RVUE HOLDINGS, INC. - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - RVUE HOLDINGS, INC.	Financial_Report.xls
EX-32.1 - EXHIBIT 32.1 - RVUE HOLDINGS, INC.	v354997_ex32-1.htm
EX-31.2 - EXHIBIT 31.2 - RVUE HOLDINGS, INC.	v354997_ex31-2.htm
EX-31.1 - EXHIBIT 31.1 - RVUE HOLDINGS, INC.	v354997_ex31-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2013

¨ 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)

10740B West Grand Avenue
Franklin Park, IL 60131		(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 ¨ No þ

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 ¨ No þ

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 þ

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

The number of shares outstanding of each of the issuer’s classes of common stock as of the close of business on October 4, 2013 is as follows:

Class		Number of Shares
Common Stock: $0.001 Par Value		117,378,620

RVUE HOLDINGS, INC.

TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements.
	Condensed Consolidated Balance Sheets – June 30, 2013 and December 31, 2012	1
	Condensed Consolidated Statements of Operations – Three and Six Months Ended June 30, 2013 and 2012	2
	Condensed Consolidated Statements of Stockholders’ Equity – Six Months Ended June 30, 2013	3
	Condensed Consolidated Statements of Cash Flows –Six Months Ended June 30, 2013 and 2012	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	12
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.	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	23
Item 3.	Defaults Upon Senior Securities.	23
Item 4.	Mine Safety Disclosures.	23
Item 5.	Other Information.	23
Item 6.	Exhibits.	24

rVUE HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30,		December 31,
	2013		2012
	(unaudited)		(audited)
Assets
Current assets:

Cash and cash equivalents	$	410,790	$	848,174
Accounts receivable		82,115		163,074
Prepaid expenses		27,602		56,380

Total current assets		520,507		1,067,628

Property and equipment, net		5,167		8,548

Software development costs		26,080		23,232
Deposits		15,610		13,510

	$	567,364	$	1,112,918

Liabilities and Stockholders' Equity
Current liabilities:

Accounts payable	$	122,164	$	154,600
Accrued expenses		348,724		389,848
Subscription investment payable		-		270,000
Deferred revenue		11,975		11,975

Total current liabilities		482,863		826,423

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; 140,000,000 shares authorized at June 30, 2013 and December 31, 2012; 115,928,620 issued and outstanding at June 30, 2013 and 100,691,954 at December 31, 2012		115,929		100,692
Additional paid-in capital		11,178,549		9,802,786
Accumulated deficit		(11,209,977)		(9,616,983)

Total stockholders' equity		84,501		286,495

	$	567,364	$	1,112,918

rVUE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2013		2012		2013		2012
Revenue
rVue advertising revenue	$	167,040	$	11,510	$	246,329	$	27,829
Network		35,925		95,925		94,150		211,094
		202,965		107,435		340,479		238,923
Costs and expenses
Cost of revenue		120,683		15,051		185,526		71,260
Selling, general and administrative expenses		413,583		528,291		1,724,713		1,456,138
Depreciation and amortization		10,075		172,021		23,548		295,689
Interest income		(90)		(34)		(314)		(170)
Interest expense		-		351,344		-		647,827
Change in fair value of derivative		-		(896,719)		-		(453,008)
Loss on early extinguishment of debt		-		-		-		17,456
		544,251		169,954		1,933,473		2,035,192
Loss before provision for income taxes		(341,286)		(62,519)		(1,592,994)		(1,796,269)
Provision for income taxes		-		-		-		-
Net loss	$	(341,286)	$	(62,519)	$	(1,592,994)	$	(1,796,269)
Net loss per common share - basic and diluted	$	(0.00)	$	(0.00)	$	(0.01)	$	(0.05)
Shares used in computing net loss per share:
Basic and diluted		115,488,620		38,171,099		112,244,805		37,917,448

rVUE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2013

(unaudited)

									Additional
	Preferred Stock				Common Stock				Paid-In		Accumulated
	Shares		Amount		Shares		Amount		Capital		Deficit		Total

Balance, December 31, 2012		-		-		100,691,954	$	100,692	$	9,802,786	$	(9,616,983)	$	286,495

Common stock issued for compensation and services		-		-		5,236,666	$	5,237	$	868,263		-	$	873,500

