10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

  X .

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

For the quarterly period ended June 30, 2014

 .

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

For the transition period from __________ to __________

Commission File Number: 000-54348

	RVUE HOLDINGS, INC.
(Exact name of registrant as specified in its charter)

NEVADA	94-3461079
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

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

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  X . No .

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  X . No .

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	.	Accelerated filer	.
Non-accelerated filer	. (Do not check if a smaller reporting company)	Smaller reporting company	X .

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

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

Class	Number of Shares
Common Stock: $0.001 Par Value	140,222,189

RVUE HOLDINGS, INC.

TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements.
	Condensed Consolidated Balance Sheets – June 30, 2014 and December 31, 2013	3
	Condensed Consolidated Statements of Operations – Three and Six Months Ended June 30, 2014 and 2013	4
	Condensed Consolidated Statements of Stockholders’ Equity – Six Months Ended June 30, 2014	5
	Condensed Consolidated Statements of Cash Flows –Six Months Ended June 30, 2014 and 2013	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	20
Item 4.	Controls and Procedures.	20
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings.	21
Item 1A.	Risk Factors.	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	22
Item 3.	Defaults Upon Senior Securities.	22
Item 4.	Mine Safety Disclosures.	22
Item 5.	Other Information.	22
Item 6.	Exhibits.	22

2

rVUE HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30,		December 31,
	2014		2013
	(unaudited)		(audited)
Assets
Current assets:
Cash and cash equivalents	$	398,757	$	844,589
Accounts receivable		155,730		124,993
Prepaid expenses		19,772		10,856
Total current assets		574,259		980,438
Property and equipment, net		1,814		3,065
Software development costs		132,070		80,600
Deposits		4,730		10,680
	$	712,873	$	1,074,783
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	72,509	$	132,121
Accrued expenses		137,950		113,384
Subscription investment payable		-		25,000
Deferred revenue		10,500		-
Total current liabilities		220,959		270,505
Commitments and contingencies (Note 9)
Stockholders' equity:
Preferred stock, $0.001 par value per share; 10,000,000 shares authorized; none issued or outstanding		-		-
Common stock, $0.001 par value per share; 240,000,000 shares authorized at June 30, 2014 and December 31, 2013;135,793,618 issued and outstanding at June 30, 2014 and 132,221,476 at December 31, 2013		135,794		132,222
Additional paid-in capital		12,698,904		12,418,899
Accumulated deficit		(12,342,784)		(11,746,843)
Total stockholders' equity		491,914		804,278
	$	712,873	$	1,074,783

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rVUE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
Revenue
Core fees	$	199,508	$	167,040	$	392,172	$	246,329
Non-core fees		31,500		35,925		67,425		94,150
		231,008		202,965		459,597		340,479
Costs and expenses
Cost of revenue		175,078		120,683		344,837		185,526
Selling, general and administrative expenses		332,620		413,583		679,007		1,724,713
Depreciation and amortization		19,267		10,075		31,694		23,548
Interest income		-		(90)				(314)
		526,965		544,251		1,055,538		1,933,473
Loss before provision for income taxes		(295,957)		(341,286)		(595,941)		(1,592,994)
Provision for income taxes		-		-		-		-
Net loss	$	(295,957)	$	(341,286)	$	(595,941)	$	(1,592,994)
Net loss per common share - basic and diluted	$	$0.00	$	$0.00	$	$0.00	$	($0.01)
Shares used in computing net loss per share: Basic and diluted		135,743,509		115,488,620		135,436,858		112,244,805

4

rVUE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2014

(unaudited)

							Additional
	Preferred Stock			Common Stock			Paid-In		Accumulated
	Shares	Amount		Shares	Amount		Capital		Deficit		Total
Balance, December 31, 2013	-	$	-	132,221,476	$	132,222	$	12,418,899	$	(11,746,843)	$	804,278
Common stock issued for compensation and services	-		-	715,000		715		52,685		-		53,400
Common stock issued	-		-	2,857,142		2,857		197,143				200,000
Stock based compensation expense	-		-	-		-		30,177				30,177
Net loss	-		-	-		-		-		(595,941)		(595,941)
Balance, June 30, 2014	-	$	-	135,793,618	$	135,794	$	12,698,904	$	(12,342,784)	$	491,914

