$	141,008		$	(50,286)			-35.7%
Stock-based compensation expense			19,060			15,088			3,972			26.3%
Facility expense			10,790			17,400			(6,610)			-38.0%
Communications expense			17,615			17,703			(88)			-0.5%
Travel expense			11,570			5,892			5,678			96.4%
Investor relations and investment banking fees			53,128			14,724			38,404			260.8%
Professional and consulting fees			58,351			59,203			(852)			-1.4%
Office support and supply expense			70,696			61,602			9,094			14.8%
Total		$	331,932		$	332,620		$	(5,438)			-1.6%

 

Compensation and benefits decreased $50,286, or 35.7% for the three months ended June 30, 2015 when compared to the three months ended June 30, 2014. This change was due to a $62,581decrease in salary and payroll related expenses offset by a $4,310 decrease in the amount of payroll costs being capitalized for software development, and a $7,985 increase in the vacation accrual.

 

Stock-based compensation expense increased $3,972 or 26.3% for the three months ended June 30, 2015 when compared to the three months ended June 30, 2014.  This increase is due to the employee stock options granted in January 2015.

Facility expense decreased $6,610 or 38.0% for the three months ended June 30, 2015 when compared to the three months ended June 30, 2014.  The decrease in facility expense is due to the closure of the Florida office.

 

Travel expense increased $5,678 or 96.4% to for the three months ended June 30, 2015 when compared to the three months ended June 30, 2014.  The increase is attributable to an increase in sales related travel in 2015.

Investor relations and investment banking fees expense increased by $38,404 or 260.8%, in the three-month period ended June 30, 2015, when compared to the three-month period ended June 30, 2014. $49,354 of the total expense for 2015 is due to an eight month investor relations program to attract investors to rVue that began in November 2014 and was completed in May 2015.  The remaining $3,774 of 2015 investor relations and investment banking fees expense is related to fees paid related to investor relations outside services.

Professional and consulting fees decreased $852 or 1.4% for the three months ended June 30, 2015 when compared to the three months ended June 30, 2014.  The decrease is due to a $5,622 decrease in legal fees, a $4,570 decrease in accounting and audit fees and a $1,320 decrease in SEC filing service fees offset by a $10,700 increase in sales and marketing consulting fees.

Office support and supply expense for the three-month period ended June 30, 2015 increased $9,094 or 14.8%, compared to the three-month period ended June 30, 2014. This increase is attributable to outside consultants rVue has engaged in operations and software development.

 

Depreciation and amortization

 

Depreciation and amortization was $33,524 for the three-month period ended June 30, 2015 compared to $19,267 for the three-month period ended June 30, 2014, a $14,257 increase, or 74.0%.

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Six Months Ended June 30, 2015 and 2014:

 

Our unaudited results of operations for the six-month periods ended June 30, 2015 and 2014 were as follows:

 

		For the Six Months Ended
		June 30
		2015			2014
Revenue
Core fees		$	616,038		$	392,172
Non-core fees			63,000			67,425
			679,038			459,597
Costs and expenses
Cost of revenue			566,310			344,837
Selling, general and administrative expenses			746,385			679,007
Depreciation and amortization			70,308			31,694
Interest income			451			-
			1,383,454			1,055,538
Loss before provision for income taxes			(704,416)			(595,941)
Provision for income taxes			-			-
Net loss		$	(704,416)		$	(595,941)
Net loss per common share - basic and diluted		$	(0.00)		$	(0.00)
Shares used in computing net loss per share:
Basic and diluted			141,706,061			135,436,858

 

Revenue

 

Revenue was $679,038 for the six-month period ended June 30, 2015 compared to $459,597 for the six-month period ended June 30, 2014, a $219,441 increase, or 47.7%. We earned revenue as follows:

 

		Six Months ended
		June 30,
Revenue Category		2015			2014			$ Change			% Change
Core Fees		$	616,038		$	392,172		$	223,866			57.1%
Non-Core Fees			63,000			67,425			(4,425)			-6.6%
Total Revenue		$	679,038		$	459,597		$	219,441			47.7%

 

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 $616,038 for the six-month period ended June 30, 2015, a $223,866 or 57.1% improvement over the $392,172 rVue fees for the six-month period ended June 30, 2014.  As the rVue platform gains traction with advertisers and agencies, we expect to generate additional revenue and fees in the second half of 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 2015 and beyond. We cannot provide assurance that advertisers or agencies will accept the rVue platform as their platform of choice for placing advertising with DpbM networks.