Common stock issued		-		-		10,000,000	$	10,000	$	507,500		-	$	517,500

Net loss		-		-		-		-		-		(1,592,994)	$	(1,592,994)

Balance, June 30, 2013		-	$	-		115,928,620	$	115,929	$	11,178,549	$	(11,209,977)	$	84,501

rVUE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	For the Six Months Ended June 30,
	2013		2012
Operating activities
Net loss	$	(1,592,994)	$	(1,796,269)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		23,548		295,689
Stock-based compensation expense		748,000		22,001
Common stock issued for services		40,833		38,000
Convertible loan interest		-		647,705
Change in fair value of derivative instruments		-		(453,008)
Loss on early extinguishment of debt		-		17,456
Changes in operating assets and liabilities:
Accounts receivable		80,959		40,623
Prepaid expenses		28,778		95,438
Accounts payable		(32,436)		(35,553)
Accrued expenses		(25,457)		23,533

Cash used in operating activities		(728,769)		(1,104,284)
Investing activities

Payments for property, equipment and software development		(23,015)		(96,968)
Change in deposits		(2,100)		(100)
Cash used in investing activities		(25,115)		(97,068)
Financing activities
Proceeds from convertible notes		-		1,235,000
Proceeds from the issuance of common stock		316,500		-

Cash provided by financing activities		316,500		1,235,000
Increase (decrease) in cash and cash equivalents		(437,384)		33,648
Cash and cash equivalents, beginning of period		848,174		19,917
Cash and cash equivalents, end of period	$	410,790	$	53,565

See supplemental non-cash information in Note 11.

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 accounting principles generally accepted in the United States of America. 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, 2012, included in our Annual Report on Form 10-K (the “2012 Form 10-K”).

The unaudited condensed consolidated statement of operations for the three and six months ended June 30, 2013 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 $11,209,977 at June 30, 2013. 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 business. Management’s plans in order to help meet our operating cash flow requirements include (i) financing activities such as private placements of common stock, and issuances of debt and convertible debt instruments, (ii) staff reductions, (iii) a hiring and expansion freeze, and (iv) the establishment of strategic relationships which we believe will lead to the generation of additional revenue opportunities.

While we believe that we should be successful in obtaining the necessary financing to fund our operations, there are no assurances 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, 2013 and 2012, 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, 2013 and 2012 since this would have an anti-dilutive effect. Additionally, in 2012, dilutive shares included shares issuable upon conversion of convertible notes payable.

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,
	2013		2012		2013		2012
Numerator:
Net loss	$	(341,286)	$	(62,519)	$	(1,592,994)	$	(1,796,269)

Denominator:
Weighted-average shares outstanding		115,488,620		38,171,099		112,244,805		37,917,448
Effect of dilutive securities		-		-		-		-
Weighted-average diluted shares		115,488,620		38,171,099		112,244,805		37,917,448
Basic and diluted loss per share	$	(0.00)	$	(0.00)	$	(0.01)	$	(0.05)

Note 4 – Financial Instruments

Cash and cash equivalents

The following table summarizes the fair value of the Company’s cash and cash equivalents as of June 30, 2013 and December 31, 2012:

	June 30,		December 31,
	2013		2012
Cash	$	86,924	$	17,193
Cash equivalents - money market funds		323,866		830,981

Total cash and cash equivalents	$	410,790	$	848,174

Accounts Receivable

We sell our services directly to our customers. We generally do not require collateral from our customers; however, we will require collateral in certain instances to limit credit risk. Accounts receivable from one of our customers accounted for 93.5% of total accounts receivable at June 30, 2013, and accounts receivable from one of our customers accounted for 85.5 % of total accounts receivable at December 31, 2012. We had no allowance for doubtful accounts at either June 30, 2013 or at December 31, 2012.

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.

Assets and liabilities measured at fair value on a recurring basis at June 30, 2013 and December 31, 2012 were as follows:

	Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
June 30, 2013
Assets:

Cash equivalents - money market funds	$	323,866	$	-	$	-	$	323,866

December 31, 2012
Assets:

Cash equivalents - money market funds	$	830,981	$	-	$	-	$	830,981

The fair value of the money market funds, classified as Level 1, utilized quoted prices in active markets. The Company had no Level 2 and Level 3 assets or liabilities at June 30, 2013 and December 31, 2012.