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rVUE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	For the Six Months Ended
	June 30,
	2014		2013
Operating activities
Net loss	$	(595,941)	$	(1,592,994)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		31,694		23,548
Stock-based compensation expense		30,177		748,000
Common stock issued for services		-		40,833
Changes in operating assets and liabilities:
Accounts receivable		(30,737)		80,959
Prepaid expenses		(8,915)		28,778
Accounts payable		(17,612)		(32,436)
Accrued expenses		35,965		(25,457)
Deferred revenue		10,500		-
Cash used in operating activities		(544,869)		(728,769)
Investing activities
Payments for property, equipment and software development		(81,913)		(23,015)
Change in deposits		5,950		(2,100)
Cash used in investing activities		(75,963)		(25,115)
Financing activities
Proceeds from the issuance of common stock		175,000		316,500
Cash provided by financing activities		175,000		316,500
Decrease in cash and cash equivalents		(445,832)		(437,384)
Cash and cash equivalents, beginning of period		844,589		848,174
Cash and cash equivalents, end of period	$	398,757	$	410,790

See supplemental non-cash information in Note 10.

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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, 2013, included in our Annual Report on Form 10-K (the “2013 Form 10-K”).

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

NOTE 2 – GOING CONCERN

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

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

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

7

RVUE HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

NOTE 3 - LOSS PER COMMON SHARE

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

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
Numerator:
Net loss	$	(295,957)	$	(341,286)	$	(595,941)	$	(1,592,994)
Denominator:
Weighted-average shares outstanding		135,743,509		115,488,620		135,436,858		112,244,805
Effect of dilutive securities (1)		-		-		-		-
Weighted-average diluted shares		135,743,509		115,488,620		135,436,858		112,244,805
Basic and diluted loss per share	$	$0.00	$	$0.00	$	$0.00	$	($0.01)

⁽¹⁾

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

	Three Months Ended
	June 30,
	2014	2013
Stock options	-	-
Warrants	50,904	-
	50,904	-

NOTE 4 – FINANCIAL INSTRUMENTS

Accounts Receivable

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

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RVUE HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

NOTE 5 – FAIR VALUE MEASUREMENTS

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

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

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

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

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

NOTE 6 – CONDENSED CONSOLIDATED FINANCIAL STATEMENT DETAILS

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

Prepaid expenses	June 30, 2014		December 31, 2013
Insurance	$	16,542	$	8,510
Other		3,230		2,346
	$	19,772	$	10,856

Property and Equipment	Estimated Useful Lives (Years)	June 30, 2014		December 31, 2013
Computers and software	2 - 5	$	91,083	$	91,083
Furniture and equipment	3		22,977		22,977
Gross property and equipment			114,060		114,060
Less accumulated depreciation			(112,246)		(110,995)
Net property and equipment		$	1,814	$	3,065

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

Software Development Costs	Estimated Useful Lives (Months)	June 30, 2014		December 31, 2013
Software development costs	18	$	1,230,626	$	1,148,713
Less accumulated amortization			(1,098,556)		(1,068,113)
Net software development costs		$	132,070	$	80,600

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

9

RVUE HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Accrued Expenses	June 30, 2014		December 31, 2013
Personnel costs	$	15,134	$	18,966
Professional fees		-		39,000
Network costs		105,316		37,918
Other		17,500		17,500
		137,950		113,384

NOTE 7 - INCOME TAXES

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

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

NOTE 8 - STOCKHOLDERS’ EQUITY AND STOCK BASED COMPENSATION

Equity Awards

Stock Option Activity

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

		Weighted		Weighted
		Average		Average
		Exercise		Remaining	Aggregate
	Number of	Price Per		Contractual	Intrinsic
	Options	Share		Term	Value
Balance at December 31, 2013	2,640,000	$	0.17	8.41		-
Options granted	-		-
Options exercised	-		-
Options forfeited	(200,000)	$	0.30	-		-
Balance at June 30, 2014	2,440,000	$	0.16	8.10	$	-
Exercisable at June 30, 2014	920,000	$	0.22	6.25	$	-
Expected to vest after June 30, 2014	1,520,000	$	0.13	9.22	$	-

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

10

RVUE HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Stock-Based Compensation

