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, 2016
.TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___
Commission File Number: 000-54348
RVUE HOLDINGS, INC. |
(Exact name of registrant as specified in its charter) |
NEVADA |
| 94-3461079 |
(State or other jurisdiction of incorporation |
| (I.R.S. Employer Identification No.) |
or organization) |
|
|
17W220 22nd Street, Suite 200 |
|
|
Oakbrook Terrace, IL 60181 |
| (855) 261-8370 |
(Address of principal executive offices, |
| (Registrants telephone number, |
including zip code) |
| including area code) |
|
(Former name, former address and former fiscal year, if changed since last report) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No .
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes X . No .
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer . |
| Accelerated filer . |
Non-accelerated filer . (Do not check if a smaller reporting company) |
| Smaller reporting company X . |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes . No X .
The number of shares outstanding of each of the issuers classes of common stock as of the close of business on August 11, 2016 is as follows:
Class |
| Number of Shares |
Common Stock: $0.001 Par Value |
| 278,354,557 |
RVUE HOLDINGS, INC.
TABLE OF CONTENTS
PART I | FINANCIAL INFORMATION |
|
|
|
|
Item 1. | Financial Statements. |
|
| Condensed Consolidated Balance Sheets June 30, 2016 and December 31, 2015 | 3 |
| Condensed Consolidated Statements of Operations Three and Six Months Ended June 30, 2016 and 2015 | 4 |
| Condensed Consolidated Statements of Stockholders Equity (Deficit) Six Months Ended June 30, 2016 | 5 |
| Condensed Consolidated Statements of Cash Flows Six Months Ended June 30, 2016 and 2015 | 6 |
| Notes to Condensed Consolidated Financial Statements | 7 |
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations. | 16 |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk. | 23 |
Item 4. | Controls and Procedures. | 23 |
|
|
|
PART II | OTHER INFORMATION |
|
|
|
|
Item 1. | Legal Proceedings. | 24 |
Item 1A. | Risk Factors. | 24 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. | 24 |
Item 3. | Defaults Upon Senior Securities. | 24 |
Item 4. | Mine Safety Disclosures. | 24 |
Item 5. | Other Information. | 24 |
Item 6. | Exhibits. | 25 |
2
rVUE HOLDINGS, INC. |
CONDENSED CONSOLIDATED BALANCE SHEETS |
|
|
|
|
| ||
|
| June 30, |
| December 31, | ||
|
| 2016 |
| 2015 | ||
|
| (unaudited) |
| (audited) | ||
Assets |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 9,150 |
| $ | 67,069 |
Accounts receivable |
|
| 103,450 |
|
| 21,390 |
Prepaid expenses |
|
| 64,286 |
|
| 30,700 |
|
|
|
|
|
|
|
Total current assets |
|
| 176,886 |
|
| 119,159 |
|
|
|
|
|
|
|
Property and equipment, net |
|
| - |
|
| 14 |
Software development costs |
|
| 150,346 |
|
| 123,525 |
Deposits |
|
| 3,239 |
|
| 3,239 |
|
|
|
|
|
|
|
|
| $ | 330,471 |
| $ | 245,937 |
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity (Deficit) |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 88,011 |
| $ | 71,792 |
Accrued expenses |
|
| 108,970 |
|
| 33,231 |
Interest payable |
|
| - |
|
| 9,339 |
Note payable |
|
| 40,458 |
|
| 11,710 |
Convertible notes |
|
| - |
|
| 144,293 |
Derivative liability |
|
| - |
|
| 123,855 |
Deferred revenue |
|
| 32,635 |
|
| 10,500 |
|
|
|
|
|
|
|
Total current liabilities |
|
| 270,074 |
|
| 404,720 |
|
|
|
|
|
|
|
Commitments and contingencies (Note 12) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity (deficit): |
|
|
|
|
|
|
Preferred stock, $0.001 par value per share; 10,000,000 shares authorized; none issued or outstanding |
|
| - |
|
| - |
Common stock, $0.001 par value per share; 375,000,000 shares authorized at June 30, 2016 and 240,000,000 shares authorized at December 31, 2015; 264,508,403 issued and outstanding at June 30, 2016 and 173,507,292 issued and outstanding at December 31, 2015 |
|
| 264,508 |
|
| 173,507 |
Additional paid-in capital |
|
| 14,754,195 |
|
| 13,740,269 |
Accumulated deficit |
|
| (14,958,306) |
|
| (14,072,559) |
|
|
|
|
|
|
|
Total stockholders' equity (deficit) |
|
| 60,397 |
|
| (158,783) |
|
|
|
|
|
|
|
|
| $ | 330,471 |
| $ | 245,937 |
3
rVUE HOLDINGS, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
(unaudited) |
|
| For the Three Months Ended June 30, |
| For the Six Months Ended June 30, | ||||||||
|
| 2016 |
| 2015 |
| 2016 |
| 2015 | ||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Core fees |
| $ | 117,615 |
| $ | 542,903 |
| $ | 307,005 |
| $ | 616,038 |
Non-core fees |
|
| 31,500 |
|
| 31,500 |
|
| 63,000 |
|
| 63,000 |
|
|
| 149,115 |
|
| 574,403 |
|
| 370,005 |
|
| 679,038 |
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
| 104,955 |
|
| 501,764 |
|
| 271,726 |
|
| 566,310 |
Selling, general and administrative expenses |
|
| 274,242 |
|
| 331,932 |
|
| 653,810 |
|
| 746,385 |
Depreciation and amortization |
|
| 35,958 |
|
| 33,524 |
|
| 71,120 |
|
| 70,308 |
Interest expense |
|
| 415 |
|
| 451 |
|
| 58,754 |
|
| 451 |
Change in fair value of derivative instruments |
|
| - |
|
| - |
|
| 128,634 |
|
| - |
Loss on early extinguishment of debt |
|
| - |
|
| - |
|
| 71,708 |
|
| - |
|
|
| 415,570 |
|
| 867,671 |
|
| 1,255,752 |
|
| 1,383,454 |
Loss before provision for income taxes |
|
| (266,455) |
|
| (293,268) |
|
| (885,747) |
|
| (704,416) |
Provision for income taxes |
|
| - |
|
| - |
|
| - |
|
| - |
Net loss |
| $ | (266,455) |
| $ | (293,268) |
| $ | (885,747) |
| $ | (704,416) |
Net loss per common share - basic and diluted |
| $ | (0.00) |
| $ | (0.00) |
| $ | (0.00) |
| $ | (0.00) |
Shares used in computing net loss per share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share |
|
| 259,335,114 |
|
| 141,944,146 |
|
| 222,302,666 |
|
| 141,706,061 |
4
rVUE HOLDINGS, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) |
FOR THE SIX MONTHS ENDED JUNE 30, 2016 |
(unaudited) |
|
|
|
|
|
| Additional |
|
|
|
|
|
| |||||||||
|
| Preferred Stock |
| Common Stock |
| Paid-In |
| Accumulated |
|
|
| ||||||||||
|
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Total | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2015 |
|
| - |
|
| - |
|
| 173,507,292 |
|
| 173,507 |
|
| 13,740,269 |
|
| (14,072,559) |
|
| (158,783) |
Common stock issued |
|
| - |
|
| - |
|
| 55,530,555 |
|
| 55,530 |
|
| 638,383 |
|
| - |
|
| 693,913 |
Common stock issued upon the conversion of notes |
|
| - |
|
| - |
|
| 35,470,556 |
|
| 35,471 |
|
| 336,821 |
|
| - |
|
| 372,292 |
Stock-based compensation expense |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 38,722 |
|
| - |
|
| 38,722 |
Net loss |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| (885,747) |
|
| (885,747) |
Balance, June 30, 2016 |
|
| - |
| $ | - |
|
| 264,508,403 |
| $ | 264,508 |
| $ | 14,754,195 |
| $ | (14,958,306) |
| $ | 60,397 |
5
rVUE HOLDINGS, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
(unaudited) |
|
| For the Six Months Ended June 30, | ||||
|
| 2016 |
| 2015 | ||
Operating activities |
|
|
|
|
|
|
Net loss |
| $ | (885,747) |
| $ | (704,416) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
Depreciation and amortization |
|
| 71,121 |
|
| 70,308 |
Non-cash interest expense |
|
| 43,656 |
|
| - |
Stock-based compensation expense |
|
| 38,722 |
|
| 38,121 |
Change in fair value of derivative instruments |
|
| 128,634 |
|
| - |
Common stock issued for services |
|
| - |
|
| 45,000 |
Loss on early extinguishment of debt |
|
| 14,549 |
|
| - |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Accounts receivable |
|
| (82,060) |
|
| 313,544 |
Prepaid expenses |
|
| 11,238 |
|
| 2,199 |
Accounts payable |
|
| 16,219 |
|
| 186,726 |
Accrued expenses |
|
| 75,740 |
|
| (117,527) |
Deferred revenue |
|
| 22,135 |
|
| - |
Interest payable |
|
| (4,751) |
|
| - |
Cash used in operating activities |
|
| (550,544) |
|
| (166,045) |
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
Payments for property, equipment and software development |
|
| (97,928) |
|
| (60,248) |
Change in deposits |
|
| - |
|
| 80 |
Cash used in investing activities |
|
| (97,928) |
|
| (60,168) |
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
Proceeds from the issuance of common stock |
|
| 693,913 |
|
| 75,000 |
Payments on note payable |
|
| (16,077) |
|
| - |
Payments on convertible notes |
|
| (87,283) |
|
| - |
Cash provided by financing activities |
|
| 590,553 |
|
| 75,000 |
|
|
|
|
|
|
|
Decrease in cash and cash equivalents |
|
| (57,919) |
|
| (151,213) |
Cash and cash equivalents, beginning of period |
|
| 67,069 |
|
| 418,803 |
Cash and cash equivalents, end of period |
| $ | 9,150 |
| $ | 267,590 |
|
|
|
|
|
|
|
Cash paid for interest |
| $ | 19,090 |
| $ | - |
See supplemental non-cash information in Note 13.
6
RVUE HOLDINGS, INC. |
Notes to Condensed Consolidated Financial Statements |
(unaudited) |
Note 1 Summary of Significant Accounting Policies
rVue Holdings, Inc., formerly known as Rivulet International, Inc. (We, rVue or the Company), was incorporated in the State of Nevada on November 12, 2008. We are an advertising technology company that has developed and operates an integrated advertising exchange and digital distribution platform rVue for the Digital Out-of-Home (DOOH) advertising and place-based media 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 Companys 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 Companys annual consolidated financial statements and the notes thereto for the year ended December 31, 2015, included in our Annual Report on Form 10-K (the 2015 Form 10-K).
The unaudited condensed consolidated statement of operations for the three and six months ended June 30, 2016 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 $14,958,306 at June 30, 2016. These factors raise substantial doubt about our ability to continue to operate in the normal course of business. We have funded our activities to date almost exclusively from equity and debt financings.
We will continue to require substantial funds to continue development of our core businesses. Managements plan in order to meet our operating cash flow requirements includes financing activities such as private placements of common stock and private issuances of debt and convertible instruments and the continued establishment of strategic relationships which we expect will lead to the generation of additional revenue opportunities.
While we believe that we will be successful in obtaining the necessary financing to fund our operations, there is no assurance that such additional funding will be achieved or that we will succeed in our future operations. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.
Note 3 - Loss Per Common Share
Basic and diluted loss per common share is computed by dividing the loss by the weighted average number of common shares outstanding for the period. Since the Company incurred losses attributable to common stockholders during the three and six months ended June 30, 2016 and 2015, 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, 2016 and 2015 since this would have an anti-dilutive effect.