The Company had level 3 derivative liabilities at June 30, 2012 as a result of a conversion feature contained in a Promissory Note Agreement, as well as related stock warrants. These transactions are more fully described in Note 9 of the Company’s annual report on Form 10-K filed for the year ended December 31, 2012.

The table below sets forth a summary of changes in the fair value of the Company’s Level 3 liabilities for the three month period ended June 30, 2012:

Balance, April 1, 2012	$	1,659,438
Issuances		167,400
Settlements		(446,419)
Realized and unrealized (gains) losses included in earnings		(896,719)
Balance at June 30, 2012		483,700

The table below sets forth a summary of changes in the fair value of the Company’s Level 3 liabilities for the six month period ended June 30, 2012:

Balance, January 1, 2012	$	100,900
Issuances		1,282,227
Settlements		(523,119)
Realized and unrealized (gains) losses included in earnings		(376,308)
Balance at June 30, 2012		483,700

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, 2013 and December 31, 2012:

Prepaid expenses	June 30, 2013		December 31, 2012
Insurance	$	13,972	$	16,978
Licenses and subscriptions		10,938		13,332
Prepaid Rent		2,332		12,964
Services		-		12,500
Other		360		606
	$	27,602	$	56,380

Property and Equipment	Estimated Useful Lives		June 30,		December 31,
	(Years)		2013		2012
Computers and software		2 - 5	$	91,083	$	86,977
Furniture and equipment		3		22,977		22,573
Gross property and equipment				114,060		109,550
Less accumulated depreciation				(108,893)		(101,002)
Net property and equipment			$	5,167	$	8,548

Depreciation expense was $7,891 and $ 18,874 for the six months ended June 30, 2013 and 2012, respectively.

Software Development Costs	Estimated Useful Lives		June 30,		December 31,
	(Months)		2013		2012
Software development costs		18	$	1,080,028	$	1,061,522
Less accumulated amortization				(1,053,948)		(1,038,290)
Net software development costs			$	26,080	$	23,232

Amortization expense was $15,658 and $ 245,982 for the six months ended June 30, 2013 and 2012, respectively.

Accrued Expenses			December 31,
	June 30, 2013		2012
Investor relations fees	$	-	$	5,600
Personnel costs		15,938		52,191
Directors fees		38,750		144,667
Professional fees		114,225		69,724
Deferred rent		-		8,682
Network costs		15,980		44,209
Stock issuance costs		69,000		-
Other		24,831		37,275
Consulting fees		70,000		27,500

	$	348,724	$	389,848

RVUE HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 7 - Income Taxes

There is no income tax benefit for the losses for the six-month period ended June 30, 2013 and 2012, 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, 2012, 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, 2013. We did not recognize any interest or penalties during 2012 related to unrecognized tax benefits, or through the period ended June 30, 2013.

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, 2013 is as follows:

	Number of Options		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Balance at December 31, 2012		2,326,667	$	0.24		7.80		-
Options granted		-		-
Options exercised		-		-
Options forfeited		(1,051,667)	$	0.23
Balance at June 30, 2013		1,275,000	$	0.25		7.02	$	-
Exercisable at June 30, 2013		1,275,000	$	0.25		7.02	$	-
Expected to vest after June 30, 2013		-	$				$	-

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.

We did not grant any options during the six-month period ended June 30, 2013 or 2012.

RVUE HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

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 three months ended March 31, 2013.

Note 9 – Commitments and Contingencies

Other Off-Balance Sheet Commitments

We leased our Ft. Lauderdale 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 – under a 12 month lease at a rate of approximately $2,200 a month.

Our corporate headquarters are now located in Franklin Park, IL, where we occupy approximately 1,700 square feet of office space from Cortina, Inc. Cortina, which is owned by a friend of a former director, is letting us utilize the unoccupied space at no charge. This facility accommodates our principal sales, marketing, operations, finance and administrative activities. We will be moving our corporate headquarters to a new facility in October to a location in the Chicago area.