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

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

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

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

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

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

NOTE 9 – COMMITMENTS AND CONTINGENCIES

Other Off-Balance Sheet Commitments

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

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

11

RVUE HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Contingencies

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

NOTE 10 – SUPPLEMENTAL NON-CASH INFORMATION

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

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

NOTE 11 – SUBSEQUENT EVENTS

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

12

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

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

Available Information

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

Executive Overview

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

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

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

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

13

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

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

Critical Accounting Policies and Estimates

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

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

Results of Operations

Three Months Ended June 30, 2014 and 2013:

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

	For the Three Months Ended
	June 30,
	2014		2013
Revenue
Core fees	$	199,508	$	167,040
Non-core fees		31,500		35,925
		231,008		202,965
Costs and expenses
Cost of revenue		175,078		120,683
Selling, general and administrative expenses		332,620		413,583
Depreciation and amortization		19,267		10,075
Interest income		-		(90)
		526,965		544,251
Loss before provision for income taxes		(295,957)		(341,286)
Provision for income taxes		-		-
Net loss	$	(295,957)	$	(341,286)
Net loss per common share - basic and diluted	$	(0.00)	$	(0.00)
Shares used in computing net loss per share:
Basic and diluted		135,743,509		115,488,620

14

Revenue

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

	Three Months ended
	June 30,
Revenue Category	2014		2013		$ Change		% Change
Core fees	$	199,508	$	167,040	$	32,468	0.19%
Non-core fees		31,500		35,925		(4,425)	(0.12)%
Total Revenue	$	231,008	$	202,965	$	28,043	0.14%

Core fees

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

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

Non-core fees

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

Cost of Revenue

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

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

	Three Months ended
	June 30,
	2014		2013		$ Change		% Change
Temporary labor	$	2,890	$	983	$	1,907	194.0%
Network services		180		200		(20)	(10.0)%
rVue operations		172,008		119,500		52,508	43.9%
Total	$	175,078	$	120,683	$	54,395	45.1%

15

Selling, general and administrative expenses

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

	Three Months ended
	June 30,
	2014		2013		$ Change		% Change
Compensation and benefits	$	141,008	$	145,782	$	(4,774)	(3.3)%
Stock-based compensation expense		15,088		-		15,088	100.0%
Facility expense		17,400		32,851		(15,451)	(47.0)%
Communications expense		17,703		27,527		(9,824)	(35.7)%
Travel expense		5,892		23,231		(17,339)	(74.6)%
Advertising and marketing expense		14,724		8,906		5,818	(65.3)%
Investor relations and investment banking fees		-		553		(553)	(100.0)%
Professional and consulting fees		59,203		145,465		(86,262)	(59.3)%
Office support and supply expense		61,602		29,268		32,334	110.5%
Total	$	332,620	$	413,583	$	(80,963)	(19.6)%

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

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

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

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

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

Depreciation and amortization

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

16

Six Months Ended June 30, 2014 and 2013:

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

	For the Six Months Ended
	June 30,
	2014		2013
Revenue
Core fees	$	392,172	$	246,329
Non-core fees		67,425		94,150
		459,597		340,479
Costs and expenses
Cost of revenue		344,837		185,526
Selling, general and administrative expenses		679,007		1,724,713
Depreciation and amortization		31,694		23,548
Interest income		-		(314)
		1,055,538		1,933,473
Loss before provision for income taxes		(595,941)		(1,592,994)
Provision for income taxes		-		-
Net loss	$	(595,941)	$	(1,592,994)
Net loss per common share - basic and diluted	$	$0.00	$	(0.01)
Shares used in computing net loss per share:
Basic and diluted		135,436,858		112,244,805

Revenue

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

	Six Months ended
	June 30,
Revenue Category	2014		2013		$ Change		% Change
Core Fees	$	392,172	$	246,329	$	145,843	59.2%
Non-Core Fees		67,425		94,150		(26,725)	(28.4)%
Total Revenue	$	459,597	$	340,479	$	119,118	35.0%

Core fees

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

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

17

Non-core fees

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

Cost of Revenue

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

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

	Six Months ended
	June 30,
	2014		2013		$ Change		% Change
Compensation and benefits	$	4,932	$	2,331	$	2,601	111.6%
Network services		365		5,496		(5,131)	(93.4)%
rVue operations		339,540		177,699		161,841	91.1%
Total	$	344,837	$	185,526	$	159,311	85.9%

