0001387131-16-005510.txt : 20160513 0001387131-16-005510.hdr.sgml : 20160513 20160513164102 ACCESSION NUMBER: 0001387131-16-005510 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 62 CONFORMED PERIOD OF REPORT: 20160331 FILED AS OF DATE: 20160513 DATE AS OF CHANGE: 20160513 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CareView Communications Inc CENTRAL INDEX KEY: 0001377149 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 954659068 STATE OF INCORPORATION: NV FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-54090 FILM NUMBER: 161649009 BUSINESS ADDRESS: STREET 1: 405 STATE HIGHWAY 121 STREET 2: SUITE B-240 CITY: LEWISVILLE STATE: TX ZIP: 75067 BUSINESS PHONE: 972-943-6050 MAIL ADDRESS: STREET 1: 405 STATE HIGHWAY 121 STREET 2: SUITE B-240 CITY: LEWISVILLE STATE: TX ZIP: 75067 10-Q 1 crvw-10q_033116.htm QUARTERLY REPORT
 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

 

For the quarterly period ended March 31, 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 No. 000-54090

 

CAREVIEW COMMUNICATIONS, INC.

(Exact name of registrant as specified in its charter)

 

Nevada 95-4659068
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

 

 

405 State Highway 121, Suite B-240, Lewisville, TX  75067 (972) 943-6050
(Address of principal executive offices) (Registrant’s Telephone Number)

 

N/A

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

 

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

 

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

 

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 ☐     Smaller reporting company ☒

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐   No ☒

 

The number of shares outstanding of each of the issuer’s classes of Common Stock as of May 13, 2016 was 139,380,742.

 

  
 

 

CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

INDEX

 

        Page
PART I - FINANCIAL INFORMATION    
         
  Item. 1 Financial Statements    
         
    Condensed Consolidated Balance Sheets as of March 31, 2016 (Unaudited) and December 31, 2015   3
         
    Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2016 and 2015 (Unaudited)   4
         
    Condensed Consolidated Statement of Stockholders' Deficit for the period from January 1, 2016 to March 31, 2016 (Unaudited)   5
         
    Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2016 and 2015 (Unaudited)   6
         
    Notes to the Condensed Consolidated Financial Statements   7
         
  Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations   23
         
  Item 3. Quantitative and Qualitative Disclosures about Market Risk   28
         
  Item 4. Controls and Procedures   28
         
PART II - OTHER INFORMATION    
         
  Item 1. Legal Proceedings   28
         
  Item 1A. Risk Factors   28
         
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds   28
         
  Item 3. Defaults Upon Senior Securities   28
         
  Item 4.   Mine Safety Disclosures   29
         
  Item 5. Other Information   29
         
  Item 6. Exhibits   29
         
 

 

CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

    March 31,    
    2016   December 31,
    (unaudited)   2015
ASSETS
Current Assets:    
Cash and cash equivalents   $ 15,568,573     $ 17,678,969  
Accounts receivable, net     1,185,132       1,176,404  
Other current assets     493,179       471,075  
     Total current assets     17,246,884       19,326,448  
                 
Property and equipment, net     4,534,718       4,483,440  
                 
Other Assets:                
Restricted cash     3,250,000       3,250,000  
Intangible assets, net     530,519       380,765  
Other assets     2,548,282       2,689,758  
      6,328,801       6,320,523  
     Total assets   $ 28,110,403     $ 30,130,411  
                 
 LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:                
Accounts payable   $ 387,303     $ 332,402  
Notes payable     441,498       441,498  
Mandatorily redeemable equity in joint venture     441,498       441,498  
Accrued interest     276,508       261,450  
Other current liabilities     586,043       479,226  
     Total current liabilities     2,132,850       1,956,074  
                 
Long-term Liabilities:                
Senior secured convertible notes, net of debt discount and debt costs of $22,951,069 and $23,041,363, respectively     35,593,463       33,729,093  
Loan payable     20,000,000       20,000,000  
Fair value of warrant liability     84,308       168,805  
     Total long-term liabilities     55,677,771       53,897,898  
     Total liabilities     57,810,621       55,853,972  
                 
Commitments and Contingencies                
                 
Stockholders' Deficit:                
Preferred stock - par value $0.001; 20,000,000 shares authorized; no shares issued and outstanding     —         —    
Common stock - par value $0.001; 300,000,000 shares authorized;  139,380,748 issued and outstanding     139,381       139,381  
Additional paid in capital     83,142,148       82,434,461  
Accumulated deficit     (112,463,946 )     (107,795,712 )
        Total CareView Communications Inc. stockholders' deficit     (29,182,417 )     (25,221,870 )
Noncontrolling interest     (517,801 )     (501,691 )
     Total stockholders' deficit     (29,700,218 )     (25,723,561 )
     Total liabilities and stockholders' deficit   $ 28,110,403     $ 30,130,411  

The accompanying footnotes are an integral part of these condensed consolidated financial statements.