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 - Related Party Transactions and Certain Other Transactions

In March 2011, we entered into a Consulting/Services Agreement to facilitate the marketing and promotion of direct TV advertised products with Acorn, an entity that is wholly owned by Robert Roche, a stockholder and director of ours who beneficially owns approximately 35 % of our outstanding shares of Common Stock as of September 30, 2013. We did not record any significant revenue under this contract in either of the six-month periods ended June 30, 2013 or 2012.

We paid consulting fees of $ 48,000 during the year ended December 31, 2012 to a consultant who was appointed by our board of directors.

RVUE HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

In January 2012, in connection with the sale of the promissory notes, we agreed to reimburse an investor (the “Lead Investor”) $ 65,000 for costs and expenses incurred by it (including, without limitation, legal and administrative fees) payable in cash or shares of our Common Stock at our election. On February 8, 2012, we issued 325,000 shares of our Common Stock to the Lead Investor as payment. Robert Roche, who is the sole stockholder of Acorn, is the grantor of the trust that controls the majority member of the Lead Investor. His sister is the manager of both the Lead Investor and the majority member of the Lead Investor. Mr. Roche disclaims any beneficial ownership of securities held by the Lead Investor as he does not have voting or dispositive powers over such securities. In addition another one of our directors is a minority member of the Lead Investor.

Note 11 – 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, 2012, the Company modified the warrants resulting in a reclassification of the derivative warrant liability to equity totaling $446,419. Additionally during the six months ended June 30, 2012, the Company paid debt issuance costs of $95,000 by issuing 475,000 shares of its stock.

Note 12 – Subsequent Events

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

On August 2, 2013, the Company issued 1,056,000 stock options to employees of the Company. On August 7, 2013, the Company issued 450,000 stock warrants for fees associated with the equity raised in 2013. On August 13, 2013, the Company issued 700,000 shares of common stock for fees associated with the equity raised in 2013 and 250,000 shares to a Director. On September 6, 2013, the Company issued 500,000 shares of common stock to the former CEO of the Company for consulting services he performed subsequent to leaving the Company.

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 II, Item 7, “Risk Factors,” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 (the “2012 Form 10-K”) filed with the U.S. Securities and Exchange Commission (“SEC”). The following discussion should be read in conjunction with the 2012 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 operate rVue, a demand-side platform (“DSP”) for planning, buying and managing DOOH and place-based media advertising. We provide an online, internet based DSP that connects advertisers and/or advertising agencies with third party DOOH media or networks, that allows the advertiser to create a targeted advertising campaign and media plan, and negotiate that media plan simultaneously with all the third-party networks selected. 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 DOOH network owner, the DOOH 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, 2013, 200+ networks comprising approximately 900,000 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 DOOH 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 DOOH 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 DOOH 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.

We provide network services and receive fees under contract or on a monthly basis, from Accenture. We provide monitoring and troubleshooting services on a 24/7 basis to Accenture for a private display network that they own under a contract for which we receive $11,975 per month. We expect to continue to receive revenue from these services to Accenture through 2013, but consider this non-core revenue. The primary forward strategy of our business is to earn transaction fees and margin from rVue technology and strategic media services, as discussed elsewhere herein.

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 2012 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, 2013 and 2012:

Our unaudited results of operations for the three-month periods ended June 30, 2013 and 2012 were as follows:

	For the Three Months Ended
	June 30,
	2013		2012
Revenue
rVue fees	$	167,040	$	11,510
Network		35,925		95,925
		202,965		107,435
Costs and expenses
Cost of revenue		120,683		15,051
Selling, general and administrative expenses		413,583		528,291
Depreciation and amortization		10,075		172,021
Interest income		(90)		(34)
Interest expense		-		351,344
Change in fair value of derivative		-		(896,719)

		544,251		169,954
Loss before provision for income taxes		(341,286)		(62,519)
Provision for income taxes		-		-
Net loss	$	(341,286)	$	(62,519)
Net loss per common share - basic and diluted	$	(0.00)	$	(0.00)
Shares used in computing net loss per share:
Basic and diluted		115,488,620		38,171,099

Revenue

Revenue was $202,965 for the three-month period ended June 30, 2013 compared to $107,435 for the three-month period ended June 30, 2012, a $95,530 increase, or 88.9%. We earned revenue as follows:

	Three Months ended
	June 30,
Revenue Category	2013		2012		$ Change		% Change
rVue fees	$	167,040	$	11,510	$	155,530		1,351.3	%
Network		35,925		95,925		(60,000)		-62.5	%
Total Revenue	$	202,965	$	107,435	$	95,530		88.9	%

rVue fees

rVue fees were $167,040 for the three-month period ended June 30, 2013, a $155,530 improvement over the $11,510 rVue fees for the three-month period ended June 30, 2012. 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 2013 from advertisers and agencies for placing advertising with DOOH 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 2013 and beyond. We cannot assure you that advertisers or agencies will accept the rVue platform as their platform of choice for placing advertising with DOOH networks.

Network

Network revenue was $35,925 for the three-month period ended June 30, 2013, a $60,000, or 62.5%, decrease compared to the $95,925 for the three-month period ended June 30, 2012. We earned fixed monthly fees of $11,975 from one client. We expect to continue to receive revenue from these services to these clients for the next twelve months, 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 $120,683 for the three-month period ended June 30, 2013 compared to $15,051 for the three-month period ended June 30, 2012, a $105,632 increase, or 701.8%, and was comprised of:

	Three Months Ended
	June 30,
	2013		2012		$ Change		% Change
Temporary labor	$	983	$	4,408	$	(3,425)		-77.7	%
Stock-based compensation expense		-		296		(296)		-100.0	%
Network services		200		2,672		(2,472)		-92.5	%
rVue operations		119,500		7,675		111,825		1,475.0	%
Total	$	120,683	$	15,051	$	105,632		701.8	%

Selling, general and administrative expenses

Selling, general and administrative expenses (“SG&A”) were $413,583 for the three-month period ended June 30, 2013, compared to $528,291 for the three-month period ended June 30, 2012, a $114,708 decrease, or 21.7%. Changes by major component of SG&A are:

	Three Months Ended
	June 30,
	2013		2012		$ Change		% Change
Compensation and benefits	$	145,782	$	338,713	$	(192,931)		-57.0	%
Stock-based compensation expense		-		6,085		(6,085)		-100.0	%
Facility expense		32,851		40,120		(7,269)		-18.1	%
Communications expense		27,527		23,348		4,179		17.9	%
Debt issuance costs		-		(65,000)		(65,000)		-100%
Travel expense		23,231		19,831		3,400		17.1	%
Advertising and marketing expense		8,906		14,212		(5,306)		-37.3	%
Investor relations and investment banking fees		553		23,281		(22,728)		-97.6	%
Professional and consulting fees		145,465		100,591		44,874		44.6	%

Office support and supply expense		29,268		27,110		2,158		7.96	%
Total	$	413,583	$	528,291	$	(114,708)		-21.7	%

Compensation and benefits decreased $192,931, or 57.0% for the three months ended June 30, 2013 when compared to the three months ended June 30, 2012. This change was due to an $38,884 reduction in the amount of payroll costs being capitalized for software development, a reduction in payroll of $229,190 and a reduction in payroll taxes of $17,206, a reduction in benefits of $24,003 a reduction of payroll administrative expenses of $5,734 due to staff reductions that were implemented in the three months ended June 30, 2013, a $39,624 increase in the vacation accrual for recent staff additions and an increase of unemployment tax expense of $4,694 due to receiving a credit from the Company’s insurer for the three months ended June 30, 2012 when the Company contested the rate it was being charged.

Stock-based compensation expense varies depending on the term over which the options vest. Options that were granted in 2010 and 2011 have now vested and are fully expensed in 2012 resulting in a lower expense in the three-month period ended June 30, 2013 compared to the expense for the three-month period ended June 30, 2012.

Debt issuance costs were for costs and expenses paid to the lead investor in connection with the January 2012 issuance of secured convertible promissory notes. The debt issuance costs totaled $95,000 and are being amortized over the life of the underlying debt. There was no amortization of debt issuance cost during the three months ended June 30, 2013.

Advertising and marketing expense decreased by $5,306, or 37.3%, in the three-month period ended June 30, 2013, when compared to the three-month period ended June 30, 2012.

Investor relations and investment banking fees for the three-month period ended June 30, 2013 decreased $22,728, or 97.6%, when compared to the three-month period ended June 30, 2012. The Company ended its agreement with its investor relations representative to reduce its operating costs.