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

Selling, general and administrative expenses

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

	Six Months ended
	June 30,
	2014		2013		$ Change		% Change
Compensation and benefits	$	294,615	$	281,220	$	13,395	4.8%
Stock-based compensation expense		30,177		748,000		(717,823)	(96.0)%
Facility expense		35,342		67,914		(32,570)	(48.0)%
Communications expense		33,898		59,142		(25,244)	(42.7)%
Travel expense		10,789		43,007		(32,218)	(74.9)%
Advertising and marketing expense		17,004		74,811		(57,807)	(77.3)%
Investor relations and investment banking fees		-		1,260		(1,260)	(100.0)%
Professional and consulting fees		154,207		392,793		(238,586)	(60.7)%
Office support and supply expense		102,975		56,566		46,409	82.0%
Total	$	679,007	$	1,724,713	$	(1,045,706)	(60.6)%

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

18

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

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

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

Depreciation and amortization

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

Liquidity and Capital Resources

As of June 30, 2014, we had cash and cash equivalents totaling $398,757. Since our inception, we have incurred net losses, and at June 30, 2014, we had an accumulated deficit of $12,342,784 and total stockholders’ equity of $491,914. We expect to continue to incur losses in fiscal 2014. There is no guarantee that we will ultimately be able to generate sufficient revenue or reduce our costs in the anticipated time frame to achieve and maintain profitability and have sustainable cash flows.

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

We did not have any material commitments for capital expenditures at June 30, 2014. We have budgeted capital expenditures of approximately $200,000 for fiscal 2014, primarily capitalized labor for software development. Any required expenditure will be completed through internally generated funding or from proceeds from the sale of common or preferred stock, or borrowings.

We did not have any significant elements of income or loss not arising from continuing operations in the six-month periods ended June 30, 2014 and 2013. While our business is marginally seasonal, we do not expect this seasonality to have a material adverse effect on our results of operations or cash flows.

Cash used in operating activities

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

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

Cash used in investing activities

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

19

Cash from financing activities

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

Financial condition

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

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

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

Off-Balance Sheet Arrangements

Since our inception, except for standard operating leases, we have not engaged in any off-balance sheet arrangements, including the use of structured finance, special purpose entities or variable interest entities.

Item 3. Quantitative And Qualitative Disclosures About Market Risk.

Not applicable.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

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

Inherent Limitations Over Internal Controls

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

(i)

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

(ii)

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

(iii)

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

20

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

Changes in Internal Control Over Financial Reporting

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

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

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

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

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

21

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

Item 1A. Risk Factors.

Not applicable.

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

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

(a) Index to Exhibits

Exhibit No.	Exhibit Description
31.1*	Rule 13a-14(a) Certification of Chief Executive Officer.
31.2*	Rule 13a-14(a) Certification of Chief Financial Officer.
32.1**	Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer.
EX-101.INS *	XBRL Instance Document
EX-101.SCH *	XBRL Taxonomy Extension Schema Document
EX-101.CAL *	XBRL Taxonomy Extension Calculation Linkbase Document
EX-101.DEF *	XBRL Taxonomy Extension Definition Linkbase Document
EX-101.LAB *	XBRL Taxonomy Extension Label Linkbase Document
EX-101.PRE *	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith.

** Furnished herewith.

22

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	rVue Holdings, Inc.
	(Registrant)
Date: August 13, 2014	By:	/s/ Mark P. Pacchini
		Acting Chief Financial Officer
		(Duly Authorized Officer and
		Principal Financial Officer)

23

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.

24

EX-31.1

Exhibit 31.1

Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Mark P. Pacchini, certify that:

1.

I have reviewed this Quarterly Report on Form 10-Q of rVue Holdings, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 13, 2014	/s/ Mark P. Pacchini
	Mark P. Pacchini
	Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Mark P. Pacchini, certify that:

1.