7
RVUE HOLDINGS, INC. |
Notes to Condensed Consolidated Financial Statements |
(unaudited) |
The following table sets forth the computation of basic and diluted loss per common share:
|
| Three Months Ended |
| Six Months Ended | ||||||||
|
| June 30, |
| June 30, | ||||||||
|
| 2016 |
| 2015 |
| 2016 |
| 2015 | ||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (266,455) |
| $ | (293,268) |
| $ | (885,747) |
| $ | (704,416) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding |
|
| 259,335,114 |
|
| 141,944,146 |
|
| 222,302,666 |
|
| 141,706,061 |
Effect of dilutive securities (1) |
|
| - |
|
| - |
|
| - |
|
| - |
Weighted-average diluted shares |
|
| 259,335,114 |
|
| 141,944,146 |
|
| 222,302,666 |
|
| 141,706,061 |
Basic and diluted loss per share |
| $ | (0.00) |
| $ | (0.00) |
| $ | (0.00) |
| $ | (0.00) |
(1)
The following stock options and warrants outstanding as of June 30, 2016 and 2015 were not included in the computation of dilutive loss per share because the net effect would have been anti-dilutive:
|
| Six Months Ended | ||||
|
| June 30, | ||||
|
| 2016 |
| 2015 | ||
Stock options |
|
| 81,907 |
|
| - |
Warrants |
|
| - |
|
| 50,698 |
|
|
| 81,907 |
|
| 50,698 |
Note 4 Financial Instruments
Accounts Receivable
We sell our services directly to our customers. Accounts receivable from three of our customers accounted for 100% of total accounts receivable at June 30, 2016, and accounts receivable from two of our customers accounted for 100% of total accounts receivable at December 31, 2015. We had no allowance for doubtful accounts at either June 30, 2016 or at December 31, 2015.
Note 5 Convertible Note Financing
On March 31, 2016, the Company retired both of its outstanding convertible note financings as further described below.
Carebourn Convertible Note Financing
On July 30, 2015 (the Closing Date), the Company entered into a Securities Purchase Agreement dated July 30, 2015 (the Carebourn SPA) with Carebourn Capital, L.P. (Carebourn). Pursuant to the Carebourn SPA, the Company issued to Carebourn a convertible promissory note (the Carebourn Note) in the principal amount of $115,000.
The Carebourn Note had a term of 9 months and an interest rate of 10% per annum. The net proceeds to the Company from the Carebourn Note were $100,000, consisting of gross proceeds of $115,000, less $10,000 in original issue discount and $5,000 in expense reimbursements. The entire principal balance of the Carebourn Note, together with all accrued interest, was due and payable on April 30, 2016.
8
RVUE HOLDINGS, INC. |
Notes to Condensed Consolidated Financial Statements |
(unaudited) |
Beginning on the date that was ninety (90) days after the Closing Date, so long as any amount was outstanding under the Carebourn Note, Carebourn could convert all or any portion of the balance of the Carebourn Note into shares of the Companys common stock. Generally, the conversion price would be calculated by applying a discount of 40% to the average of the three (3) lowest closing bid prices for the common stock during the twenty (20) trading days immediately preceding the applicable conversion. Carebourn was generally prohibited from acquiring more than 4.99% of the Companys outstanding shares pursuant to the Carebourn Note.
On March 31, 2016, the Company entered into a letter agreement (the Carebourn Letter Agreement) with Carebourn to retire its outstanding convertible note financing with Carebourn. Pursuant to the terms of the Carebourn Letter Agreement, the Company (a) paid $82,355 (the Cash Payment), and (b) issued 8,000,000 shares of its common stock, $0.001 par value per share (the Share Payment and together with the Cash Payment, the Carebourn Payoff Amount), to Carebourn in full satisfaction of, and to terminate, all obligations under the Carebourn SPA and the Carebourn Note. As additional consideration for each of the Company and Carebourn to enter into the Carebourn Letter Agreement, the parties executed a mutual release of claims.
Typenex Convertible Note Financing
On July 8, 2015 (the Closing Date), the Company entered into a Securities Purchase Agreement dated July 7, 2015 but effective July 8, 2015 (the Typenex SPA) with Typenex Co-Investment, LLC (Typenex). Pursuant to the Typenex SPA, the Company issued to Typenex a convertible promissory note (the Typenex Note) in the principal amount of $252,500, deliverable in four tranches as described below.
The Typenex Note had a term of 17 months, an interest rate of 10% per annum and an original issue discount (OID) of $22,500. The aggregate commitment to the Company from the Typenex Note was $225,000, in the form of: (a) an initial tranche of $75,000 in cash (gross proceeds of $87,500, less $7,500 in OID and $5,000 in expense reimbursements), and (b) a future conditional commitment of three promissory notes of $55,000 each (each consisting of $55,000 in gross proceeds, less $5,000 in OID (the Investor Notes)). Typenex could elect, in its sole discretion, to fund one or more of the Investor Notes. Absent such an election by Typenex, the Investor Notes would not result in cash proceeds to, or an obligation to repay on the part of, the Company.
Beginning on the date that was six (6) months after the Closing Date and on the same day of each month thereafter until the maturity date of the Typenex Note, so long as any amount was outstanding thereunder, the Company was required to pay to Typenex installments of principal equal to $21,041 (or such lesser principal amount as was then outstanding), plus the sum of any accrued and unpaid interest. Payments of each installment amount could be made in cash. Alternatively, Typenex or the Company could elect to convert an installment amount into Common Stock as described below.
Beginning six (6) months after the Closing Date, Typenex could convert the balance of the Typenex Note, or any installment or portion thereof, utilizing the conversion price calculation set forth below. Generally, the Lender Conversion Price would be $0.08. However, in the event that the Companys market capitalization fell below $3,000,000 at any time, then in such event (a) the conversion price for all lender conversions occurring after the first date of such occurrence would equal the lower of the Lender Conversion Price and the Market Price as of any applicable date of conversion. The Market Price was calculated by applying a discount of 30% to the average of the three (3) lowest closing bid prices during the twenty (20) trading days immediately preceding the applicable conversion. The Company could also elect to make payment of installments in the form of equity, subject to the terms and conditions of the Typenex Note.
In January 2016, the Company elected to exercise the Borrower Offset Right under the agreement with Typenex to cancel the three Investor Notes of $50,000 each. This enabled the Company to deduct and offset the $150,000 owed under the Investor Notes.
On March 31, 2016, the Company entered into a letter agreement (the Typenex Letter Agreement) with Typenex to retire its outstanding convertible note financing with Typenex. Pursuant to the terms of the Typenex Letter Agreement, the Company paid $50,000 (the Typenex Payoff Amount) to Typenex in exchange for the termination of, and satisfaction of all obligations under (a) the Typenex SPA, (b) the Typenex Note, and (c) the Investor Notes. As additional consideration for each of the Company and Typenex to enter the Typenex Letter Agreement, each of the parties executed a mutual release of claims.
9
RVUE HOLDINGS, INC. |
Notes to Condensed Consolidated Financial Statements |
(unaudited) |
Derivatives
The Typenex Note and the Carebourn Note described above had conversion features which are embedded derivatives as defined in FASB ASC 815. The key factors in this analysis included: (i) determining that the conversion features met the definition of a derivative, and (ii) that a scope exception was not applicable to the Company, as the conversion features were not considered indexed to the Companys own stock, due to the various potential adjustments to the conversion price.
Derivative financial instruments are initially measured at their fair value and then are re-valued at each reporting date, with changes in fair value reported as charges or credits to income.
At inception, the Company valued the derivative instruments in the Typenex Note and the Carebourn Note at $25,370 and $75,869, respectively. At December 31, 2015, we valued the derivative instruments at $123,855. We determined the fair value of the two embedded conversion features based on available data using a binomial lattice valuation model given all the rights and obligations of the instruments.
The initial fair value of the derivative was recorded as a reduction of the Typenex Note and the Carebourn Note. The effective interest rate of the Typenex Note and the Carebourn Note were 78% and 238%, respectively. This original issue discount (OID) was amortized as interest expense over the term of the Notes.
At December 31, 2015, the Notes were carried at $144,293, which was net of unamortized OID of $58,207. During the six months ended June 30, 2016, the Carebourn Note and the Typenex Note were extinguished as a result of the following: (1) Carebourn converted $69,176 of principal and accrued interest under the debt agreement for 26,600,000 shares at an aggregate conversion price of $0.003, (2) Typenex converted $50,630 of principal under the debt agreement for 8,870,556 shares at an aggregate conversion price of $0.006 and (3) the Company making cash payments of $87,283 (which includes an installment payment to Typenex of $21,042) and $57,845 for payment of principal and other fees to extinguish the debt, respectively.
Prior to extinguishment, the convertible notes had an aggregate outstanding balance of $202,500. The notes were carried at $187,939, net of unamortized OID of $14,561 and the embedded conversion feature was valued at $252,489, resulting in a loss of early extinguishment of the convertible notes of $71,708 during the six months ended June 30, 2016.
Note 6 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.
10
RVUE HOLDINGS, INC. |
Notes to Condensed Consolidated Financial Statements |
(unaudited) |
Assets and liabilities measured at fair value on a recurring basis at June 30, 2016 and December 31, 2015 were as follows:
|
| Quoted Prices |
|
| Significant |
|
| Significant |
|
| Total | ||||
June 30, 2016 |
|
|
|
|
|
|
|
|
|
|
| ||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
| ||||
Derivative liability |
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
December 31, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability |
| $ | - |
|
| $ | - |
|
| $ | 123,855 |
|
| $ | 123,855 |
The fair value of the derivative liability, classified as Level 3, utilized a simulation analysis using a binomial lattice model and other unobservable inputs (Note 5).
Rollforward of Level 3 Net Liability
The table below sets forth a summary of changes in the fair value of the Companys Level 3 liabilities for the six months ended June 30, 2016:
Balance, January 1, 2016 |
| $ | 123,855 |
Issuances |
|
| - |
Settlements |
|
| (252,489) |
Realized and unrealized (gains) losses included in earnings |
|
| 128,634 |
Transfers into or out of level 3 |
|
| - |
Balance, June 30, 2016 |
| $ | - |
There were no assets or liabilities classified as level 3 during the three months ended June 30, 2015.
Note 7 Fair Value Measurements
The carrying amounts of our financial instruments, including cash, accounts receivable, accounts payable and accrued liabilities, approximate fair value because of their generally short maturities.
11
RVUE HOLDINGS, INC. |
Notes to Condensed Consolidated Financial Statements |
(unaudited) |
Note 8 Condensed Consolidated Financial Statement Details
The following tables show the Companys condensed consolidated financial statement details as of June 30, 2016 and December 31, 2015:
Prepaid expenses |
| June 30, 2016 |
| December 31, 2015 | ||
Insurance |
| $ | 50,519 |
|
| 27,470 |
Other |
|
| 13,767 |
|
| 3,230 |
|
| $ | 64,286 |
|
| 30,700 |
Property and Equipment |
| Estimated |
| June 30, |
| December 31, | |||
|
| (Years) |
| 2016 |
| 2015 | |||
Computers and software |
|
| 2 - 5 |
| $ | 91,083 |
|
| 91,083 |
Equipment |
|
| 3 |
|
| 22,977 |
|
| 22,977 |
Gross property and equipment |
|
|
|
|
| 114,060 |
|
| 114,060 |
Less accumulated depreciation |
|
|
|
|
| (114,060) |
|
| (114,046) |
Net property and equipment |
|
|
|
| $ | - |
|
| 14 |
Depreciation expense was $14 and $580 for the six months ended June 30, 2016 and 2015, respectively. Depreciation expense was $0 and $34 for the three months ended June 30, 2016 and 2015, respectively.
Software Development Costs |
| Estimated |
| June 30, |
| December 31, | |||
|
| (Months) |
| 2016 |
| 2015 | |||
Software development costs |
|
| 18 |
| $ | 1,516,215 |
|
| 1,418,287 |
Less accumulated amortization |
|
|
|
|
| (1,365,869) |
|
| (1,294,762) |
Net software development costs |
|
|
|
| $ | 150,346 |
|
| 123,525 |
Amortization expense was $71,107 and $69,728 for the six months ended June 30, 2016 and 2015, respectively. Amortization expense was $35,957 and $33,490 for the three months ended June 30, 2016 and 2015, respectively.