 

 

 

CAREVIEW COMMUNICATIONS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

(Unaudited)

 

    Three Months Ended
    March 31, 2016   March 31, 2015
         
Revenues, net   $ 1,495,793     $ 1,000,554  
                 
Operating expenses:                
Network operations     1,152,107       830,094  
General and administration     1,054,858       838,309  
Sales and marketing     221,688       197,622  
Research and development     249,098       225,196  
Depreciation and amortization     445,416       415,904  
     Total operating expense     3,123,167       2,507,125  
                 
Operating loss     (1,627,374 )     (1,506,571 )
                 
Other income and (expense)                
Interest expense     (3,151,557 )     (2,045,901 )
Change in fair value of warrant liability     84,497       (238,101 )
Interest income     4,970       1,143  
Other income     5,120       1,125  
     Total other income (expense)     (3,056,970 )     (2,281,734 )
                 
Loss before taxes     (4,684,344 )     (3,788,305 )
                 
Provision for income taxes     —         —    
                 
Net loss     (4,684,344 )     (3,788,305 )
                 
Net loss attributable to noncontrolling interest     (16,110 )     (16,222 )
                 
Net loss attributable to CareView Communications, Inc.   $ (4,668,234 )   $ (3,772,083 )
                 
Net loss per share attributable to CareView Communications, Inc., basic and diluted   ($ 0.03 )   ($ 0.03 )
                 
Weighted average number of common shares outstanding, basic and diluted     139,380,748       139,380,748  

 

The accompanying footnotes are an integral part of these condensed consolidated financial statements.

 

 

 

CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

FOR THE PERIOD FROM JANUARY 1, 2016 TO MARCH 31, 2016

(Unaudited)

 

            Additional            
    Common Stock   Paid in   Accumulated   Noncontrolling    
    Shares   Amount   Capital   Deficit   Interest   Total
Balance, January 1, 2016     139,380,748     $ 139,381     $ 82,434,461     $ (107,795,712 )   $ (501,691 )   $ (25,723,561 )
                                                 
Stock options granted as compensation     —         —         190,843       —         —         190,843  
                                                 
Beneficial conversion features for senior secured convertible notes     —         —         516,844       —         —         516,844  
                                                 
Net loss     —         —         —         (4,668,234 )     (16,110 )     (4,684,344 )
                                                 
Balance, March 31, 2016     139,380,748     $ 139,381     $ 83,142,148     $ (112,463,946 )   $ (517,801 )   $  (29,700,218 )

 

The accompanying footnotes are an integral part of these condensed consolidated financial statements.

 

 

CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

(Unaudited)

 

    Three Months Ended
    March 31, 2016   March 31, 2015
CASH FLOWS FROM OPERATING ACTIVITES    
  Net loss   $ (4,684,344 )   $ (3,788,305 )
Adjustments to reconcile net loss to net cash flows used in operating activities:                
          Depreciation     423,560       409,634  
          Amortization of debt discount and debt costs     607,138       552,066  
          Amortization of deferred installation costs     102,541       66,631  
          Amortization of deferred debt issuance and debt financing costs     72,772       —    
          Amortization of intangible assets     21,856       6,270  
          Interest incurred and paid in kind     1,774,076       1,471,707  
          Stock based compensation related to options granted     190,843       190,106  
          (Gain) loss on disposal of assets     —         43,740  
          Change in fair value of warrant liability     (84,497 )     238,101  
          Changes in operating assets and liabilities:                
             Accounts receivable     (8,728 )     8,639  
             Other current assets     (18,929 )     (238,795 )
             Other assets     4,098       4,098  
             Accounts payable     54,901       183,405  
             Accrued expenses and other current liabilities     121,875       (77,177 )
Net cash flows used in operating activities     (1,422,838 )     (929,880 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES                
  Purchase of property and equipment     (474,838 )     (103,098 )
  Payment for deferred installation costs     (37,935 )     (47,371 )
  Patent and trademark costs     (174,785 )     (10,273 )
Net cash flows used in investing activities     (687,558 )     (160,742 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES                
  Proceeds from notes and loan payable     —         5,931,520  
Net cash flows provided by financing activities     —         5,931,520  
                 