I have reviewed this Quarterly Report on Form 10-Q of rVue Holdings, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 13, 2014	/s/ Mark P. Pacchini
	Mark P. Pacchini
	Acting Chief Financial Officer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of rVue Holdings, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark P. Pacchini, Chief Executive Officer and acting Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Mark P. Pacchini

Mark P. Pacchini

Chief Executive Officer

Date: August, 13, 2014

/s/ Mark P. Pacchini

Mark P. Pacchini

Acting Chief Financial Officer

Date: August 13, 2014

A signed original of this written statement required by Section 906 has been provided to rVue Holdings, Inc. and will be retained by rVue Holdings, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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COMMITMENTS AND CONTINGENCIES (Details) (USD $)	Nov. 01, 2013	Oct. 01, 2013	Jul. 01, 2013
COMMITMENTS:
Leased office space at a rate of approximately per month	$ 1,300	$ 3,100	$ 2,200

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Condensed consolidated financial statement details (Details) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Prepaid expenses:
Insurance	$ 16,542	$ 8,510
Other	3,230	2,346
Prepaid expenses	19,772	10,856
Property and Equipment:
Computers and software	91,083	91,083
Furniture and equipment	22,977	22,977
Gross property and equipment	114,060	114,060
Less accumulated depreciation	(112,246)	(110,995)
Property and equipment, net	$ 1,814	$ 3,065

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LOSS PER COMMON SHARE

6 Months Ended

Jun. 30, 2014

LOSS PER COMMON SHARE

LOSS PER COMMON SHARE

NOTE 3 - LOSS PER COMMON SHARE

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

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
Numerator:
Net loss	$	(295,957)	$	(341,286)	$	(595,941)	$	(1,592,994)
Denominator:
Weighted-average shares outstanding		135,743,509		115,488,620		135,436,858		112,244,805
Effect of dilutive securities (1)		-		-		-		-
Weighted-average diluted shares		135,743,509		115,488,620		135,436,858		112,244,805
Basic and diluted loss per share	$	$0.00	$	$0.00	$	$0.00	$	($0.01)

⁽¹⁾

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

	Three Months Ended
	June 30,
	2014	2013
Stock options	-	-
Warrants	50,904	-
	50,904	-

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Amortization expense (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Amortization expense:
Amortization expense	$ 18,670	$ 6,865	$ 30,443	$ 15,658

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Software Development Costs (Details) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Software Development Costs:
Software development costs Gross	$ 1,230,626	$ 1,148,713
Less accumulated amortization	(1,098,556)	(1,068,113)
Software development costs	$ 132,070	$ 80,600

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Accrued Expenses (Details) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Accrued Expenses:
Personnel costs	$ 15,134	$ 18,966
Professional fees	0	39,000
Network costs	105,316	37,918
Other	17,500	17,500
Accrued expenses	$ 137,950	$ 113,384

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Summary of stock option activity (Details) (USD $)	Number of Options	Weighted Average Exercise Price Per Share	Weighted Average Remaining contractual Term	Aggregate Intrinsic Value
Balance. at Dec. 31, 2013	2,640,000	0.17	8.41	0
Options granted	$ 0	$ 0.00	$ 0.00	$ 0
Options exercised	0	0.00	0.00	0
Options forfeited	$ (200,000)	$ 0.30	$ 0.00	$ 0
Expected to vest after June 30, 2014	1,520,000	0.13	9.22	0
Exercisable at Jun. 30, 2014	920,000	0.22	6.25	0
Balance. at Jun. 30, 2014	2,440,000	0.16	8.10	0

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GOING CONCERN

6 Months Ended

Jun. 30, 2014

GOING CONCERN

GOING CONCERN

NOTE 2 – GOING CONCERN

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

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

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

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Stock-based compensation (Details) (USD $)	3 Months Ended	6 Months Ended
	Mar. 31, 2013	Jun. 30, 2014	Mar. 29, 2013
Stock-Based Compensation:
Stock-based compensation expense		$ 30,177
Payment of compensation to a Director for serving			4,400,000
Accomplishment of the objectives resulting expense	748,000
Issued an aggregate shares to officers and directors		816,667
Additional director fee expense		$ 40,833