Professional and consulting fees for the three-month period ended June 30, 2013 were up $44,874, or 44.6%, compared to the three-month period ended June 30, 2012. Consulting fees were up $54,289 due to a consulting agreement with the former CEO of the Company, legal fees were down $14,906, fees related to SEC filings and Sarbanes-Oxley work were up approximately $8,951, and accounting and other fees were down by approximately $3,460.

Depreciation and amortization

Depreciation and amortization was $10,075 for the three-month period ended June 30, 2013 compared to $172,021 for the three-month period ended June 30, 2012, a $161,946 decline, or 94.1%. For the three-month period ended June 30, 2013, the large decrease in depreciation and amortization expense for software development costs is due to the costs being amortized over an 18 month period with minimal additions since December 31, 2011.

Interest income

Interest income was $90 for the three-month period ended June 30, 2013 compared to $34 for the three-month period ended June 30, 2012, a $56 increase, or 164.7%. Interest income is a function of cash on hand.

Interest expense

	Three Months Ended
	June 30,
	2013		2012
Interest on convertible notes	$	-	$	20,754
Original issue discount		-		330,590
	$	-	$	351,344

We issued promissory notes in November 2011 and additional promissory notes in January and May 2012. The interest on these notes accrues at 6% per annum and totaled $20,754 for the three-month period ended June 30, 2012. The original issue discount represents the amortization of the initial value of the embedded derivative components of the notes. These notes were converted into shares of our common stock on September 10, 2012.

Change in fair value of derivative instruments

The decrease in the fair value of the derivative liability and the Series C Warrants at June 30, 2012 resulted in us recognizing an unrealized gain during the three-month period ended June 30, 2012 of $896,719.

Six Months Ended June 30, 2013 and 2012:

Our unaudited results of operations for the six month periods ended June 30, 2013 and 2012 were as follows:

	For the Six Months Ended
	June 30
	2013		2012
Revenue

rVue fees	$	246,329	$	27,829
Network		94,150		211,094
		340,479		238,923
Costs and expenses
Cost of revenue		185,526		71,260

Selling, general and administrative expenses		1,724,713		1,456,138
Depreciation and amortization		23,548		295,689
Interest income		(314)		(170)
Interest expense		-		647,827
Change in fair value of derivative		-		(453,008)
Loss on early extinguishment of debt		-		17,456

		1,933,473		2,035,192

Loss before provision for income taxes		(1,592,994)		(1,796,269)
Provision for income taxes		-		-

Net loss	$	(1,592,994)	$	(1,796,269)

Net loss per common share - basic and diluted	$	(0.01)	$	(0.05)
Shares used in computing net loss per share:

Basic and diluted		112,244,805		37,917,448

Revenue

Revenue was $340,479 for the six-month period ended June 30, 2013 compared to $238,923 for the six-month period ended June 30, 2012, a $101,556 increase, or 42.5%. We earned revenue as follows:

	Six Months ended
	June 30,
Revenue Category	2013		2012		$ Change		% Change

rVue Revenue – Core Fees	$	246,329	$	27,829	$	218,500		785.15	%

Network Revenue – Non Core Fees		94,150		211,094		(116,944)		-55.40	%
Total Revenue	$	340,479	$	238,923	$	101,556		42.51	%

rVue Revenue – 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.

rVue fees were $246,329 for the six month period ended June 30, 2013, a $218,500 improvement over the $27,829 rVue fees for the six-month period ended June 30, 2012. 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 2013 from advertisers and agencies for placing advertising with DOOH 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 2013 and beyond. We cannot assure you that advertisers or agencies will accept the rVue platform as their platform of choice for placing advertising with DOOH networks.