Accrued Expenses |
| June 30, |
| December 31, | ||
|
| 2016 |
| 2015 | ||
Personnel costs |
| $ | 12,884 |
|
| 11,407 |
Network costs |
|
| 66,586 |
|
| 324 |
Other |
|
| 29,500 |
|
| 21,500 |
|
| $ | 108,970 |
|
| 33,231 |
Note 9 Note Payable
In May 2016, the Company entered into a $44,625 financing agreement for the Companys annual directors and officers insurance. The term of the financing agreement is ten months and the interest rate is 5.77%. The first payment of $4,581 was made in June 2016 and the final payment will be in March 2017.
12
RVUE HOLDINGS, INC. |
Notes to Condensed Consolidated Financial Statements |
(unaudited) |
Note 10 - Income Taxes
There is no income tax benefit for the losses for the six-month periods ended June 30, 2016 and 2015, 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, 2015, 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, 2016. We did not recognize any interest or penalties during 2015 related to unrecognized tax benefits, or through the period ended June 30, 2016.
Note 11 - Stockholders Equity and Stock-based Compensation
Stock Option Activity
A summary of the Companys stock option activity for the six month period ended June 30, 2016 is as follows:
|
| Number of |
| Weighted |
| Weighted |
| Aggregate | ||||
Balance at December 31, 2015 |
|
| 20,140,000 | $ |
| 0.05 |
|
| 9.50 |
| $ | 0.01 |
Options granted |
|
| 2,250,000 |
|
| 0.01 |
|
| 10.00 |
|
| - |
Options exercised |
|
| - |
|
| - |
|
| - |
|
| - |
Options forfeited |
|
| - |
|
| - |
|
| - |
|
| - |
Balance at June 30, 2016 |
|
| 22,390,000 |
|
| 0.05 |
|
| 9.10 |
| $ | - |
Exercisable at June 30, 2016 |
|
| 1,133,332 |
|
| 0.20 |
|
| 4.91 |
| $ | - |
Expected to vest after June 30, 2016 |
|
| 21,256,668 |
|
| 0.02 |
|
| 9.35 |
| $ | - |
Aggregate intrinsic value represents the value of the Companys 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 Companys 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 Companys 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.
During the three and six months ended June 30, 2016, 2,250,000 stock options were granted to a current employee and contractors of the Company. As of June 30, 2016 there was approximately $158,997 of total unrecognized compensation cost related to stock options outstanding. This cost is expected to be recognized over a period of three years.
Stock-based compensation expense was $19,380 and $19,060 for the three months ended June 30, 2016 and 2015, respectively. Stock -based compensation expense was $38,722 and $38,121 for the six months ended June 30, 2016 and 2015, respectively.
13
RVUE HOLDINGS, INC. |
Notes to Condensed Consolidated Financial Statements |
(unaudited) |
The Company entered into an employment agreement with Mark Pacchini, our CEO, on August 4, 2015. The agreement term is three years and includes mandatory bonuses payable in stock options if specific revenue goals are achieved in the Companys fiscal year. The revenue goals for this agreement remained the same as those set forth in Mr. Pacchinis previous employment agreement dated as of January 1, 2014. As of June 30, 2016 management does not believe it is probable that any of the revenue targets 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 targets included in the agreement on a quarterly basis.
In December 2015, the Company granted in aggregate 3,000,000 stock options to a salesperson and two sales representatives that vest upon the achievement of certain performance conditions. In May 2016, the Company granted in aggregate 2,000,000 stock options to a salesperson and a contract employee that vest upon the achievement of certain performance conditions. The Company recognizes compensation expense for options granted to employees which vest upon achievement of performance conditions, over the requisite service period if it is probable that the performance conditions will be satisfied. The Company recognizes compensation expense for options granted to non-employees which vest upon achievement of performance conditions, prior to measurement date at the current lowest aggregated fair value at each financial reporting date.
Note 12 Commitments and Contingencies
Other Off-Balance Sheet Commitments
On October 4, 2015, we moved our corporate headquarters to Oak Brook Terrace, Illinois, where we lease approximately 3,100 square feet of office space from Midwest Disability, P.A. under a lease that expires on October 31, 2016. Lease payments are approximately $3,200 a month. This facility accommodates our principal sales, marketing, operations, finance and administrative activities.
Contract with Consultant
In November 2014, we entered into an eight-month consulting agreement that compensated the consultant with $45,000 worth of Common Stock, initially calculated to be 483,871 shares. The agreement required rVue to provide price protection on the shares, which resulted in the Company issuing 1,016,129 additional shares of Common Stock to the consultant in October 2015.
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 13 Supplemental Non-Cash Information
At December 31, 2014, the Company had $45,000 of prepaid consulting services that were paid for via the issuance of Common Stock in 2014. During the six months ended June 30, 2015, the Company recognized consulting expenses of $45,000 related to the arrangement. In addition, in May 2015, the Company entered into a $57,600 financing agreement for directors and officers insurance.
During the first six months of 2016, $4,588 of accrued interest and $115,217 of debt principal were converted to Common Stock. In May 2016, the Company entered into a $44,625 financing agreement for the Companys annual directors and officers insurance.
14
RVUE HOLDINGS, INC. |
Notes to Condensed Consolidated Financial Statements |
(unaudited) |
Note 14 Related Party Transactions
On January 26, 2016, the Company entered into a Subscription Agreement (the Subscription Agreement) with Acorn Composite Corporation (Acorn). Under the agreement, the Company has the right, but not the obligation, to issue shares of Common Stock to Acorn, valued at up to $90,000 per month over a period of twelve (12) months, for a total of $1,080,000, if the Company certifies in writing to Acorn that it has an operational need for such funds (Regular Purchases). In addition, the Company had the right, but not the obligation, to issue additional shares of Common Stock to Acorn, up $396,100 in the aggregate, for use in retiring the Companys convertible financings with Carebourn and Typenex (Take-Out Purchases). Acorn also has the option to purchase any such shares that the Company does not require Acorn to purchase. In all cases the price per share for Regular Purchases is $0.013 per share, and the price per share for Take-Out Purchases of $0.011 per share. Acorns option to make purchases with respect to unused portion of its commitment to make the Regular Purchases is exercisable at any time commencing on November 1, 2016 until October 31, 2020 and its option to make purchases with respect to the unused portion of its commitment to make Take-Out Purchases is exercisable at any time commencing on January 1, 2017 until September 30, 2020. During the six months ending June 30, 2016, Acorn made Regular Purchases and Take-Out Purchases of 41,538,462 and 13,992,093 shares, respectively, and the Company received $693,913 in aggregate proceeds from such sales. At June 30, 2016, Acorn has the right to purchase 22,007,907 shares at the Take-Out Purchases price that will be exercisable beginning on January 1, 2017.
As of June 30, 2016 the Company received a cash advance of $20,000 from Acorn.
Note 15 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.
In July and August 2016, Acorn made Regular Purchases totaling 13,846,154 shares and the Company received $180,000 in proceeds for such sale based on the terms described in Note 14 above. In July 2016, 250,000 stock options were granted to an employee of the Company with an exercise price of $0.011 per share.
15
Item 2. Managements 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 Companys 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 Companys Annual Report on Form 10-K for the year ended December 31, 2015 (the 2015 Form 10-K) filed with the U.S. Securities and Exchange Commission (SEC). The following discussion should be read in conjunction with the 2015 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 Companys 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 (the Exchange Act) are filed with the SEC. Such reports and other information filed by the Company with the SEC are available on the Companys 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 SECs 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 Companys 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 DOOH and place-based media advertising. We provide media services, including an online, Internet based DSP that connects advertisers and/or advertising agencies with third party DOOH media or networks, that allows the advertiser to create a targeted advertising campaign and media plan, and negotiate that media plan simultaneously with all the third-party networks selected. Through our strategic media services group, we execute complete campaigns on behalf of advertising clients or their agencies.
The rVue DSP is accessible via the Internet. Through rVue, once an advertising campaign has been agreed to between the advertiser and the DOOH network owner, the DOOH networks receive the display advertising to be shown on their installed base of digital media displays. rVue allows programming and advertising to be customized for display in specific venues, at specific times, and for demographic targeting. We provide the tools for advertisers and advertising agencies to customize campaigns for details as specific as location, customer preference, product availability, current events and other needs. We provide Proof-of-Play analytics and the network statistics necessary to monitor advertising on the networks and assist in evaluating the performance or refinements required for an advertising campaign, in some cases in real time. Furthermore, rVues integrated analytics provide insight and opportunities for advertisers and agencies to extend the reach, impact and engagement of future campaigns.
As of June 30, 2016, approximately 175 networks comprising approximately 1,500,000 screens and delivering over 250 million daily impressions representing the top 50 market areas were accessible through rVue. Through our strategic media services group, we execute complete campaigns on behalf of advertising clients or their agencies.
We believe that consumers who are mobile are increasingly difficult to reach via traditional analog media platforms such as television, print and radio. Interaction with these consumers via multiple DOOH platforms has advantages. Advertisers desire, for example, to send pre-programmed, customized messages to specific geographic or demographic targets throughout the life of an advertising campaign. This can be achieved via the Internet, and we believe will increasingly be achieved through digital displays located along roadsides, on trains and buses and train platforms and bus stations, in elevators, in government offices, schools, restaurants and bars. All of these DOOH platforms are aggregated for advertiser and advertising agencies via the rVue DSP.
Similar models have been successfully deployed for Internet DSPs, through Internet ad networks and exchanges that utilize similar services to sell banner and other advertising by websites and Internet publishers with excess inventory to monetize their assets. For example, Yahoo's Right Media Exchange leverages Yahoo's advertisers to assist publishers in monetizing available Internet advertising inventory. Our services provide a digital advertising solution that streamlines the process of planning, buying and optimizing display advertising on DOOH display networks. rVue is designed to simplify the process of buying and selling digital display ads while connecting all the market players networks, advertisers, agencies, partners and developers from a unified platform to do business more efficiently and effectively.
16
Under a contractual arrangement with a large advertiser we provide technical services on a monthly basis for a fixed monthly payment resulting in total monthly revenue of approximately $10,500. Under these arrangements, we provide technical services, including network monitoring, troubleshooting and maintenance, among other services. See the Revenue section for more information.
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity with GAAP and the Companys discussion and analysis of its financial condition and operating results require the Companys management to make judgments, assumptions, and estimates that affect the amounts reported in its condensed consolidated financial statements and accompanying notes. Note 1, Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements of this Form 10-Q and in the Notes to Consolidated Financial Statements in the Companys 2015 Form 10-K describes the significant accounting policies and methods used in the preparation of the Companys 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 Companys 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 Companys financial condition and operating results, and they require management to make judgments and estimates about inherently uncertain matters. Management has reviewed these critical accounting policies and related disclosures with the Audit Committee of the Companys Board of Directors.