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)	Jun. 30, 2014	Dec. 31, 2013
Current assets:
Cash and cash equivalents	$ 398,757	$ 844,589
Accounts receivable	155,730	124,993
Prepaid expenses	19,772	10,856
Total current assets	574,259	980,438
Property and equipment, net	1,814	3,065
Software development costs	132,070	80,600
Deposits	4,730	10,680
Total Assets	712,873	1,074,783
Current liabilities:
Accounts payable	72,509	132,121
Accrued expenses	137,950	113,384
Subscription investment payable	0	25,000
Deferred revenue	10,500	0
Total current liabilities	220,959	270,505
Commitments and contingencies (Note 9)
Stockholders' equity:
Preferred stock, $0.001 par value per share; 10,000,000 shares authorized; none issued or outstanding	0	0
Common stock, $0.001 par value per share; 240,000,000 shares authorized at June 30, 2014 and December 31, 2013;135,793,618 issued and outstanding at June 30, 2014 and 132,221,476 at December 31, 2013	135,794	132,222
Additional paid-in capital	12,698,904	12,418,899
Accumulated deficit	(12,342,784)	(11,746,843)
Total stockholders' equity	491,914	804,278
Total Liabilities and Stockholders' Equity	$ 712,873	$ 1,074,783

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (USD $)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Operating activities
Net loss	$ (595,941)	$ (1,592,994)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	31,694	23,548
Stock-based compensation expense	30,177	748,000
Common stock issued for services	0	40,833
Changes in operating assets and liabilities:
Accounts receivable	(30,737)	80,959
Prepaid expenses	(8,915)	28,778
Accounts payable	(17,612)	(32,436)
Accrued expenses	35,965	(25,457)
Deferred revenue	10,500	0
Cash used in operating activities	(544,869)	(728,769)
Investing activities
Payments for property, equipment and software development	(81,913)	(23,015)
Change in deposits	5,950	(2,100)
Cash used in investing activities	(75,963)	(25,115)
Financing activities
Proceeds from the issuance of common stock	175,000	316,500
Cash provided by financing activities	175,000	316,500
Decrease in cash and cash equivalents	(445,832)	(437,384)
Cash and cash equivalents, beginning of period	844,589	848,174
Cash and cash equivalents, end of period	$ 398,757	$ 410,790

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GOING CONCERN (Details) (USD $)	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013
GOING CONCERN DETAILS
Accumulated deficit	$ (12,342,784)		$ (11,746,843)
Issuance of Common Stock to investors	310,000	200,000	1,004,000
Capital raised along with continued operations	$ 310,000

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FINANCIAL INSTRUMENTS (Details)	Jun. 30, 2014
Accounts Receivable:
Accounts receivable from one customer accounted for (percent)	87.90%
Accounts receivable from three customer accounted for (percent)	80.90%

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2014

Accounting Policies:

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Basis of Presentation and Preparation

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

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

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

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CONDENSED CONSOLIDATED BALANCE SHEETS PARANTHETICALS (USD $)	Jun. 30, 2014	Dec. 31, 2013
Parentheticals
Preferred Stock, par value	$ 0.001	$ 0.001
Preferred Stock, shares authorized	10,000,000	10,000,000
Common Stock, par value	$ 0.001	$ 0.001
Common Stock, shares authorized	240,000,000	240,000,000
Common Stock, shares issued	135,793,618	132,221,476
Common Stock, shares outstanding	135,793,618	132,221,476

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SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2014

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

NOTE 11 – SUBSEQUENT EVENTS

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

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Document and Entity Information	6 Months Ended
	Jun. 30, 2014	Aug. 13, 2014
Document and Entity Information:
Entity Registrant Name	RVUE HOLDINGS, INC.
Document Type	10-Q
Document Period End Date	Jun. 30, 2014
Amendment Flag	false
Entity Central Index Key	0001455206
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		140,222,189
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2

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SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 2014

SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Preparation

Basis of Presentation and Preparation

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

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

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

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Revenue
Core fees	$ 199,508	$ 167,040	$ 392,172	$ 246,329
Non-core fees	31,500	35,925	67,425	94,150
Total revenues	231,008	202,965	459,597	340,479
Costs and expenses
Cost of revenue	175,078	120,683	344,837	185,526
Selling, general and administrative expenses	332,620	413,583	679,007	1,724,713
Depreciation and amortization	19,267	10,075	31,694	23,548
Interest income	0	(90)	0	(314)
Total Costs and Operating Expenses	526,965	544,251	1,055,538	1,933,473
Loss before provision for income taxes	(295,957)	(341,286)	(595,941)	(1,592,994)
Provision for income taxes	0	0	0	0
Net loss	$ (295,957)	$ (341,286)	$ (595,941)	$ (1,592,994)
Net loss per common share - basic and diluted	$ 0.00	$ 0.00	$ 0.00	$ (0.01)
Shares used in computing net loss per share: Basic and diluted	135,743,509	115,488,620	135,436,858	112,244,805