Increase (decrease) in cash     (2,110,396 )     4,840,898  
Cash and cash equivalent, beginning of period     17,678,969       2,546,262  
Cash and cash equivalents, end of period   $ 15,568,573     $ 7,387,160  
                 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
                 
Cash paid for interest   $ 682,150     $ 5,150  
                 
Cash paid for income taxes   $ —       $ —    
                 
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES:
                 
               
Beneficial conversion features for senior secured convertible notes   $ 516,844     $ 456,987  
                 
Warrants issued in connection with senior secured convertible notes   $ —       $ 1,471,105  

 

The accompanying footnotes are an integral part of these condensed consolidated financial statements.

 

 

CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 1 – BASIS OF PRESENTATION AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

 

Interim Financial Statements

 

The accompanying unaudited interim condensed consolidated financial statements of CareView Communications, Inc. (“CareView”, the “Company”, “we”, “us” or “our”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, such financial statements include all adjustments (consisting solely of normal recurring adjustments) necessary for the fair statement of the financial information included herein in accordance with GAAP and the rules and regulations of the Securities and Exchange Commission (the “SEC”). The balance sheet at December 31, 2015 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Results of operations for interim periods are not necessarily indicative of results for the full year. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2015 as filed with the SEC on March 30, 2016.

 

Fair Value of Financial Instruments

 

Our financial instruments consist primarily of receivables, accounts payable, accrued expenses and short- and long-term debt. The carrying amount of receivables, accounts payable and accrued expenses approximates our fair value because of the short-term maturity of such instruments. We have elected not to carry our debt instruments at fair value. The carrying amount of our debt approximates fair value. Interest rates that are currently available to us for issuance of short- and long-term debt with similar terms and remaining maturities are used to estimate the fair value of the our short- and long-term debt and would be considered Level 3 inputs under the fair value hierarchy.

 

We have categorized our assets and liabilities that are valued at fair value on a recurring basis into a three-level fair value hierarchy in accordance with GAAP. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and lowest priority to unobservable inputs (Level 3).

 

Assets and liabilities recorded in the condensed consolidated balance sheets at fair value are categorized based on a hierarchy of inputs, as follows:

 

Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 - Quoted prices for similar assets or liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

Level 3 - Unobservable inputs for the asset or liability.

 

The Company’s financial assets and liabilities recorded at fair value on a recurring basis include the fair value of warrant liability as detailed below. The fair value of this warrant liability is included in long-term liabilities on the accompanying condensed consolidated financial statements.

 

 

CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 1 – BASIS OF PRESENTATION AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (Continued)

 

Fair Value of Financial Instruments (continued)

 

The following table provides the financial assets and liabilities reported at fair value and measured on a recurring basis:

 

Description   Assets/
(Liabilities)
Measured at Fair Value
  Quoted Prices in Active Markets for Identical Assets
(Level 1)
  Significant Other Observable Inputs
(Level 2)
  Significant Other Unobservable Inputs
(Level 3)
Fair value of warrant liability   $ (84,308 )   $ —       $ —       $ (84,308 )

 

The following table provides a summary of changes in fair value associated with the Level 3 liabilities for the three months ended March 31, 2016:

 

    Fair Value Measurements Using Significant Unobservable Inputs
(Level 3)
Balance at January 1, 2016   $ (168,805 )
Issuances of derivative liabilities     —    
Change in fair value of warrant liability     (84,497 )
Transfers in and/out of Level 3     —    
Ending balance at March 31, 2016   $ (84,308 )

 

The above table of Level 3 liabilities begins with the prior period balance and adjusts the balance for changes that occurred during the current period. The ending balance of the Level 3 securities presented above represent our best estimates and may not be substantiated by comparisons to independent markets and, in many cases, could not be realized in immediate settlement of the instruments.