Results of Operations
Three Months Ended June 30, 2016 and 2015:
Our unaudited results of operations for the three-month periods ended June 30, 2016 and 2015 were as follows:
|
| For the Three Months Ended | ||||
|
| June 30, | ||||
|
| 2016 |
| 2015 | ||
Revenue |
|
|
|
|
|
|
Core fees |
| $ | 117,615 |
| $ | 542,903 |
Non-core fees |
|
| 31,500 |
|
| 31,500 |
|
|
| 149,115 |
|
| 574,403 |
Costs and expenses |
|
|
|
|
|
|
Cost of revenue |
|
| 104,955 |
|
| 501,764 |
Selling, general and administrative expenses |
|
| 274,242 |
|
| 331,932 |
Depreciation and amortization |
|
| 35,958 |
|
| 33,524 |
Interest expense |
|
| 415 |
|
| 451 |
|
|
| 415,570 |
|
| 867,671 |
Loss before provision for income taxes |
|
| (266,455) |
|
| (293,268) |
Provision for income taxes |
|
| - |
|
| - |
Net loss |
| $ | (266,455) |
| $ | (293,268) |
Net loss per common share - basic and diluted |
| $ | (0.00) |
| $ | (0.00) |
Shares used in computing net loss per share: |
|
|
|
|
|
|
Basic and diluted |
|
| 259,335,114 |
|
| 141,944,146 |
17
Revenue
Revenue was $149,115 for the three-month period ended June 30, 2016 compared to $574,403 for the three-month period ended June 30, 2015, a $425,288 decrease, or 74.0%. We earned revenue as follows:
|
| Three Months ended |
|
|
|
|
|
| ||||
|
| June 30, |
|
|
|
|
|
| ||||
Revenue Category |
| 2016 |
| 2015 |
| $ Change |
| % Change | ||||
Core fees |
| $ | 117,615 |
| $ | 542,903 |
| $ | (425,288) |
|
| -78.3% |
Non-core fees |
|
| 31,500 |
|
| 31,500 |
|
| - |
|
| -% |
Total Revenue |
| $ | 149,115 |
| $ | 574,403 |
| $ | (425,288) |
|
| -74.0% |
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 $117,615 for the three-month period ended June 30, 2016, a $425,288 decrease compared to the $542,903 core fees for the three-month period ended June 30, 2015. 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 2016 from advertisers and agencies for placing advertising within the digital place-based media (DpbM) category. This is the focus of our business and the area in which we expect to generate the majority of our revenue in 2016 and beyond. We cannot provide assurance that advertisers or agencies will accept the rVue platform as their platform of choice for placing advertising with DpbM networks.
Non-core fees
Non-core fees were $31,500 for the three-month period ended June 30, 2016, and for the three-month period ended June 30, 2015. We expect to have $31,500 of revenue in this category in the 3rd quarter of 2016.
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 $104,955 for the three-month period ended June 30, 2016 compared to $501,764 for the three-month period ended June 30, 2015, a $396,809 decrease, or 79.1 %, and was comprised of:
|
| Three Months Ended |
|
|
|
|
|
| ||||
|
| June 30, |
|
|
|
|
|
| ||||
|
| 2016 |
| 2015 |
| $ Change |
| % Change | ||||
Temporary labor |
| $ | 3,224 |
| $ | 3,220 |
| $ | 4 |
|
| 0.1% |
Network services |
|
| 180 |
|
| 180 |
|
| - |
|
| -% |
rVue operations |
|
| 101,551 |
|
| 498,364 |
|
| (396,813) |
|
| -79.6% |
Total |
| $ | 104,955 |
| $ | 501,764 |
| $ | (396,809) |
|
| -79.5% |
The decrease in cost of revenue is attributable to a $425,288 decrease, or 74.0% in rVue revenue and network mix compared to June 30, 2015. The decrease in core related revenues decreases the cost of network expenses which are recorded in rVue operations.
18
Selling, general and administrative expenses
Selling, general and administrative expenses (SG&A) were $274,242 for the three-month period ended June 30, 2016, compared to $331,932 for the three-month period ended June 30, 2015 a $57,690 decrease, or 17.4%. Changes by major component of SG&A are:
|
| Three Months Ended |
|
|
|
|
|
| ||||
|
| June 30, |
|
|
|
|
|
| ||||
|
| 2016 |
| 2015 |
| $ Change |
| % Change | ||||
Compensation and benefits |
| $ | 68,005 |
| $ | 90,722 |
| $ | (22,717) |
|
| -25.0% |
Stock-based compensation expense |
|
| 19,380 |
|
| 19,060 |
|
| 320 |
|
| 1.7% |
Facility expense |
|
| 10,458 |
|
| 10,790 |
|
| (332) |
|
| -3.1% |
Communications expense |
|
| 7,667 |
|
| 17,615 |
|
| (9,948) |
|
| -56.5% |
Travel expense |
|
| 8,631 |
|
| 11,570 |
|
| (2,939) |
|
| -25.4% |
Investor relations and investment banking fees |
|
| 8,872 |
|
| 53,128 |
|
| (44,256) |
|
| -88.3% |
Professional and consulting fees |
|
| 84,169 |
|
| 58,351 |
|
| 25,818 |
|
| 44.2% |
Office support and supply expense |
|
| 67,060 |
|
| 70,696 |
|
| (3,636) |
|
| -5.1% |
Total |
| $ | 274,242 |
| $ | 331,932 |
| $ | (57,690) |
|
| -17.4% |
Compensation and benefits decreased $22,717, or 25.0% for the three months ended June 30, 2016 when compared to the three months ended June 30, 2015. This change was due to a $3,851 decrease in salary and payroll related expenses, a $1,022 decrease in the vacation accrual and a $17,844 increase in the amount of payroll costs being capitalized for software development,.
Communications expense decreased $9,948 or 56.5% for the three months ended June 30, 2016 when compared to the three months ended June 30, 2015. The decrease in communications expense is due to a decrease in the use of outside hosting services.
Travel expense decreased $2,939 or 25.4% for the three months ended June 30, 2016 when compared to the three months ended June 30, 2015. The decrease is attributable to a decrease in sales related travel in 2016.
Investor relations and investment banking fees expense decreased by $44,256 or 88.3%, in the three-month period ended June 30, 2016, when compared to the three-month period ended June 30, 2015. $49,230 of the decrease was due to an eight-month investor relations program to attract investors to rVue that began in November 2014 and was completed in May 2015. This was offset by a $4,974 increase in small marketing projects.
Professional and consulting fees increased $25,818 or 44.2% for the three months ended June 30, 2016 when compared to the three months ended June 30, 2015. The increase is due to a $32,050 increase in sales and marketing consulting fees and a $1,395 increase in SEC filing service fees, offset by a decrease in legal fees of $3,877, and a decrease in accounting and audit fees of $3,750.
Office support and supply expense for the three-month period ended June 30, 2016 decreased $3,636 or 5.1%, compared to the three-month period ended June 30, 2015. This decrease is mainly attributable to a decrease in membership fees to a DOOH association.
Depreciation and amortization
Depreciation and amortization was $35,958 for the three-month period ended June 30, 2016 compared to $33,524 for the three-month period ended June 30, 2015, a $2,434 increase, or 7.3%. The increase is attributable to an increase in the amount of payroll being capitalized for software development.
19
Six Months Ended June 30, 2016 and 2015:
Our unaudited results of operations for the six-month periods ended June 30, 2016 and 2015 were as follows:
|
| For the Six Months Ended | ||||
|
| June 30, | ||||
|
| 2016 |
| 2015 | ||
Revenue |
|
|
|
|
|
|
Core fees |
| $ | 307,005 |
| $ | 616,038 |
Non-core fees |
|
| 63,000 |
|
| 63,000 |
|
|
| 370,005 |
|
| 679,038 |
Costs and expenses |
|
|
|
|
|
|
Cost of revenue |
|
| 271,726 |
|
| 566,310 |
Selling, general and administrative expenses |
|
| 653,810 |
|
| 746,385 |
Depreciation and amortization |
|
| 71,120 |
|
| 70,308 |
Interest expense |
|
| 58,754 |
|
| 451 |
Change in fair value of derivative instruments |
|
| 128,634 |
|
| - |
Loss on early extinguishment of debt |
|
| 71,708 |
|
| - |
|
|
| 1,255,752 |
|
| 1,383,454 |
Loss before provision for income taxes |
|
| (885,747) |
|
| (704,416) |
Provision for income taxes |
|
| - |
|
| - |
Net loss |
| $ | (885,747) |
| $ | (704,416) |
Net loss per common share - basic and diluted |
| $ | (0.00) |
| $ | (0.00) |
Shares used in computing net loss per share: |
|
|
|
|
|
|
Basic and diluted |
|
| 222,302,666 |
|
| 141,706,061 |
Revenue
Revenue was $370,055 for the six-month period ended June 30, 2016 compared to $679,038 for the six-month period ended June 30, 2015, a $309,033 decrease, or 45.5%. We earned revenue as follows:
|
| Six Months ended |
|
|
|
|
|
| ||||
|
| June 30, |
|
|
|
|
|
| ||||
Revenue Category |
| 2016 |
| 2015 |
| $ Change |
| % Change | ||||
Core Fees |
| $ | 307,005 |
| $ | 616,038 |
| $ | (309,033) |
|
| -50.2% |
Non-Core Fees |
|
| 63,000 |
|
| 63,000 |
|
| - |
|
| - |
Total Revenue |
| $ | 370,005 |
| $ | 679,038 |
| $ | (309,033) |
|
| -45.5% |
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 $307,005 for the six-month period ended June 30, 2016, a $309,033 or 50.2% decrease from the $616,038 rVue fees for the six-month period ended June 30, 2015. In the second quarter of 2015 rVue had a significant campaign that accounted for as the rVue platform gains traction with advertisers and agencies, we expect to generate additional revenue and fees in the second half of 2016 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 2016 and beyond. We cannot provide assurance that advertisers or agencies will accept the rVue platform as their platform of choice for placing advertising with DpbM networks.
20
Non-core fees
Non-core fees were $63,000 for the six-month period ended June 30, 2016 and 2015. We expect to continue to receive revenue in the amount of $10,500 monthly from these services to this client through October 2016, 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 $271,726 for the six-month period ended June 30, 2016 compared to $566,310 for the six-month period ended June 30, 2015, a $294,584 decrease, or 52.0%, and was comprised of:
|
| Six Months Ended |
|
|
|
|
|
| ||||
|
| June 30, |
|
|
|
|
|
| ||||
|
| 2016 |
| 2015 |
| $ Change |
| % Change | ||||
Compensation and benefits |
| $ | 6,448 |
| $ | 6,401 |
| $ | 47 |
|
| 0.7% |
Network services |
|
| 360 |
|
| 360 |
|
| - |
|
| - |
rVue operations |
|
| 264,918 |
|
| 559,549 |
|
| (295,319) |
|
| -52.8% |
Total |
| $ | 271,726 |
| $ | 566,310 |
| $ | (294,584) |
|
| -52.0% |
The decrease in cost of revenue is attributable to a $309,033 or 50.2% decrease in rVue revenue and network mix compared to June 30, 2015. The decrease in core related revenues decreases the cost of network expenses which are recorded in rVue operations.
Selling, general and administrative expenses
SG&A were $653,810 for the six-month period ended June 30, 2016, compared to $746,385 for the six month period ended June 30, 2015, a $92,575 decrease, or12.4%. Changes by major component of SG&A are:
|
| Six Months Ended |
|
|
|
|
|
| ||||
|
| June 30, |
|
|
|
|
|
| ||||
|
| 2016 |
| 2015 |
| $ Change |
| % Change | ||||
Compensation and benefits |
| $ | 146,893 |
| $ | 249,355 |
| $ | (102,462) |
|
| -41.1% |
Stock-based compensation expense |
|
| 38,722 |
|
| 38,121 |
|
| 601 |
|
| 1.6% |
Facility expense |
|
| 21,161 |
|
| 23,398 |
|
| (2,237) |
|
| -9.6% |
Communications expense |
|
| 22,297 |
|
| 35,338 |
|
| (13,041) |
|
| -36.9% |
Travel expense |
|
| 17,425 |
|
| 14,988 |
|
| 2,437 |
|
| 16.3% |
Investor relations and investment banking fees |
|
| 24,929 |
|
| 93,320 |
|
| (68,391) |
|
| -73.3% |
Professional and consulting fees |
|
| 246,948 |
|
| 150,332 |
|
| 96,616 |
|
| 64.3% |
Office support and supply expense |
|
| 135,435 |
|
| 141,533 |
|
| (6,098) |
|
| 4.3% |
Total |
| $ | 653,810 |
| $ | 746,385 |
| $ | (92,575) |
|
| -12.4% |
Compensation and benefits decreased $102,462, or 41.1% for the six months ended June 30, 2016 when compared to the six months ended June 30, 2015. This change was due to a $64,983 decrease in salary and payroll related expenses and a $37,679 increase in the amount of payroll costs being capitalized for software development offset by a $200 increase in the vacation accrual.