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CONDENSED CONSOLIDATED FINANCIAL STATEMENT DETAILS

6 Months Ended

Jun. 30, 2014

CONDENSED CONSOLIDATED FINANCIAL STATEMENT DETAILS

CONDENSED CONSOLIDATED FINANCIAL STATEMENT DETAILS

NOTE 6 – CONDENSED CONSOLIDATED FINANCIAL STATEMENT DETAILS

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

Prepaid expenses	June 30, 2014		December 31, 2013
Insurance	$	16,542	$	8,510
Other		3,230		2,346
	$	19,772	$	10,856

Property and Equipment	Estimated Useful Lives (Years)	June 30, 2014		December 31, 2013
Computers and software	2 - 5	$	91,083	$	91,083
Furniture and equipment	3		22,977		22,977
Gross property and equipment			114,060		114,060
Less accumulated depreciation			(112,246)		(110,995)
Net property and equipment		$	1,814	$	3,065

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

Software Development Costs	Estimated Useful Lives (Months)	June 30, 2014		December 31, 2013
Software development costs	18	$	1,230,626	$	1,148,713
Less accumulated amortization			(1,098,556)		(1,068,113)
Net software development costs		$	132,070	$	80,600

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

Accrued Expenses	June 30, 2014		December 31, 2013
Personnel costs	$	15,134	$	18,966
Professional fees		-		39,000
Network costs		105,316		37,918
Other		17,500		17,500
		137,950		113,384

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FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2014

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

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.

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LOSS PER COMMON SHARE (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
LOSS PER SHARE INFORMATION
Net loss	$ (295,957)	$ (341,286)	$ (595,941)	$ (1,592,994)
Weighted-average shares outstanding	135,743,509	115,488,620	135,436,858	112,244,805
Weighted-average diluted shares	135,743,509	115,488,620	135,436,858	112,244,805
Basic and diluted loss per share	$ 0.00	$ 0.00	$ 0.00	$ (0.01)

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LOSS PER COMMON SHARE (Tables)

6 Months Ended

Jun. 30, 2014

BASIC AND DILUTED LOSS PER COMMON SHARE

Schedule of Earnings Per Share, Basic and Diluted

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
Numerator:
Net loss	$	(295,957)	$	(341,286)	$	(595,941)	$	(1,592,994)
Denominator:
Weighted-average shares outstanding		135,743,509		115,488,620		135,436,858		112,244,805
Effect of dilutive securities (1)		-		-		-		-
Weighted-average diluted shares		135,743,509		115,488,620		135,436,858		112,244,805
Basic and diluted loss per share	$	$0.00	$	$0.00	$	$0.00	$	($0.01)

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

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

	Three Months Ended
	June 30,
	2014	2013
Stock options	-	-
Warrants	50,904	-
	50,904	-

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2014

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

NOTE 9 – COMMITMENTS AND CONTINGENCIES

Other Off-Balance Sheet Commitments

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

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

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.

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INCOME TAXES

6 Months Ended

Jun. 30, 2014

INCOME TAXES

INCOME TAXES

NOTE 7 - INCOME TAXES

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

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

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STOCKHOLDERS' EQUITY AND STOCK BASED COMPENSATION

6 Months Ended

Jun. 30, 2014

STOCKHOLDERS' EQUITY AND STOCK BASED COMPENSATION

STOCKHOLDERS' EQUITY AND STOCK BASED COMPENSATION

NOTE 8 - STOCKHOLDERS’ EQUITY AND STOCK BASED COMPENSATION

Equity Awards

Stock Option Activity

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

		Weighted		Weighted
		Average		Average
		Exercise		Remaining	Aggregate
	Number of	Price Per		Contractual	Intrinsic
	Options	Share		Term	Value
Balance at December 31, 2013	2,640,000	$	0.17	8.41		-
Options granted	-		-
Options exercised	-		-
Options forfeited	(200,000)	$	0.30	-		-
Balance at June 30, 2014	2,440,000	$	0.16	8.10	$	-
Exercisable at June 30, 2014	920,000	$	0.22	6.25	$	-
Expected to vest after June 30, 2014	1,520,000	$	0.13	9.22	$	-

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

Stock-Based Compensation

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

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

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

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

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

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

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SUPPLEMENTAL NON-CASH INFORMATION