 

Earnings Per Share

 

We calculate earnings per share (“EPS”) in accordance with GAAP, which requires the computation and disclosure of two EPS amounts, basic and diluted. Basic EPS is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted EPS is computed based on the weighted average number of common shares outstanding plus all potentially dilutive common shares outstanding during the period under the treasury stock method. Such potential dilutive common shares consist of stock options, warrants and convertible debt. Potential common shares totaling 110,156,518 and 104,333,559 at March 31, 2016 and 2015, respectively, have been excluded from the diluted earnings per share calculation as they are anti-dilutive due to our reported net loss.

 

 

 

CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 1 – BASIS OF PRESENTATION AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (Continued)

 

Recently Issued and Newly Adopted Accounting Pronouncements

 

In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”). The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. We are evaluating the impact that ASU 2016-03 will have on our consolidated financial statements and related disclosures.

 

There have been no material changes to our significant accounting policies as summarized in NOTE 2 of our Annual Report on Form 10-K for the year ended December 31, 2015. We do not expect that the adoption of any recent accounting pronouncements will have a material impact on our accompanying condensed consolidated financial statements.

 

NOTE 2 – LIQUIDITY AND MANAGEMENT’S PLAN

 

Our cash position at March 31, 2016 was approximately $15,569,000. We also have $3,250,000 recorded as restricted cash related to a debt covenant in our credit agreement with PDL BioPharma, Inc. as discussed below.

 

Pursuant to the terms of a Note and Warrant Purchase Agreement dated April 21, 2011 (as subsequently amended) with HealthCor Partners Fund, LP and HealthCor Hybrid Offshore Master Fund, LP (“HealthCor”) we are required to maintain a minimum cash balance $2,000,000 (see NOTE 11 for further details), and we are in compliance with the minimum cash balance as of the date of this filing.

 

Our continued successful operation is dependent upon us achieving positive cash flow through operations while maintaining adequate liquidity. We expect that the cash on hand, as well as our existing and projected cash flow from billable contracts, will enable us to continue to operate for the next twelve month period. We believe that our sales and marketing plan to attract new business and our ongoing deployment and installation of units under existing hospital agreements, will meet our near-term cash needs and will help us achieve future operating profitability.

 

At present, we have sufficient inventory to install and service a select number of large customers, but eventually we will need to address additional capital requirements. To that end, on June 26, 2015, we entered into a Credit Agreement with PDL Biopharma, Inc., as administrative agent and lender (“the Lender”), (the “PDL Credit Agreement”) pursuant to which the Lender made available to us up to $40 million in two tranches of $20 million each, with each tranche contingent upon us meeting certain milestones. On October 7, 2015, pursuant to the First Amendment to the PDL Credit Agreement (the “First Amendment”) the Lender made the first tranche of $20 million available and funded us $19,533,992, net of fees. As of March 31, 2016, we are including $20 million in long-term liabilities on the accompanying condensed consolidated financial statements. Pursuant to the terms of the PDL Credit Agreement, we are required to maintain a minimum cash balance $3,250,000, and we are in compliance with the minimum cash balance as of the date of this filing (see NOTE13 for further details). No funds under the second tranche of the PDL Credit Agreement were available to us as of March 31, 2016.

 

 

CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 3 – STOCKHOLDERS’ EQUITY

 

Warrants to Purchase Common Stock of the Company

 

We use the Black-Scholes-Merton option pricing model (the “Black-Scholes Model”) to determine the fair value of warrants to purchase Common Stock of the Company (“Warrants”) (except certain Warrants issued to HealthCor in 2011 as discussed in NOTE 11 and the warrants issued in connection with a private placement completed in April 2013 (the “Private Placement Warrants”). The Private Placement Warrants contain provisions that protect the holders from a decline in the issue price of our common stock or “down round” provisions. In accordance with the accounting standards, we determined that these instruments qualify as derivative liabilities and should be recorded at their fair value on the date of issuance and re-measured at fair value each reporting period with the change reported in earnings). The Black-Scholes Model is an acceptable model in accordance with the GAAP. The Black-Scholes Model requires the use of a number of assumptions including volatility of the stock price, the weighted average risk-free interest rate, and the weighted average term of the Warrant. The fair value of the Warrants issued to HealthCor and the Private Placement Warrants was computed using the Binomial Lattice model, incorporating transaction details such as the price of our Common Stock, contractual terms, maturity and risk free rates, as well as assumptions about future financings, volatility, and holder behavior. Due to the down round provisions associated with the exercise price of these Warrants, we determined that the Binomial Lattice model was the most appropriate model for valuing these instruments. As discussed in NOTE 11, the Warrants issued to HealthCor in 2011 were substantially amended and no longer contain down round provisions. The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds whose maturity period is appropriate for the term of the Warrants and is calculated by using the average daily historical stock prices through the day preceding the grant date. Estimated volatility is a measure of the amount by which our stock price is expected to fluctuate each year during the expected life of the award. Our estimated volatility is an average of the historical volatility of our stock prices (and that of peer entities whose stock prices were publicly available). Our calculation of estimated volatility is based on historical stock prices over a period equal to the expected life of the awards. Where appropriate we used the historical volatility of peer entities due to the lack of sufficient historical data of our stock price during 2007-2009.