Facility expense decreased $2,327 or 9.6% for the six months ended June 30, 2016 when compared to the six months ended June 30, 2015. The decrease in facility expense is due to the move to the Oak Brook Terrace office.
Communications expense decreased $13,041 or 36.9% for the six months ended June 30, 2016 when compared to the six months ended June 30, 2015. The decrease in communications expense is due to a decrease in the use of outside hosting services.
Travel expense increased $2,437 or 16.3% for the six months ended June 30, 2016 when compared to the six months ended June 30, 2015. The increase is attributable to an increase in sales related travel in the first quarter of 2016.
Investor relations and investment banking fees expense decreased by $68,391 or 73.3%, in the six-month period ended June 30, 2016, when compared to the six-month period ended June 30, 2015. Approximately $79,000 of the total expense for 2015 is due to an eight-month investor relations program to attract investors to rVue that began in November 2014 and was completed in May 2015, which was offset by an approximate $11,000 increase in marketing projects.
21
Professional and consulting fees increased $96,616 or 64.3% for the six months ended June 30, 2016 when compared to the six months ended June 30, 2015. The increase is due to a $24,111 increase in legal fees, a $80,300 increase in sales and marketing consulting fees, and a $2,540 increase in SEC filing service fees offset by a $10,335 decrease in accounting and audit fees.
Office support and supply expense for the six-month period ended June 30, 2016 decreased $6,098 or 4.3%, compared to the six-month period ended June 30, 2015. The decrease is attributable to a $6,000 decrease in membership fees, a $1,339 decrease in payroll fees, a $2,820 decrease in state fees, and a $2,857 decrease in miscellaneous expenses offset by a $6,918 increase in outside consultants rVue has engaged in operations and software development.
Depreciation and amortization
Depreciation was $14 for the six-month period ended June 30, 2016 compared to $580 for the six-month period ended June 30, 2015, a $566 decline, or 97.6%. For the six-month period ended June 30, 2016, amortization expense for software development was $71,106 compared to $69,728 for the six-month period ended June 30, 2015, a $1,378 increase, or 2.0%. The large increase in amortization expense for software development costs is due to the increase in software development by rVue.
Liquidity and Capital Resources
As of June 30, 2016, we had cash and cash equivalents totaling $9,150. Since our inception, we have incurred net losses, and at June 30, 2016, we had an accumulated deficit of $14,958,306 and total stockholders equity of $60,397. We expect to continue to incur losses in fiscal 2016. At the present time, the Company does not have sufficient cash to continue through the third quarter of 2016. Management is currently in the process of raising additional capital.
We did not have any material commitments for capital expenditures at June 30, 2016. We have budgeted capital expenditures of approximately $200,000 for fiscal 2016, 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 arising from continuing operations in the three-month periods ended June 30, 2016 and 2015. 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.
We intend to raise additional capital through the sale of Common Stock to investors in 2016, but no assurance can be made that we will be successful in doing so on terms acceptable to the Company.
Cash used in operating activities
Net cash used in operating activities totaled $550,544 for the six-month period ended June 30, 2016 compared to $166,045 for the six-month period ended June 30, 2015. In the six-month period ended June 30, 2016, cash was used to fund a net loss of $885,747, reduced by depreciation of $71,121, non-cash interest expense of $43,656, stock-based compensation expense of $38,722, loss on early extinguishment of debt of $14,549 and by changes in operating assets and liabilities totaling $38,491.
During the six-month period ended June 30, 2015, cash was used to fund a net loss of $704,416, reduced by depreciation of $70,308, stock-based compensation expense of $38,121 and changes in operating assets and liabilities totaling $384,942.
Cash used in investing activities
Net cash used in investing activities totaled $97,928 for the six-month period ended June 30, 2016 compared to $60,168 of net cash used in investing activities in the six-month period ended June 30, 2015. In the six-month period ended June 30, 2016, cash used in investing activities consisted of $97,928 of software development costs. In the six-month period ended June 30, 2015, cash used in investing activities consisted of $60,248 of software development costs and that amount was offset by a decrease in deposits of $80.
Cash from financing activities
Net cash provided by financing activities totaled $590,553 for the six-month period ended June 30, 2016. We received proceeds from the issuance of common stock of $693,913, reduced by $16,077 for payments on debt and by $87,283 for payments on convertible notes. For the six-month period ended June 30, 2015, net cash provided by financing activities totaled $75,000 from the sale of common stock.
22
Financial condition
As of June 30, 2016, we had a working capital deficit of $93,188, an accumulated deficit of $14,958,306 and total stockholders equity of $60,397, compared to a working capital deficit of $143,598 an accumulated deficit of $13,372,892 and total stockholders equity of $13,181 at December 31, 2015.
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 end of the year. 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, 2015 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. Management intends to address this concern by focusing on revenue growth and on raising additional capital in the coming months.
Off-Balance Sheet Arrangements
Since our inception, except for standard operating leases, we have not engaged in any off-balance sheet arrangements, including the use of structured finance, special purpose entities or variable interest entities.
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 Companys management, the Companys principal executive officer and principal financial officer have concluded that the Companys 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, 2016, 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 Companys 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 Companys 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 Companys 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 Companys 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 Companys receipts and expenditures are being made only in accordance with authorizations of the Companys management and board of directors; and |
| (iii) | provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use, or disposition of the Companys assets that could have a material effect on the financial statements. |
Management, including the Companys principal executive officer and principal financial officer, does not expect that the Companys 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.
23
Changes in Internal Control Over Financial Reporting
There were no changes in the Companys internal control over financial reporting during the three-month period ended June 30, 2016 which were identified in connection with managements 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 Companys internal control over financial reporting.
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
Not applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On January 26, 2016, the Company entered into a Subscription Agreement (the Subscription Agreement) with Acorn Composite Corporation (Acorn). Under the agreement, the Company has the right, but not the obligation, to issue shares of Common Stock to Acorn, valued at up to $90,000 per month over a period of twelve (12) months, for a total of $1,080,000, if the Company certifies in writing to Acorn that it has an operational need for such funds (Regular Purchases). In addition, the Company had the right, but not the obligation, to issue additional shares of Common Stock to Acorn, up $396,100 in the aggregate, for use in retiring the Companys convertible financings with Carebourn and Typenex (Take-Out Purchases). Acorn also has the option to purchase any such shares that the Company does not require Acorn to purchase. In all cases the price per share for Regular Purchases is $0.013 per share, and the price per share for Take-Out Purchases of $0.011 per share. Acorns option to make purchases with respect to unused portion of its commitment to make the Regular Purchases is exercisable at any time commencing on November 1, 2016 until October 31, 2020 and its option to make purchases with respect to the unused portion of its commitment to make Take-Out Purchases is exercisable at any time commencing on January 1, 2017 until September 30, 2020. During the six months ending June 30, 2016, Acorn made Regular Purchases and Take-Out Purchases of 41,538,462 and 13,992,093 shares, respectively, and the Company received $693,913 in aggregate proceeds from such sales. At June 30, 2016, Acorn has the right to purchase 22,007,907 shares at the Take-Out Purchases price that will be exercisable beginning on January 1, 2017.
All such shares were issued to Acorn without registration in reliance upon the exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended, as a transaction by the Company not involving any public offering, and Rule 506(b) promulgated thereunder, as a transaction by the Company not involving any public offering and involving only accredited investors. A copy of the Subscription Agreement is attached to the Companys Current Report on Form 8-K filed with the SEC on January 27, 2016 as Exhibit 4.1.
During the three months ended June 30, 2016, Acorn made the following purchase according to the Subscription Agreement:
Date | Amount Paid | Number of Shares Purchased |
April 19, 2016 | $90,000 | 6,923,077 |
May 16, 2016 | $90,000 | 6,923,077 |
June 13, 2016 | $90,000 | 6,923,077 |
We did not repurchase any shares of our Common Stock during the quarter ended June 30, 2016.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
24
Item 6. Exhibits.
(a) Index to Exhibits
Exhibit No. |
| Exhibit Description |
10.1 |
| Securities Purchase Agreement dated July 30, 2015 by and between the Company and Carebourn Capital, L.P. (incorporated by reference to Exhibit 10.2 to the registrants Quarterly Report on Form 10-Q filed August 13, 2015) |
10.2 |
| Convertible Promissory Note dated July 30, 2015 by the Company and payable to Carebourn Capital, L.P. (incorporated by reference to Exhibit 10.1 to the registrants Quarterly Report on Form 10-Q filed August 13, 2015) |
10.3 |
| Securities Purchase Agreement dated July 7, 2015 but effective July 8, 2015 by and between the Company and Typenex Co-Investment, LLC (incorporated by reference to Exhibit 4.1 to the registrants Current Report on Form 8-K filed July 14, 2015) |
10.4 |
| Convertible Promissory Note dated July 7, 2015 but effective July 8, 2015 by the Company and payable to Typenex (incorporated by reference to Exhibit 4.2 to the registrants Current Report on Form 8-K filed July 14, 2015) |
10.5 |
| Subscription Agreement dated January 26, 2016, by and between the Company and Acorn Composite Corporation (incorporated by reference to Exhibit 4.1 to the registrants Current Report on Form 8-K dated as of January 27, 2016) |
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.
25
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 11, 2016 | By: | /s/ Mark P. Pacchini |
|
| Acting Chief Financial Officer |
|
| (Duly Authorized Officer and |
|
| Principal Financial Officer) |
26
EXHIBIT INDEX
Exhibit No. |
| Exhibit Description |
10.1 |
| Securities Purchase Agreement dated July 30, 2015 by and between the Company and Carebourn Capital, L.P. (incorporated by reference to Exhibit 10.2 to the registrants Quarterly Report on Form 10-Q filed August 13, 2015) |
10.2 |
| Convertible Promissory Note dated July 30, 2015 by the Company and payable to Carebourn Capital, L.P. (incorporated by reference to Exhibit 10.1 to the registrants Quarterly Report on Form 10-Q filed August 13, 2015) |
10.3 |
| Securities Purchase Agreement dated July 7, 2015 but effective July 8, 2015 by and between the Company and Typenex Co-Investment, LLC (incorporated by reference to Exhibit 4.1 to the registrants Current Report on Form 8-K filed July 14, 2015) |
10.4 |
| Convertible Promissory Note dated July 7, 2015 but effective July 8, 2015 by the Company and payable to Typenex (incorporated by reference to Exhibit 4.2 to the registrants Current Report on Form 8-K filed July 14, 2015) |
10.5 |
| Subscription Agreement dated January 26, 2016, by and between the Company and Acorn Composite Corporation (incorporated by reference to Exhibit 4.1 to the registrants Current Report on Form 8-K dated as of January 27, 2016) |
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.
27
Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Mark 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 registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act 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 reasonably 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 registrants 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 registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
| 5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants 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 registrants 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 registrants internal control over financial reporting. |
| |
August 11, 2016 | /s/ Mark Pacchini |
| Mark Pacchini |
| Chief Executive Officer (Principal Executive Officer) |
Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Mark 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 registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act 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 reasonably 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 registrants 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 registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
| 5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants 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 registrants 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 registrants internal control over financial reporting. |
| |
August 11, 2016 | /s/ Mark Pacchini |
| Mark Pacchini |
| Acting Chief Financial Officer (Principal Financial Officer) |
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, 2016 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 11, 2016 |
|
|
|
/s/ Mark P. Pacchini |
|
Mark P. Pacchini |
|
Acting Chief Financial Officer |
|
Date: August 11, 2016 |
|
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.