Network Revenue – Non-core fees

Network revenue was $94,150 for the six-month period ended June 30, 2013, a $116,944, or 55.4%, decrease compared to the $211,094 for the six-month period ended June 30, 2012. We earned fixed monthly fees of $11,975 from one client and fees from special projects from one client. We expect to continue to receive revenue from these services to this client for the remainder of 2013, 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 was $185,526 for the six-month period ended June 30, 2013 compared to $71,260 for the six-month period ended June 30, 2012, a $114,266 increase, or 160.4%, and was comprised of:

	Six Months Ended
	June 30,
	2013		2012		$ Change		% Change
Compensation and benefits	$	2,331	$	45,558	$	(43,227)		-94.9	%
Stock-based compensation expense		-		889		(889)		-100.0	%
Network services		5,496		6,552		(1,056)		-16.1	%
rVue operations		177,699		18,261		159,438		873.1	%
Total	$	185,526	$	71,260	$	114,266		160.4	%

The increase in cost of revenue is attributable to a $101,556 increase in sales compared to June 30, 2012, and the change in revenue category mix. The increase in core related revenues increases the cost of network expenses which are recorded in rVue operations. The substantial decrease in compensation and benefits is due to head count reduction for the non-core related services.

Selling, general and administrative expenses

SG&A were $1,724,713 for the six-month period ended June 30, 2013, compared to $1,456,138 for the six month period ended June 30, 2012, a $268,575 increase, or 18.4%. Changes by major component of SG&A are:

	Six Months Ended
	June 30,
	2013		2012		$ Change		% Change
Compensation and benefits	$	281,220	$	814,972	$	(533,752)		-65.5	%
Stock-based compensation expense		748,000		21,112		726,888		3,443.0	%
Facility expense		67,914		86,962		(19,048)		-21.9	%
Communications expense		59,142		43,096		16,046		37.2	%

Travel expense		43,007		37,945		5,062		13.3	%
Advertising and marketing expense		74,811		27,320		47,491		173.8	%
Investor relations and investment banking fees		1,260		130,909		(129,649)		-99.0	%
Professional and consulting fees		392,793		236,832		155,961		65.9	%
Office support and supply expense		56,566		56,990		(424)		-.7	%
Total	$	1,724,713	$	1,456,138	$	268,575		18.4	%

Compensation and benefits decreased $533,752, or 65.5% for the six months ended June 30, 2013 when compared to the six months ended June 30, 2012. This change was due to a $77,963 reduction in the amount of payroll costs being capitalized for software development, a reduction in payroll of $496,161 due to staff reductions that were implemented in the six months ended June 30, 2013, a $10,662 reduction in the vacation accrual for recent staff reductions, a $51,800 reduction in healthcare costs due to staff reductions and a reduction of payroll tax expense of $40,063 and a reduction in payroll administrative costs of $13,029 due to lower payroll costs.

The stock-based compensation expense increase for the six months ended June 30, 2013 relates to a board approved one time, performance based payment to a former director who served as the interim CEO and CFO for approximately one year.

Advertising and marketing expense increased by $47,491 or 173.8%, in the six-month period ended June 30, 2013, when compared to the six-month period ended June 30, 2012. This increase is a result of rVue’s investment in new product development.

Investor relations and investment banking fees for the six-month period ended June 30, 2013 decreased $129,649, or 99.0%, when compared to the six-month period ended June 30, 2012. The Company ended its agreement with its investor relations representative to reduce its operating costs.

Professional and consulting fees for the six-month period ended June 30, 2013 increased $155,961, or 65.9%, compared to the six-month period ended June 30, 2012. Consulting fees increased approximately $155,089 due to consulting fees paid to former CEO Jason Kates, as prescribed in his separation agreement, legal fees decreased $28,592, fees related to SEC filings and Sarbanes-Oxley work increased $1,477 and directors’ fees increased $47,316 while accounting and other fees decreased $19,331.

Depreciation and amortization

Depreciation was $7,891 for the six-month period ended June 30, 2013 compared to $30,833 for the six-month period ended June 30, 2012, a $22,942 decline, or 74.4%%. For the six-month period ended June 30, 2013, amortization expense for software development was $15,658, compared to $264,856 for the six-month period ended June 30, 2012, a $249,198 decline, or 94.1%. The large decrease in depreciation and amortization expense for software development costs is due to the costs being amortized over an 18 month period with minimal additions since December 31, 2011.

Interest income

Interest income was $314 for the six-month period ended June 30, 2013 compared to $170 for the six-month period ended June 30, 2012, an $144 increase, or 84.7%. Interest income is a function of cash on hand.