 

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Non-core fees

 

Non-core fees were $63,000 for the six-month period ended June 30, 2015, a $4,425, or 6.6%, decrease compared to the $67,425 for the six-month period ended June 30, 2014. 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 2015, 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 $566,310 for the six-month period ended June 30, 2015 compared to $344,837 for the six-month period ended June 30, 2014, a $221,473 increase, or 64.2%, and was comprised of:

 

		Six Months Ended
		June 30,
		2015			2014			$ Change			% Change
Compensation and benefits		$	6,401		$	4,932		$	1,469			29.8%
Network services			360			365			(5)			-1.4%
rVue operations			559,549			339,540			220,009			64.8%
Total		$	566,310		$	344,837		$	221,473			64.2%

The increase in cost of revenue is attributable to a $219,441 increase in rVue revenue and network mix compared to June 30, 2014. 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 $746,385 for the six-month period ended June 30, 2015, compared to $679,007 for the six month period ended June 30, 2014, a $67,378 increase, or 9.9%. Changes by major component of SG&A are:

 

		Six Months Ended
		June 30,
		2015			2014			$ Change			% Change
Compensation and benefits		$	249,355		$	294,615		$	(45,260)			-15.4%
Stock-based compensation expense			38,121			30,177			7,944			26.3%
Facility expense			23,398			35,342			(11,944)			-33.8%
Communications expense			35,338			33,898			1,440			4.2%
Travel expense			14,988			10,789			4,199			38.9%
Investor relations and investment banking fees			93,320			17,004			76,316			448.8%
Professional and consulting fees			150,332			154,207			(3,875)			-2.5%
Office support and supply expense			141,533			102,975			38,558			37.4%
Total		$	746,385		$	679,007		$	67,378			9.9%

 

Compensation and benefits decreased $45,260, or 15.4% for the six months ended June 30, 2015 when compared to the six months ended June 30, 2014. This change was due to a $72,034 decrease in salary and payroll related expenses and offset by a $5,109 increase in the vacation accrual and a $21,665 decrease in the amount of payroll costs being capitalized for software development.

Stock-based compensation expense increased $7,944 or 26.3% for the six months ended June 30, 2015 when compared to the six months ended June 30, 2014.  This increase is due to the employee stock options granted in January 2015.

 

Facility expense decreased $11,944 or 33.8% for the six months ended June 30, 2015 when compared to the six months ended June 30, 2014.  The decrease in facility expense is due to the closure of the Florida office.

Travel expense increased $4,199 or 38.9% due to for the six months ended June 30, 2015 when compared to the six months ended June 30, 2014.  The increase is attributable to an increase in sales related travel in 2015.

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Investor relations and investment banking fees expense increased by $76,316 or 448.8%, in the six-month period ended June 30, 2015, when compared to the six-month period ended June 30, 2014. $86,613 of the total expense for 2015 is due to an eight-month investor relations program to attract investors to rVue that began in November 2014 and was completed in May 2015.  The remaining $6,707 of 2015 investor relations and investment banking fees expense is related to fees paid related to investor relations outside services.

Professional and consulting fees decreased $3,875 or 2.5% for the six months ended June 30, 2015 when compared to the six months ended June 30, 2014.  The decrease is due to a $15,079 decrease in legal fees, a $3,659 increase in accounting and audit fees and a $3,155 decrease in SEC filing service fees and a $10,700 increase in sales and marketing consulting fees.

Office support and supply expense for the six-month period ended June 30, 2015 increased $38,558 or 37.4%, compared to the six-month period ended June 30, 2014. This increase is attributable to outside consultants rVue has engaged in operations and software development.