 

Warrant Activity during the Three Months Ended March 31, 2016

 

During the three months ended March 31, 2016, no Warrants were issued and none were exercised or expired.

 

As of December 31, 2015, we recorded a warrant liability of $168,805 in our consolidated financial statements. At March 31, 2016, the Private Placement Warrants were re-valued with a fair value determination of $84,308, resulting in a difference of $84,497, which was included as change in fair value of warrant liability in other income and expense in the accompanying condensed consolidated financial statements.

 

Warrant Activity during the Three Months Ended March 31, 2015

 

On February 17, 2015, we entered into a Fifth Amendment to the Note and Warrant Purchase Agreement with HealthCor and certain other investors and agreed to sell and issue (i) additional notes in the initial aggregate principal amount of $6,000,000, with a conversion price per share equal to $0.52 (subject to adjustment for standard anti-dilution provisions) and (ii) additional Warrants for an aggregate of up to 3,692,307 shares of our Common Stock at an exercise price per share equal to $0.52 (subject to adjustment for standard anti-dilution provisions) (the “Fifth Amendment Warrants”). The fair value of the convertible debt and the Fifth Amendment Warrants was determined to be $7,336,615, resulting in a relative fair value of $1,093,105 for the Fifth Amendment Warrants on the date of grant. (See NOTE 11 for further details.)

 

10 
 

CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 3 – STOCKHOLDERS’ EQUITY (Continued)

 

Warrants to Purchase Common Stock of the Company (continued)

 

Warrant Activity during the Three Months Ended March 31, 2015 (continued)

 

On March 31, 2015, we issued HealthCor a Warrant for up to an aggregate of 1,000,000 shares of our Common Stock in consideration for certain prior waivers of the minimum cash balance requirement in the Purchase Agreement. This Warrant has an exercise price of $0.53 per share and an expiration date of March 31, 2025. (See NOTE 11 for further details).

 

During the three months ended March 31, 2015, warrants to purchase an aggregate of 2,882,626 shares of our Common Stock expired.

 

Options to Purchase Common Stock of the Company

 

During the three months ended March 31, 2016, we granted options to purchase 20,000 shares of our Common Stock (the ‘‘Option(s)’’) to an employee. During the three months ended March 31, 2015, we granted 1,815,000 Options to certain employees and members of our board of directors. During those same three month periods, 65,002 and 41,002 Options, respectively, were canceled and 66,667 and 6,231,310 Options, respectively, expired.

 

A summary of our stock option activity and related information follows:

 

    Number of Shares Under Options   Weighted Average Exercise Price   Weighted
Average
Remaining
Contractual Life
  Aggregate Intrinsic Value
Balance at December 31, 2015     9,350,667     $ 0.58       7.6     $ 15,705  
   Granted     20,000     $ 0.30       10.0     $ —    
   Expired     (66,667 )                        
   Canceled     (65,002 )                        
Balance at March 31, 2016     9,238,998     $ 0.58       7.4     $ —    
Vested and Exercisable at   March 31, 2016     5,547,825     $ 0.62       6.7     $ —    

 

The valuation methodology used to determine the fair value of the Options issued was the Black-Scholes Model.

 

The assumptions used in the Black-Scholes Model are set forth in the table below.