Document and Entity Information - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Aug. 11, 2016 |
|
Document and Entity Information: | ||
Entity Registrant Name | RVUE HOLDINGS, INC. | |
Entity Trading Symbol | rvue | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2016 | |
Amendment Flag | false | |
Entity Central Index Key | 0001455206 | |
Current Fiscal Year End Date | --12-31 | |
Entity Common Stock, Shares Outstanding | 278,354,557 | |
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 | 2016 | |
Document Fiscal Period Focus | Q2 |
CONDENSED CONSOLIDATED BALANCE SHEETS PARENTHETICALS - $ / shares |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
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 | 375,000,000 | 240,000,000 |
Common Stock, shares issued | 264,508,403 | 173,507,292 |
Common Stock, shares outstanding | 264,508,403 | 173,507,292 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Revenue | ||||
Core fees | $ 117,615 | $ 542,903 | $ 307,005 | $ 616,038 |
Non-core fees | 31,500 | 31,500 | 63,000 | 63,000 |
Total revenues | 149,115 | 574,403 | 370,005 | 679,038 |
Costs and expenses | ||||
Cost of revenue | 104,955 | 501,764 | 271,726 | 566,310 |
Selling, general and administrative expenses | 274,242 | 331,932 | 653,810 | 746,385 |
Depreciation and amortization | 35,958 | 33,524 | 71,120 | 70,308 |
Interest expense | 415 | 451 | 58,754 | 451 |
Change in fair value of derivative instruments | 0 | 0 | 128,634 | 0 |
Loss on early extinguishment of debt | 0 | 0 | 71,708 | 0 |
Total Costs and expenses | 415,570 | 867,671 | 1,255,752 | 1,383,454 |
Loss before provision for income taxes | (266,455) | (293,268) | (885,747) | (704,416) |
Provision for income taxes | 0 | 0 | 0 | 0 |
Net loss | $ (266,455) | $ (293,268) | $ (885,747) | $ (704,416) |
Net loss per common share - basic and diluted | $ 0.00 | $ 0.00 | $ 0.00 | $ 0.00 |
Shares used in computing net loss per share: Basic and diluted | 259,335,114 | 141,944,146 | 222,302,666 | 141,706,061 |
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (unaudited) - 6 months ended Jun. 30, 2016 - USD ($) |
Preferred Stock Shares |
Preferred Stock Amount |
Common Stock Shares |
Common Stock Amount |
Additional Paid-In Capital |
Accumulated Deficit |
Total |
---|---|---|---|---|---|---|---|
Balance at Dec. 31, 2015 | 0 | 0 | 173,507,292 | 173,507 | 13,740,269 | (14,072,559) | (158,783) |
Common stock issued | 0 | 0 | 55,530,555 | 55,530 | 638,383 | 0 | 693,913 |
Common stock issued upon the conversion of notes | 0 | 0 | 35,470,556 | 35,471 | 336,821 | 0 | 372,292 |
Stock-based compensation expense | $ 0 | $ 0 | $ 38,722 | $ 0 | $ 38,722 | ||
Net loss | $ 0 | $ 0 | $ 0 | $ (885,747) | $ (885,747) | ||
Balance at Jun. 30, 2016 | 0 | 0 | 264,508,403 | 264,508 | 14,754,195 | (14,958,306) | 60,397 |
Summary of Significant Accounting Policies |
6 Months Ended |
---|---|
Jun. 30, 2016 | |
Summary of Significant 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) advertising and place-based media 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 Companys 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 Companys annual consolidated financial statements and the notes thereto for the year ended December 31, 2015, included in our Annual Report on Form 10-K (the 2015 Form 10-K).
The unaudited condensed consolidated statement of operations for the three and six months ended June 30, 2016 are not necessarily indicative of the results that may be expected for the entire year.
|
Going Concern |
6 Months Ended |
---|---|
Jun. 30, 2016 | |
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 $14,958,306 at June 30, 2016. These factors raise substantial doubt about our ability to continue to operate in the normal course of business. We have funded our activities to date almost exclusively from equity and debt financings.
We will continue to require substantial funds to continue development of our core businesses. Managements plan in order to meet our operating cash flow requirements includes financing activities such as private placements of common stock and private issuances of debt and convertible instruments and the continued establishment of strategic relationships which we expect will lead to the generation of additional revenue opportunities.
While we believe that we will be successful in obtaining the necessary financing to fund our operations, there is no assurance that such additional funding will be achieved or that we will succeed in our future operations. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.
|
Loss Per Common Share |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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, 2016 and 2015, 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, 2016 and 2015 since this would have an anti-dilutive effect.
The following table sets forth the computation of basic and diluted loss per common share:
(1) The following stock options and warrants outstanding as of June 30, 2016 and 2015 were not included in the computation of dilutive loss per share because the net effect would have been anti-dilutive:
|
Financial Instruments |
6 Months Ended |
---|---|
Jun. 30, 2016 | |
Financial Instruments | |
Financial Instruments | Note 4 Financial Instruments
Accounts Receivable
We sell our services directly to our customers. Accounts receivable from three of our customers accounted for 100% of total accounts receivable at June 30, 2016, and accounts receivable from two of our customers accounted for 100% of total accounts receivable at December 31, 2015. We had no allowance for doubtful accounts at either June 30, 2016 or at December 31, 2015.
|
Convertible Note Financing |
6 Months Ended |
---|---|
Jun. 30, 2016 | |
Convertible Note Financing | |
Convertible Note Financing | Note 5 Convertible Note Financing
On March 31, 2016, the Company retired both of its outstanding convertible note financings as further described below.
Carebourn Convertible Note Financing
On July 30, 2015 (the Closing Date), the Company entered into a Securities Purchase Agreement dated July 30, 2015 (the Carebourn SPA) with Carebourn Capital, L.P. (Carebourn). Pursuant to the Carebourn SPA, the Company issued to Carebourn a convertible promissory note (the Carebourn Note) in the principal amount of $115,000.
The Carebourn Note had a term of 9 months and an interest rate of 10% per annum. The net proceeds to the Company from the Carebourn Note were $100,000, consisting of gross proceeds of $115,000, less $10,000 in original issue discount and $5,000 in expense reimbursements. The entire principal balance of the Carebourn Note, together with all accrued interest, was due and payable on April 30, 2016.
Beginning on the date that was ninety (90) days after the Closing Date, so long as any amount was outstanding under the Carebourn Note, Carebourn could convert all or any portion of the balance of the Carebourn Note into shares of the Companys common stock. Generally, the conversion price would be calculated by applying a discount of 40% to the average of the three (3) lowest closing bid prices for the common stock during the twenty (20) trading days immediately preceding the applicable conversion. Carebourn was generally prohibited from acquiring more than 4.99% of the Companys outstanding shares pursuant to the Carebourn Note.
On March 31, 2016, the Company entered into a letter agreement (the Carebourn Letter Agreement) with Carebourn to retire its outstanding convertible note financing with Carebourn. Pursuant to the terms of the Carebourn Letter Agreement, the Company (a) paid $82,355 (the Cash Payment), and (b) issued 8,000,000 shares of its common stock, $0.001 par value per share (the Share Payment and together with the Cash Payment, the Carebourn Payoff Amount), to Carebourn in full satisfaction of, and to terminate, all obligations under the Carebourn SPA and the Carebourn Note. As additional consideration for each of the Company and Carebourn to enter into the Carebourn Letter Agreement, the parties executed a mutual release of claims.
Typenex Convertible Note Financing
On July 8, 2015 (the Closing Date), the Company entered into a Securities Purchase Agreement dated July 7, 2015 but effective July 8, 2015 (the Typenex SPA) with Typenex Co-Investment, LLC (Typenex). Pursuant to the Typenex SPA, the Company issued to Typenex a convertible promissory note (the Typenex Note) in the principal amount of $252,500, deliverable in four tranches as described below.
The Typenex Note had a term of 17 months, an interest rate of 10% per annum and an original issue discount (OID) of $22,500. The aggregate commitment to the Company from the Typenex Note was $225,000, in the form of: (a) an initial tranche of $75,000 in cash (gross proceeds of $87,500, less $7,500 in OID and $5,000 in expense reimbursements), and (b) a future conditional commitment of three promissory notes of $55,000 each (each consisting of $55,000 in gross proceeds, less $5,000 in OID (the Investor Notes)). Typenex could elect, in its sole discretion, to fund one or more of the Investor Notes. Absent such an election by Typenex, the Investor Notes would not result in cash proceeds to, or an obligation to repay on the part of, the Company.
Beginning on the date that was six (6) months after the Closing Date and on the same day of each month thereafter until the maturity date of the Typenex Note, so long as any amount was outstanding thereunder, the Company was required to pay to Typenex installments of principal equal to $21,041 (or such lesser principal amount as was then outstanding), plus the sum of any accrued and unpaid interest. Payments of each installment amount could be made in cash. Alternatively, Typenex or the Company could elect to convert an installment amount into Common Stock as described below.
Beginning six (6) months after the Closing Date, Typenex could convert the balance of the Typenex Note, or any installment or portion thereof, utilizing the conversion price calculation set forth below. Generally, the Lender Conversion Price would be $0.08. However, in the event that the Companys market capitalization fell below $3,000,000 at any time, then in such event (a) the conversion price for all lender conversions occurring after the first date of such occurrence would equal the lower of the Lender Conversion Price and the Market Price as of any applicable date of conversion. The Market Price was calculated by applying a discount of 30% to the average of the three (3) lowest closing bid prices during the twenty (20) trading days immediately preceding the applicable conversion. The Company could also elect to make payment of installments in the form of equity, subject to the terms and conditions of the Typenex Note.
In January 2016, the Company elected to exercise the Borrower Offset Right under the agreement with Typenex to cancel the three Investor Notes of $50,000 each. This enabled the Company to deduct and offset the $150,000 owed under the Investor Notes.
On March 31, 2016, the Company entered into a letter agreement (the Typenex Letter Agreement) with Typenex to retire its outstanding convertible note financing with Typenex. Pursuant to the terms of the Typenex Letter Agreement, the Company paid $50,000 (the Typenex Payoff Amount) to Typenex in exchange for the termination of, and satisfaction of all obligations under (a) the Typenex SPA, (b) the Typenex Note, and (c) the Investor Notes. As additional consideration for each of the Company and Typenex to enter the Typenex Letter Agreement, each of the parties executed a mutual release of claims.
Derivatives
The Typenex Note and the Carebourn Note described above had conversion features which are embedded derivatives as defined in FASB ASC 815. The key factors in this analysis included: (i) determining that the conversion features met the definition of a derivative, and (ii) that a scope exception was not applicable to the Company, as the conversion features were not considered indexed to the Companys own stock, due to the various potential adjustments to the conversion price.
Derivative financial instruments are initially measured at their fair value and then are re-valued at each reporting date, with changes in fair value reported as charges or credits to income.
At inception, the Company valued the derivative instruments in the Typenex Note and the Carebourn Note at $25,370 and $75,869, respectively. At December 31, 2015, we valued the derivative instruments at $123,855. We determined the fair value of the two embedded conversion features based on available data using a binomial lattice valuation model given all the rights and obligations of the instruments.
The initial fair value of the derivative was recorded as a reduction of the Typenex Note and the Carebourn Note. The effective interest rate of the Typenex Note and the Carebourn Note were 78% and 238%, respectively. This original issue discount (OID) was amortized as interest expense over the term of the Notes.
At December 31, 2015, the Notes were carried at $144,293, which was net of unamortized OID of $58,207. During the six months ended June 30, 2016, the Carebourn Note and the Typenex Note were extinguished as a result of the following: (1) Carebourn converted $69,176 of principal and accrued interest under the debt agreement for 26,600,000 shares at an aggregate conversion price of $0.003, (2) Typenex converted $50,630 of principal under the debt agreement for 8,870,556 shares at an aggregate conversion price of $0.006 and (3) the Company making cash payments of $87,283 (which includes an installment payment to Typenex of $21,042) and $57,845 for payment of principal and other fees to extinguish the debt, respectively.