Interest expense

	Six Months Ended
	June 30,
	2013		2012
Interest on convertible notes	$	-	$	35,101
Original issue discount		-		612,726
	$	-	$	647,827

We issued promissory notes in November 2011 and additional promissory notes in January and May 2012. The interest on these notes accrues at 6% per annum and totaled $35,101 for the six-month period ended June 30, 2012. The original issue discount represents the amortization of the initial value of the embedded derivative components of the notes. These notes were converted into shares of our common stock on September 10, 2012.

Liquidity and Capital Resources

As of June 30, 2013, we had cash and cash equivalents totaling $410,790. Since our inception, we have incurred net losses, and at June 30, 2013, we had an accumulated deficit of $11,209,977 and total stockholders’ equity of $84,501. We expect to continue to incur losses in fiscal 2013. There is no guarantee that we will ultimately be able to generate sufficient revenue or reduce our costs in the anticipated time frame to achieve and maintain profitability and have sustainable cash flows.

We did not have any material commitments for capital expenditures at June 30, 2013. We have budgeted capital expenditures of approximately $50,000 for fiscal 2013, 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, 2013 and 2012. 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 $728,769 for the six-month period ended June 30, 2013 compared to $1,104,284 for the six-month period ended June 30, 2012. 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.

In the six-month period ended June 30, 2012, cash was used to fund a net loss of $1,796,269, reduced by depreciation of $295,689, stock-based compensation expense of $22,001 and common stock issued for services valued at $38,000, convertible loan interest of $647,705, a net gain in fair value of derivative liabilities of $453,008, loss on early extinguishment of debt of $17,456 and changes in operating assets and liabilities totaling $124,041.

Cash used in investing activities

Net cash used in investing activities totaled $25,115 for the six-month period ended June 30, 2013 compared to $97,068 of net cash used in investing activities in the six-month period ended June 30, 2012. In the six-month period ended June 30, 2013, cash used in investing activities consisted of $23,015 for fixed asset purchases and an increase in deposits of $2,100. In the six-month period ended June 30, 2012, cash used in investing activities consisted of $96,968 for software development costs and $100 for deposits.

Cash from financing activities

Net cash provided by financing activities totaled $316,500 for the six-month period ended June 30, 2013 which were the proceeds from the sale of common stock. For the six-month period ended June 30, 2012, net cash provided by financing activities totaled $1,235,000 and were the proceeds from the sale of the promissory notes.

Financial condition

As of June 30, 2013, we had a working capital surplus of $37,644, an accumulated deficit of $11,209,977 and total stockholders’ equity of $84,501, compared to a working capital surplus of $241,205, an accumulated deficit of $9,616,983 and total stockholders’ equity of $286,495 at December 31, 2012.

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, 2012 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 (2013) 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 not effective as of June 30, 2013, 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.

During the second half of 2012 and first half of 2013, several management positions within the Company had experienced transitions. This led to a lack of timely filing of certain of the Company’s required filings with the SEC. Current management is in the process of returning the Company to a current filing status with the SEC.

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.

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, 2013 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.

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 rVue Holdings, Inc., 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 allege 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 rVue Holdings, Inc. On December 21, 2012, we moved to dismiss the Complaint on various grounds and moved to transfer the case from New York to Florida. The Court has yet to rule on our motion to dismiss the case on other grounds. 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.

On April 10, 2013, the Company issued 4.4 million shares of its common stock 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.

The Company determined that the securities issued to Mr. Mullarkey were issued in a private placement that was exempt from the registration under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) thereunder. This determination was based on the non-public manner in which we offered the securities and on the representations of Mr. Mullarkey, which included, in pertinent part, that he was an “accredited investor” within the meaning of Rule 501 of Regulation D promulgated under the Securities Act, and that he was acquiring such securities for investment purposes for his own account and not with a view toward resale or distribution, and that he understood such securities may not be sold or otherwise disposed of without registration under the Securities Act or an applicable exemption therefrom.

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.

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: October 7, 2013	By:	/s/ Mark P. Pacchini
		Acting Chief Financial Officer
		(Duly Authorized Officer and
		Principal Financial Officer)

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.

RVUE HOLDINGS, INC. - FORM 10-Q - October 7, 2013

Attached files

RVUE HOLDINGS, INC. Reports