 

    Three Months
Ended
March 31, 2016
  Year Ended
December 31, 2015
Risk-free interest rate     1.39 %     1.41-1.74 %
Volatility     63.49 %     61.00-71.86 %
Expected life in years     6       6  
Dividend yield     0.00 %     0.00 %

 

 

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CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 3 – STOCKHOLDERS’ EQUITY (Continued)

 

Options to Purchase Common Stock of the Company (continued)

 

The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds whose maturity period is appropriate for the expected term of the Option and is calculated by using the average daily historical stock prices through the day preceding the grant date. Estimated volatility is a measure of the amount by which our stock price is expected to fluctuate each year during the expected life of the award. Our estimated volatility is an average of the historical volatility of our stock prices. Our calculation of estimated volatility is based on historical stock prices over a period equal to the expected life of the awards.

 

Share-based compensation expense for Options charged to our operating results for the three months ended March 31, 2016 and 2015 ($190,843 and $190,106, respectively) is based on awards vested. The estimate of forfeitures are to be recorded at the time of grant and revised in subsequent periods if actual forfeitures differ from the estimates. We have not included an adjustment to our stock based compensation expense based on the nominal amount of the historical forfeiture rate. We do, however, revise our stock based compensation expense based on actual forfeitures during each reporting period.

 

At March 31, 2016, total unrecognized estimated compensation expense related to non-vested Options granted prior to that date was approximately $842,000, which is expected to be recognized over a weighted-average period of 1.5 years. No tax benefit was realized due to a continued pattern of operating losses.

 

NOTE 4 – OTHER CURRENT ASSETS

 

Other current assets consist of the following:

 

    March 31,
2016
  December 31,
2015
Prepaid expenses   $ 490,119     $ 467,137  
Other current assets     3,060       3,938  
          TOTAL OTHER CURRENT ASSETS   $ 493,179     $ 471,075  

 

 

NOTE 5 – PROPERTY AND EQUIPMENT

 

Property and equipment consist of the following:

 

    March 31,
2016
  December 31,
2015
Network equipment   $ 11,762,725     $ 11,310,494  
Office equipment     218,875       200,683  
Vehicles     158,803       158,803  
Test equipment     117,871       115,712  
Furniture     84,094       81,838  
Warehouse equipment     9,524       9,524  
Leasehold improvements     5,121       5,121  
      12,357,013       11,882,175  
Less: accumulated depreciation     (7,822,295 )     (7,398,735 )
TOTAL PROPERTY AND EQUIPMENT   $ 4,534,718     $ 4,483,440  

 

Depreciation expense for the three months ended March 31, 2016 and 2015 was $423,560 and $409,634, respectively.

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 6 – OTHER ASSETS

 

Intangible assets consist of the following:

 

    March 31, 2016
    Cost   Accumulated Amortization   Net
Patents and trademarks   $ 591,747     $ 74,018     $ 517,729  
Other intangible assets     56,263       43,473       12,790  
     TOTAL INTANGIBLE ASSETS   $ 648,010     $ 117,491     $ 530,519  

 

    December 31, 2015
    Cost   Accumulated Amortization   Net
Patents and trademarks   $ 420,137     $ 53,706     $ 366,431  
Other intangible assets     56,263       41,929       14,334  
     TOTAL INTANGIBLE ASSETS   $ 476,400     $ 95,635     $ 380,765  

 

Other assets consist of the following:

 

    March 31, 2016
    Cost   Accumulated Amortization   Net
Deferred debt issuance costs   $ 1,257,778     $ 136,763     $ 1,121,015  
Prepaid financing costs     805,917       101,919       703,998  
Deferred installation costs     1,825,804       1,323,523       502,281  
Prepaid license fee     249,999       75,135       174,864  
Security deposit     46,124       —         46,124  
     TOTAL OTHER ASSETS   $ 4,185,622     $ 1,637,340     $ 2,548,282  

 

Other assets consist of the following:

 

    December 31, 2015
    Cost   Accumulated Amortization   Net
Deferred debt issuance costs   $ 1,257,778     $ 91,840     $ 1,165,938  
Deferred financing costs     805,917       74,070       731,847  
Deferred installation costs     1,787,869       1,220,982       566,887  
Prepaid license fee     249,999       71,037       178,962  
Security deposit     46,124       —         46,124  
     TOTAL OTHER ASSETS   $ 4,147,687     $ 1,457,929     $ 2,689,758  

 

 

 

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CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 7 – OTHER CURRENT LIABILITIES

 

Other current liabilities consist of the following:

 

    March 31,
2016
  December 31,
2015
Accrued taxes   $ 243,683     $ 235,162  
Accrued insurance     135,059       —    
Allowance for system removal     102,800       54,771  
Accrued paid time off     68,007       108,526  
Accrued professional services     11,284       67,500  
Other accrued liabilities     25,210       13,267  
TOTAL OTHER CURRENT LIABILITIES   $ 586,043     $ 479,226  

 

NOTE 8 – INCOME TAXES

 

Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. We do not expect to pay any significant federal or state income tax for 2016 as a result of the losses recorded during the three months ended March 31, 2016 and the additional losses expected for the remainder of 2016 and net operating loss carry forwards from prior years. Accounting standards require the consideration of a valuation allowance for deferred tax assets if it is “more likely than not” that some component or all of the benefits of deferred tax assets will not be realized. As of March 31, 2016, we maintained a full valuation allowance for all deferred tax assets. Based on these requirements, no provision or benefit for income taxes has been recorded. There were no recorded unrecognized tax benefits at the end of the reporting period.

 

NOTE 9 – JOINT VENTURE AGREEMENT

 

On November 16, 2009, we entered into a Master Investment Agreement (the “Rockwell Agreement”) with Rockwell Holdings I, LLC, a Wisconsin limited liability (“Rockwell”). Under the terms of the Rockwell Agreement, we used funds from Rockwell to fully implement the CareView System™ in Hillcrest Medical Center in Tulsa, Oklahoma (“Hillcrest”) and Saline Memorial Hospital in Benton, Arkansas (“Saline”) (the “Project Hospital(s)”). CareView-Hillcrest, LLC and CareView-Saline, LLC were created as the operating entities for the Project Hospitals under the Rockwell Agreement (the “Project LLC(s) “).

 

Rockwell and the Company own 50% of each Project LLC. We contributed our intellectual property rights and hospital contract with each Project Hospital and Rockwell contributed cash to be used for the purchase of equipment for the Project LLCs. Rockwell provided $1,151,205 as the initial funding, $575,603 was provided under promissory notes (the “Project Notes”) and $575,602 was provided under an investment interest (“Rockwell’s Preferential Return”). We classified Rockwell’s Preferential Return as a liability since it represents an unconditional obligation by us and is recorded in mandatorily redeemable equity in joint venture on the accompanying consolidated financial statements. The Project Notes and Rockwell’s Preferential Returns both earn interest at the rate of ten percent (10%) and are secured by a security interest in all of the equipment in the Project Hospitals, intellectual property rights, and the Project Hospital Contract.

 

 

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CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 9 – JOINT VENTURE AGREEMENT (Continued)

 

In accordance with GAAP, we determined the Project LLCs are VIEs based on the fact that the total equity investment at risk was not sufficient to finance the entities activities without additional financial support. We consolidate the Project LLCs as we have the power to direct the activities and an obligation to absorb losses of the VIEs. We have no contractual liability to Rockwell with respect to the repayment obligations of the Project LLCs.

 

As additional consideration to Rockwell for providing the funding, we granted Rockwell 1,151,206 Warrants on the date of the Rockwell Agreement, and using the Black-Scholes Model valued the Warrants at $1,124,728 (the “Project Warrant”). The Project Warrant is classified as equity and is included in additional paid-in-capital on the accompanying condensed consolidated financial statements. We allocated the proceeds to the Project Warrant, the Project Notes and Preferential Returns based on the relative fair value. The originally recorded debt discount of $636,752 was amortized over the expected life of the debt and was fully amortized as of March 31, 2013.

 

Hillcrest notified us of its desire to terminate its hospital agreement effective January 27, 2012. This termination resulted in the loss of monthly revenue totaling approximately $20,000, which revenue was used to make payments on our indebtedness to Rockwell. To date, we have incurred system removal costs of approximately $3,000 for removing our equipment from the hospital premises. We currently have approximately 100 units remaining on site at Hillcrest. Included in other current liabilities in the accompanying condensed consolidated financial statements is an allowance for system removal totaling $10,250 to reserve for the removal of the remaining units.