Prior to extinguishment, the convertible notes had an aggregate outstanding balance of $202,500. The notes were carried at $187,939, net of unamortized OID of $14,561 and the embedded conversion feature was valued at $252,489, resulting in a loss of early extinguishment of the convertible notes of $71,708 during the six months ended June 30, 2016.
|
Fair Value Measurements |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measures and Disclosures: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Note 6 Fair Value Measurements
Fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following fair value hierarchy is used in selecting inputs, with the highest priority given to Level 1, as these are the most transparent or reliable:
Level 1 - Quoted prices for identical instruments in active markets.
Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable directly or indirectly.
Level 3 - Valuations derived from valuation techniques in which one or more significant inputs are unobservable.
We are responsible for the valuation process and as part of this process we used data from an outside source to establish fair value. We performed due diligence to understand the inputs used or how the data was calculated or derived, and we corroborated the reasonableness of external inputs in the valuation process.
Assets and liabilities measured at fair value on a recurring basis at June 30, 2016 and December 31, 2015 were as follows:
The fair value of the derivative liability, classified as Level 3, utilized a simulation analysis using a binomial lattice model and other unobservable inputs (Note 5).
Rollforward of Level 3 Net Liability
The table below sets forth a summary of changes in the fair value of the Companys Level 3 liabilities for the six months ended June 30, 2016:
There were no assets or liabilities classified as level 3 during the three months ended June 30, 2015.
Note 7 Fair Value Measurements
The carrying amounts of our financial instruments, including cash, accounts receivable, accounts payable and accrued liabilities, approximate fair value because of their generally short maturities.
|
Condensed Consolidated Financial Statement Details |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Consolidated Financial Statement Details | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Consolidated Financial Statement Details | Note 8 Condensed Consolidated Financial Statement Details
The following tables show the Companys condensed consolidated financial statement details as of June 30, 2016 and December 31, 2015:
Depreciation expense was $14 and $580 for the six months ended June 30, 2016 and 2015, respectively. Depreciation expense was $0 and $34 for the three months ended June 30, 2016 and 2015, respectively.
Amortization expense was $71,107 and $69,728 for the six months ended June 30, 2016 and 2015, respectively. Amortization expense was $35,957 and $33,490 for the three months ended June 30, 2016 and 2015, respectively.
|
Note Payable |
6 Months Ended |
---|---|
Jun. 30, 2016 | |
Note Payable: | |
Note Payable | Note 9 Note Payable
In May 2016, the Company entered into a $44,625 financing agreement for the Companys annual directors and officers insurance. The term of the financing agreement is ten months and the interest rate is 5.77%. The first payment of $4,581 was made in June 2016 and the final payment will be in March 2017.
|
Income Taxes |
6 Months Ended |
---|---|
Jun. 30, 2016 | |
Income Taxes | |
Income Taxes | Note 10 - Income Taxes
There is no income tax benefit for the losses for the six-month periods ended June 30, 2016 and 2015, 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, 2015, 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, 2016. We did not recognize any interest or penalties during 2015 related to unrecognized tax benefits, or through the period ended June 30, 2016. |
Stockholders' Equity and Stock Based Compensation |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity and Stock Based Compensation | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity and Stock Based Compensation | Note 11 - Stockholders Equity and Stock-based Compensation
Stock Option Activity
A summary of the Companys stock option activity for the six month period ended June 30, 2016 is as follows:
Aggregate intrinsic value represents the value of the Companys 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 Companys 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 Companys 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.
During the three and six months ended June 30, 2016, 2,250,000 stock options were granted to a current employee and contractors of the Company. As of June 30, 2016 there was approximately $158,997 of total unrecognized compensation cost related to stock options outstanding. This cost is expected to be recognized over a period of three years.
Stock-based compensation expense was $19,380 and $19,060 for the three months ended June 30, 2016 and 2015, respectively. Stock -based compensation expense was $38,722 and $38,121 for the six months ended June 30, 2016 and 2015, respectively.
The Company entered into an employment agreement with Mark Pacchini, our CEO, on August 4, 2015. The agreement term is three years and includes mandatory bonuses payable in stock options if specific revenue goals are achieved in the Companys fiscal year. The revenue goals for this agreement remained the same as those set forth in Mr. Pacchinis previous employment agreement dated as of January 1, 2014. As of June 30, 2016 management does not believe it is probable that any of the revenue targets 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 targets included in the agreement on a quarterly basis.
In December 2015, the Company granted in aggregate 3,000,000 stock options to a salesperson and two sales representatives that vest upon the achievement of certain performance conditions. In May 2016, the Company granted in aggregate 2,000,000 stock options to a salesperson and a contract employee that vest upon the achievement of certain performance conditions. The Company recognizes compensation expense for options granted to employees which vest upon achievement of performance conditions, over the requisite service period if it is probable that the performance conditions will be satisfied. The Company recognizes compensation expense for options granted to non-employees which vest upon achievement of performance conditions, prior to measurement date at the current lowest aggregated fair value at each financial reporting date.
|
Commitments and Contingencies |
6 Months Ended |
---|---|
Jun. 30, 2016 | |
Commitments and Contingencies {1} | |
Commitments and Contingencies | Note 12 Commitments and Contingencies
Other Off-Balance Sheet Commitments
On October 4, 2015, we moved our corporate headquarters to Oak Brook Terrace, Illinois, where we lease approximately 3,100 square feet of office space from Midwest Disability, P.A. under a lease that expires on October 31, 2016. Lease payments are approximately $3,200 a month. This facility accommodates our principal sales, marketing, operations, finance and administrative activities.
Contract with Consultant
In November 2014, we entered into an eight-month consulting agreement that compensated the consultant with $45,000 worth of Common Stock, initially calculated to be 483,871 shares. The agreement required rVue to provide price protection on the shares, which resulted in the Company issuing 1,016,129 additional shares of Common Stock to the consultant in October 2015.
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.
|
Supplemental Non-Cash Information |
6 Months Ended |
---|---|
Jun. 30, 2016 | |
Supplemental Non-Cash Information | |
Supplemental Non-Cash Information | Note 13 Supplemental Non-Cash Information
At December 31, 2014, the Company had $45,000 of prepaid consulting services that were paid for via the issuance of Common Stock in 2014. During the six months ended June 30, 2015, the Company recognized consulting expenses of $45,000 related to the arrangement. In addition, in May 2015, the Company entered into a $57,600 financing agreement for directors and officers insurance.
During the first six months of 2016, $4,588 of accrued interest and $115,217 of debt principal were converted to Common Stock. In May 2016, the Company entered into a $44,625 financing agreement for the Companys annual directors and officers insurance.
|
Related Party Transactions |
6 Months Ended |
---|---|
Jun. 30, 2016 | |
Related Party Transactions | |
Related Party Transactions | Note 14 Related Party Transactions
On January 26, 2016, the Company entered into a Subscription Agreement (the Subscription Agreement) with Acorn Composite Corporation (Acorn). Under the agreement, the Company has the right, but not the obligation, to issue shares of Common Stock to Acorn, valued at up to $90,000 per month over a period of twelve (12) months, for a total of $1,080,000, if the Company certifies in writing to Acorn that it has an operational need for such funds (Regular Purchases). In addition, the Company had the right, but not the obligation, to issue additional shares of Common Stock to Acorn, up $396,100 in the aggregate, for use in retiring the Companys convertible financings with Carebourn and Typenex (Take-Out Purchases). Acorn also has the option to purchase any such shares that the Company does not require Acorn to purchase. In all cases the price per share for Regular Purchases is $0.013 per share, and the price per share for Take-Out Purchases of $0.011 per share. Acorns option to make purchases with respect to unused portion of its commitment to make the Regular Purchases is exercisable at any time commencing on November 1, 2016 until October 31, 2020 and its option to make purchases with respect to the unused portion of its commitment to make Take-Out Purchases is exercisable at any time commencing on January 1, 2017 until September 30, 2020. During the six months ending June 30, 2016, Acorn made Regular Purchases and Take-Out Purchases of 41,538,462 and 13,992,093 shares, respectively, and the Company received $693,913 in aggregate proceeds from such sales. At June 30, 2016, Acorn has the right to purchase 22,007,907 shares at the Take-Out Purchases price that will be exercisable beginning on January 1, 2017. As of June 30, 2016 the Company received a cash advance of $20,000 from Acorn.
|
Subsequent Events |
6 Months Ended |
---|---|
Jun. 30, 2016 | |
Subsequent Events: | |
Subsequent Events | Note 15 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.
In July and August 2016, Acorn made Regular Purchases totaling 13,846,154 shares and the Company received $180,000 in proceeds for such sale based on the terms described in Note 14 above. In July 2016, 250,000 stock options were granted to an employee of the Company with an exercise price of $0.011 per share. |
Significant Accounting Policies (Policies) |
6 Months Ended |
---|---|
Jun. 30, 2016 | |
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 Companys 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 Companys annual consolidated financial statements and the notes thereto for the year ended December 31, 2015, included in our Annual Report on Form 10-K (the 2015 Form 10-K).
The unaudited condensed consolidated statement of operations for the three and six months ended June 30, 2016 are not necessarily indicative of the results that may be expected for the entire year.
|
Schedule of Loss Per Common Share (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of 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:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | (1) The following stock options and warrants outstanding as of June 30, 2016 and 2015 were not included in the computation of dilutive loss per share because the net effect would have been anti-dilutive:
|
Schedule of Fair Value Measurements (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value Measurements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Assets and Liabilities measured at a fair value | Assets and liabilities measured at fair value on a recurring basis at June 30, 2016 and December 31, 2015 were as follows:
The fair value of the derivative liability, classified as Level 3, utilized a simulation analysis using a binomial lattice model and other unobservable inputs (Note 5).
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Summary of Changes in the fair value of the Company's Level 3 liabilities | Rollforward of Level 3 Net Liability
The table below sets forth a summary of changes in the fair value of the Companys Level 3 liabilities for the six months ended June 30, 2016:
There were no assets or liabilities classified as level 3 during the three months ended June 30, 2015.
|
Schedule of Condensed Consolidated Financial Statement Details (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Condensed Consolidated Financial Statement Details (Tables): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Condensed Consolidated Financial Statement Details | The following tables show the Companys condensed consolidated financial statement details as of June 30, 2016 and December 31, 2015:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Depreciation Expense | Depreciation expense was $14 and $580 for the six months ended June 30, 2016 and 2015, respectively. Depreciation expense was $0 and $34 for the three months ended June 30, 2016 and 2015, respectively.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Amortization Expense | Amortization expense was $71,107 and $69,728 for the six months ended June 30, 2016 and 2015, respectively. Amortization expense was $35,957 and $33,490 for the three months ended June 30, 2016 and 2015, respectively.