 

Depreciation and amortization

 

Depreciation was $580 for the six-month period ended June 30, 2015 compared to $1,251 for the six-month period ended June 30, 2014, a $671 decline, or 53.6%. For the six-month period ended June 30, 2015, amortization expense for software development was $69,728 compared to $30,443 for the six-month period ended June 30, 2014, a $39,285 increase, or 129.0%. 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, 2015, we had cash and cash equivalents totaling $267,590. Since our inception, we have incurred net losses, and at June 30, 2015, we had an accumulated deficit of $13,372,892 and total stockholders’ deficit of $13,181. We expect to continue to incur losses in fiscal 2015. 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, 2015, the Company raised approximately an additional $170,000 through the issuance of debt and convertible instruments.    We believe the $170,000 capital raised along with continued operations will provide a sufficient amount of cash to continue through year-end.  The Company is currently finalizing an agreement with its largest shareholder to provide equity financing for cash flow purposes over the next 18 months, although no assurance can be given that the Company and the shareholder will ultimately agree on terms.  The Company may issue additional shares of Common Stock to investors throughout the remainder of 2015, although 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, 2015. We have budgeted capital expenditures of approximately $150,000 for fiscal 2015, primarily capitalized labor for software development. Any required expenditure will be completed through internally generated funding or from proceeds from the sale of debt or equity securities, or borrowings.

 

We did not have any significant elements of income or loss arising from continuing operations in the six-month periods ended June 30, 2015 and 2014. 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 $166,045 for the six-month period ended June 30, 2015 compared to $544,869 for the six-month period ended June 30, 2014. In the six-month period ended June 30, 2015, cash was used to fund a net loss of $704,416, reduced by depreciation of $70,308, stock-based compensation expense of $38,121, common stock previously issued for services received in the first two quarters of $45,000 and by changes in operating assets and liabilities totaling $384,942.

 

During 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 changes in operating assets and liabilities totaling $10,799.

 

Cash used in investing activities

 

Net cash used in investing activities totaled $60,168 for the six-month period ended June 30, 2015 compared to $75,963 of net cash used in investing activities in the six-month period ended June 30, 2014. In the six-month period ended June 30, 2015, cash used in investing activities consisted of $60,248 for fixed asset purchases and that amount was offset by a decrease in deposits of $80.  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.

 

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Cash from financing activities

 

Net cash provided by financing activities totaled $75,000 for the six-month period ended June 30, 2015 from the sale of common stock.  For the six-month period ended June 30, 2014, net cash provided by financing activities totaled $175,000 from the sale of common stock.

 

Financial condition

 

As of June 30, 2015, we had a working capital deficit of $143,598, an accumulated deficit of $13,372,892 and total stockholders’ deficit of $13,181, compared to a working capital surplus of $437,555 an accumulated deficit of $12,668,476 and total stockholders’ equity of $578,114 at December 31, 2014.

 

We believe that with the cash we have on hand and the cash we expect to raise through future securities issuances and issuances of debt and convertible instruments, 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, 2014 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 losses for the second half of 2015 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, 2015, 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 board of 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, 2015 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 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.

 

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.

As previously reported in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (SEC) on August 6, 2015, the Company entered into a Securities Purchase Agreement dated July 30, 2015 (the “Carebourn SPA”) with Carebourn Capital, L.P. (“Carebourn”).  Pursuant to the Carebourn SPA, the Company issued to Carebourn a convertible promissory note (the “Carebourn Note”) in the principal amount of $115,000.  The foregoing description of the Carebourn Note and the Carebourn SPA are qualified in their entirety by the text of such documents, copies of which are attached as Exhibit 10.1 and Exhibit 10.2 to this Quarterly Report on Form 10-Q. 

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Item 6.

Exhibits.

 

(a)

Index to Exhibits

 

Exhibit No.		Exhibit Description
10.1* 10.2* 31.1*		Carebourn Note Carebourn SPA 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, 2015	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
10.1* 10.2* 31.1*		Carebourn Note Carebourn SPA 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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