6 Months Ended

Jun. 30, 2014

SUPPLEMENTAL NON-CASH INFORMATION:

SUPPLEMENTAL NON-CASH INFORMATION

NOTE 10 – SUPPLEMENTAL NON-CASH INFORMATION

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

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

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SUPPLEMENTAL NON-CASH INFORMATION (DETAILS) (USD $)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
SUBSEQUENT EVENTS AS FOLLOWS:
Future issuance of common stock totaling		$ 42,000
Issuance of warrants totaling		27,000
Accrued director fees	81,667
Issued common stock totaling	$ 11,400

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Summary of stock option (Tables)

6 Months Ended

Jun. 30, 2014

Summary of stock option (Tables)

Summary of stock option (Tables)

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

		Weighted		Weighted
		Average		Average
		Exercise		Remaining	Aggregate
	Number of	Price Per		Contractual	Intrinsic
	Options	Share		Term	Value
Balance at December 31, 2013	2,640,000	$	0.17	8.41		-
Options granted	-		-
Options exercised	-		-
Options forfeited	(200,000)	$	0.30	-		-
Balance at June 30, 2014	2,440,000	$	0.16	8.10	$	-
Exercisable at June 30, 2014	920,000	$	0.22	6.25	$	-
Expected to vest after June 30, 2014	1,520,000	$	0.13	9.22	$	-

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Property and Equipment estimated useful life (Years) (Details)	Jun. 30, 2014
Property and Equipment estimated useful life:
Computers and software minimum estimated useful life (Years)	2
Computers and software maximum estimated useful life (Years)	5
Furniture and equipment estimated useful life (Years)	3

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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $)	Preferred Stock Shares	Preferred Stock Amount USD ($)	Common Stock Shares	Common Stock Amount USD ($)	Additional Paid-In Capital USD ($)	Accumulated Deficit USD ($)	Total USD ($)
Balance at Dec. 31, 2013	0	0	132,221,476	132,222	12,418,899	(11,746,843)	804,278
Common stock issued for compensation and services	0	0	715,000	715	52,685	0	53,400
Common stock issued	0	0	2,857,142	2,857	197,143	0	200,000
Stock based compensation expense		$ 0		$ 0	$ 30,177	$ 0	$ 30,177
Net Loss		$ 0		$ 0	$ 0	$ (595,941)	$ (595,941)
Balance at Jun. 30, 2014	0	0	135,793,618	135,794	12,698,904	(12,342,784)	491,914

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FINANCIAL INSTRUMENTS

6 Months Ended

Jun. 30, 2014

FINANCIAL INSTRUMENTS

FINANCIAL INSTRUMENTS

NOTE 4 – FINANCIAL INSTRUMENTS

Accounts Receivable

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

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Depreciation expense (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Depreciation expense during the period:
Depreciation expense	$ 597	$ 3,210	$ 1,251	$ 7,891

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CONDENSED CONSOLIDATED FINANCIAL STATEMENT DETAILS (Tables)

6 Months Ended

Jun. 30, 2014

CONDENSED CONSOLIDATED FINANCIAL STATEMENT DETAILS Text Block:

Schedule of Condensed Financial Statements

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

Prepaid expenses	June 30, 2014		December 31, 2013
Insurance	$	16,542	$	8,510
Other		3,230		2,346
	$	19,772	$	10,856

Property and Equipment	Estimated Useful Lives (Years)	June 30, 2014		December 31, 2013
Computers and software	2 - 5	$	91,083	$	91,083
Furniture and equipment	3		22,977		22,977
Gross property and equipment			114,060		114,060
Less accumulated depreciation			(112,246)		(110,995)
Net property and equipment		$	1,814	$	3,065

Schedule of Depreciation expense

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

Software Development Costs	Estimated Useful Lives (Months)	June 30, 2014		December 31, 2013
Software development costs	18	$	1,230,626	$	1,148,713
Less accumulated amortization			(1,098,556)		(1,068,113)
Net software development costs		$	132,070	$	80,600

Schedule of Amortization expenses

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

Accrued Expenses	June 30, 2014		December 31, 2013
Personnel costs	$	15,134	$	18,966
Professional fees		-		39,000
Network costs		105,316		37,918
Other		17,500		17,500
		137,950		113,384