|
Schedule of Stock Options (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stock Options | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Stock option (Tables) | A summary of the Companys stock option activity for the six month period ended June 30, 2016 is as follows:
|
Going Concern (Details) |
Jun. 30, 2016
USD ($)
|
---|---|
Going Concern Details | |
Accumulated deficit | $ 14,958,306 |
Loss Per Common Share (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Numerator: | ||||
Net loss | $ (266,455) | $ (293,268) | $ (885,747) | $ (704,416) |
Denominator: | ||||
Weighted-average shares outstanding | 259,335,114 | 141,944,146 | 222,302,666 | 141,706,061 |
Effect of dilutive securities: (1) | $ 0 | $ 0 | $ 0 | $ 0 |
Weighted-average diluted shares | 259,335,114 | 141,944,146 | 222,302,666 | 141,706,061 |
Basic and diluted loss per share | $ 0.00 | $ 0.00 | $ 0.00 | $ 0.00 |
Stock options and warrants outstanding not included in the computation of dilutive loss per share (Details) - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Stock options and warrants outstanding not included in the computation of dilutive loss per share Details | ||
Stock options | 81,907 | 0 |
Warrants | 0 | 50,698 |
Total Stock options and Warrants | 81,907 | 50,698 |
Financial Instruments (Details) |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Accounts Receivable Details | ||
Accounts receivable from three of our customers accounted for (percent) | 100.00% | |
Accounts receivable from customers two accounted for (percent) | 100.00% |
Carebourn Convertible Note Financing (Details) |
Mar. 31, 2016
USD ($)
$ / shares
shares
|
Jul. 30, 2015
USD ($)
|
---|---|---|
Carebourn Convertible Note Financing Details | ||
Principal amount of convertible promissory note issued to Carebourn | $ 115,000 | |
Term of Carebourn Note in months | 9 | |
Interest rate per annum | 10.00% | |
Net proceeds to the Company | $ 100,000 | |
Gross proceeds | 115,000 | |
Original issue discount | 10,000 | |
Expense reimbursements | $ 5,000 | |
Percent of discount applied to calculate conversion price | 40.00% | |
Carebourn prohibited from acquiring more than of the Company's outstanding shares | 4.99% | |
Pursuant to the terms of the Carebourn Letter Agreement, the Company paid | $ 82,355 | |
Issued shares of common stock | shares | 8,000,000 | |
Issued shares of common stock, par value | $ / shares | $ 0.001 |
Typenex Convertible Note Financing (Details) |
Mar. 31, 2016
USD ($)
|
Jan. 31, 2016
USD ($)
|
Jul. 08, 2015
USD ($)
$ / shares
|
---|---|---|---|
Typenex Convertible Note Financing Details | |||
Principal amount of convertible promissory note issued to Typenex | $ 252,500 | ||
Term of Typenex Note in months | 17 | ||
Interest rate per annum | 10.00% | ||
Original issue discount | $ 22,500 | ||
Net proceeds to the Company | 225,000 | ||
Initial tranche in cash | 75,000 | ||
Gross proceeds | 87,500 | ||
Original issue discount | 7,500 | ||
Expense reimbursements | 5,000 | ||
Value of each of 3 promissory notes | 55,000 | ||
Gross proceeds | 55,000 | ||
Original issue discount | 5,000 | ||
Required to pay Typenex installments principal | 21,041 | ||
Market capitalization falls below | $ 3,000,000 | ||
Conversion price | $ / shares | $ 0.08 | ||
Percent of discount applied to calculate market price | 30.00% | ||
Cancelled the three Investor Notes of each | $ 50,000 | ||
Company owed under the Investor Notes | $ 150,000 | ||
Pursuant to the terms of the Typenex Letter Agreement, the Company paid | $ 50,000 |
Convertible Note Financing - Derivatives (Details) - USD ($) |
Jun. 30, 2016 |
Dec. 31, 2015 |
Jul. 30, 2015 |
Jul. 08, 2015 |
---|---|---|---|---|
Convertible Note Financing - Derivatives Details | ||||
Embedded derivative conversion feature for Typenex Note | $ 25,370 | |||
Embedded derivative conversion feature for Carebourn Note | $ 75,869 | |||
Derivative instruments valued at | $ 123,855 | |||
Change in fair value derivative instruments | 22,616 | |||
Notes were carried | $ 187,939 | 144,293 | ||
Net of unamortized original issue discount | 14,561 | $ 58,207 | ||
Convertible notes outstanding balance | 202,500 | |||
Embedded conversion feature was valued at | 252,489 | |||
Loss of early extinguishment of the convertible notes | $ 71,708 |
Convertible Note Financing - Derivatives During the period (Details) |
6 Months Ended |
---|---|
Jun. 30, 2016
USD ($)
$ / shares
shares
| |
Convertible Note Financing - Derivatives During the period Details | |
Carebourn note converted of principal and interest | $ 69,176 |
Carebourn note converted of principal and interest for shares | shares | 26,600,000 |
Carebourn note converted of principal and interest at Conversion price | $ / shares | $ 0.003 |
Typenex note converted of principal and interest | $ 50,630 |
Typenex note converted of principal and interest for shares | shares | 8,870,556 |
Typenex note converted of principal and interest at Conversion price | $ / shares | $ 0.006 |
The Company making cash payments | $ 87,283 |
Payment of principal and other fees to extinguish the debt | $ 57,845 |
Assets and liabilities measured at fair value on a recurring basis (Details) - USD ($) |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Quoted Prices in Active Markets for Identical Instruments (Level 1) | ||
Derivative liability level 1 | $ 0 | $ 0 |
Significant Other Observable Inputs (Level 2) | ||
Derivative liability level 2 | 0 | 0 |
Significant Unobservable Inputs (Level 3) | ||
Derivative liability level 3 | 0 | 123,855 |
Total: | ||
Total Derivative liability | $ 0 | $ 123,855 |
Summary of changes in the fair value of the Company's Level 3 liabilities (Details) |
6 Months Ended |
---|---|
Jun. 30, 2016
USD ($)
| |
Summary of changes in the fair value of the Company's Level 3 liabilities: | |
Balance, changes in the fair value January 1, 2016 | $ 123,855 |
Issuances | 0 |
Settlements | (252,489) |
Realized and unrealized (gains) losses included in earnings | 128,634 |
Transfers into or out of level 3 | 0 |
Balance, changes in the fair value June 30, 2016 | $ 0 |
Prepaid expenses (Details) - USD ($) |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Prepaid expenses Details | ||
Insurance | $ 50,519 | $ 27,470 |
Other | 13,767 | 3,230 |
Prepaid expenses | $ 64,286 | $ 30,700 |
Property and Equipment (Details) - USD ($) |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Property and Equipment Details | ||
Computers and software | $ 91,083 | $ 91,083 |
Equipment | 22,977 | 22,977 |
Property and equipment gross | 114,060 | 114,060 |
Less accumulated depreciation | (114,060) | (114,046) |
Property and equipment, net | $ 0 | $ 14 |
Property and Equipment estimated useful life (Years) (Details) |
6 Months Ended |
---|---|
Jun. 30, 2016 | |
Property and Equipment estimated useful life: | |
Computers and software estimated useful life (Years) | 2 to 5 years |
Equipment estimated useful life (Years) | 3 years |
Software development estimated useful life (Months) | 18 months |
Depreciation expense (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Depreciation expense during the period: | ||||
Depreciation expense | $ 0 | $ 34 | $ 14 | $ 580 |
Software Development Costs (Details) - USD ($) |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Software Development Costs: | ||
Software development costs Gross | $ 1,516,215 | $ 1,418,287 |
Less accumulated amortization | (1,365,869) | (1,294,762) |
Software development costs | $ 150,346 | $ 123,525 |
Amortization expense (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Amortization expense: | ||||
Amortization expense | $ 35,957 | $ 33,490 | $ 71,107 | $ 69,728 |
Accrued Expenses (Details) - USD ($) |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Accrued Expenses: | ||
Personnel costs | $ 12,884 | $ 11,407 |
Network costs | 66,586 | 324 |
Other | 29,500 | 21,500 |
Accrued expenses | $ 108,970 | $ 33,231 |
Note Payable (Details) |
Jun. 30, 2016
USD ($)
|
---|---|
Note Payable Details | |
In May 2016, the Company entered into a financing agreement | $ 44,625 |
Term of financing agreement (Months) | 10 |
Interest rate | 5.77% |
First payment amount | $ 4,581 |
Stock-based compensation (Details) - USD ($) |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
Dec. 31, 2015 |
|
Stock-Based Compensation: | |||||
Stock based compensation expense | $ 19,380 | $ 19,060 | $ 38,722 | $ 38,121 | |
Total unrecognized compensation cost related to stock options outstanding | $ 158,997 | $ 158,997 | |||
Company granted in aggregate stock options to a salesperson and two sales representatives | 3,000,000 | ||||
Stock options were granted to current employees | 2,250,000 | 2,250,000 |
Commitments and Contingencies (Details) - USD ($) |
Oct. 26, 2015 |
Oct. 04, 2015 |
Nov. 01, 2014 |
---|---|---|---|
Other Off-Balance Sheet Commitments: | |||
Leased office space 3,100 square feet at a rate of approximately per month | $ 3,200 | ||
Contract with Consultant: | |||
Eight-month consulting agreement that compensated the consultant worth of common stock value | $ 45,000 | ||
Shares of common stock issued as compensation to consultant | 1,016,129 | 483,871 |
Supplemental Non-Cash Information (Details) - USD ($) |
Jun. 30, 2016 |
May 31, 2016 |
Jun. 30, 2015 |
Dec. 31, 2014 |
---|---|---|---|---|
Issued stock to a consultant for services performed | $ 45,000 | |||
Recognized consulting expenses | $ 45,000 | |||
Financing agreement for the Company's annual directors and officers insurance, value. | $ 57,600 | |||
Accrued interest | $ 4,588 | |||
Debt principal were converted to common stock | $ 115,217 | |||
Financing agreement for the Company's annual directors and officers insurance | $ 44,625 |
Related Party Transactions (Details) |
6 Months Ended | |
---|---|---|
Jun. 30, 2016
USD ($)
shares
|
Jan. 26, 2016
USD ($)
$ / shares
|
|
Right to issue common shares to Acorn per month, value | $ 90,000 | |
Right to issue common shares to Acorn total value | $ 1,080,000 | |
Period (in months) | 12 | |
Right to issue additional common shares to Acorn for take out purchases value aggregate | $ 396,100 | |
Price per share for Regular purchases | $ / shares | $ 0.013 | |
Price per share for Take-Out purchases | $ / shares | $ 0.011 | |
Acorn made Regular Purchases of shares | shares | 41,538,462 | |
Acorn made Take-Out Purchases of shares | shares | 13,992,093 | |
Aggregate proceeds received from such sales | $ 693,913 | |
Acorn has the right to purchase shares at the Take-Out Purchases price | shares | 22,007,907 | |
Received a cash advance from Acorn | $ 20,000 |
Subsequent Events (Details) - USD ($) |
Aug. 31, 2016 |
Jul. 31, 2016 |
---|---|---|
Subsequent Events Details | ||
Regular Purchases of shares | 13,846,154 | |
Received in proceeds | $ 180,000 | |
Stock options granted to employee of the Company | 250,000 | |
Exercise price per share | $ 0.011 |
)^;=YE=7X*8?=
MA7]+9FP9FA^6?ZPH]__X+#LO<6W[JZ"?S([!^F!C*N?::C/L&]63"ZM?SJV^
M >;C []1D)#:MH,BQ1$)5K)7%/WHF C
ML>Q9AE^(J$=[S)8PE*/H.-=*UCY12:[=EX#W>\,I&*XGQW73 $L/=&%F:(SV
MP@WY(=DV]'Y2& 0K=H4>GH ;F01+\,/F;\51.Z^W/4\GX7@NGB'X&5U?G^X=
MHIV]./5X'AZ/1N+(F(?#T?!3G28F&MM6>RKGSQ42=K(S1K6"ZVBQ> ],"17
M^-G%54@UV=5]!:=1O:;(PB5
M..7-)-UJ%8*)8J_IE7HN,[+
MGW*AW284"Z'8"!^R:#PUBC8_#+QWJQO.S)-;+RI]TT^OZ[9/H#.5<9<<
[L;
>KQN_\?/$L [&SBMVC?INEAXNVAXR2PFH]++00YMDF+O"-
M(%NU,>L;T&L I&$ ;#=&71+'BI:;)"4UG"1!V] @(4&N)VQ?T'<;5,O^07]H
M%5LRFK/.APA8?P DOXH2Q0%AW*8I<>=KQE&Q#L2CKI'::TXP; I-N5>J1X=W/ =
M@/