 

As of March 31, 2016, the Project LLCs’ indebtedness to Rockwell, including principal and interest totaled approximately $1,200,000. On February 19, 2015, the Project Notes and Rockwell’s Preferential Returns due dates were extended to June 30, 2016. In October 2015, the expiration date of the Project Warrants was extended to November 16, 2017. All other provisions of the Project Warrant remained unchanged. The Project Warrant were revalued in October 2015 resulting in a $102,457 increase in fair value, which has been recorded as non-cash costs included in general and administration expense in the accompanying condensed consolidated financial statements. CareView, as 50% owner of the LLCs, is currently negotiating with Rockwell to settle the debt of the LLCs through the issuance of shares of CareView’s Common Stock. Although CareView anticipates that this settlement will be forthcoming in the near future, CareView and the LLCs can give no assurances that a settlement will be negotiated, or if negotiated and settled, that it will be through the issuance of CareView’s Common Stock.

 

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CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 10 – VARIABLE INTEREST ENTITIES

 

The Company consolidates VIEs of which it is the primary beneficiary. The liabilities recognized as a result of consolidating these VIEs do not necessarily represent additional claims on our general assets; rather, they represent claims against the specific assets of the consolidated VIEs. Conversely, assets recognized as a result of consolidating these VIEs do not represent additional assets that could be used to satisfy claims against our general assets.

 

The total consolidated VIE assets and liabilities reflected on our condensed consolidated balance sheets at March 31, 2016 and December 31, 2015 are as follows:

 

    March 31,
2016
  December 31,
2015
Assets        
Cash   $ 332     $ 2,146  
Receivables     4,731       4,731  
    Total current assets     5,063       6,877  
Property, net     43,463       50,382  
     Total assets   $ 48,526     $ 57,259  
                 
Liabilities                
Accounts payable   $ 134,573     $ 132,170  
Accrued interest     276,508       261,450  
Other current liabilities     27,749       26,936  
Notes payable     441,498       441,498  
Mandatorily redeemable interest     441,498       441,498  
            Total liabilities   $ 1,321,826     $ 1,303,552  

 

The financial performance of the consolidated VIEs reflected on our condensed consolidated statements of operations for the three months ended March 31, 2016 and 2015 is as follows:

 

    March 31,
    2016   2015
Revenue   $ 7,097     $ 7,097  
Network operations expense     4,164       4,164  
General and administrative expense     813       1,130  
Depreciation     12,133       12,467  
    Total operating costs     17,110       17,761  
      Operating loss     (10,013 )     (10,664 )
Other expense     (22,207 )     (21,780 )
Loss before taxes     (32,220 )     (32,444 )
Provision for taxes     —         —    
Net loss     (32,220 )     (32,444 )
Net loss attributable to noncontrolling interest     (16,110 )     (16,222 )
Net loss attributable to CareView Communications, Inc.   $ (16,110 )   $ (16,222 )

 

 

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CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 11 – AGREEMENT WITH HEALTHCOR

 

On April 21, 2011, we entered into a Note and Warrant Purchase Agreement (as subsequently amended) (the “HealthCor Purchase Agreement”) with HealthCor. Pursuant to the terms HealthCor Purchase Agreement, we sold Senior Secured Convertible Notes to HealthCor in the principal amount of $9,316,000 and $10,684,000, respectively (collectively the “2011 HealthCor Notes”). The 2011 HealthCor Notes have a maturity date of April 20, 2021. We also issued Warrants to HealthCor for the purchase of an aggregate of up to 5,488,456 and 6,294,403 shares, respectively, of our Common Stock at an exercise price of $1.40 per share (collectively the “2011 HealthCor Warrants”).

 

So long as no event of default has occurred, the outstanding principal balances of the 2011 HealthCor Notes accrue interest from April 21, 2011 through April 20, 2016 (the “First Five Year Note Period”) at the rate of 12.5% per annum, compounding quarterly and shall be added to the outstanding principal balances of the 2011 HealthCor Notes on the last day of each calendar quarter. Interest accruing from April 21, 2016 through April 20, 2021 (the “Second Five Year Note Period”) at a rate of 10% per annum, compounding quarterly, may be paid quarterly in arrears in cash or, at our option, such interest may be added to the outstanding principal balances of the 2011 HealthCor Notes on the last day of each calendar quarter.

 

From the date any event of default occurs, the interest rate, then applicable, shall be increased by five percent (5%) per annum. HealthCor has the right, upon an event of default, to declare due and payable any unpaid principal amount of the 2011 HealthCor Notes then outstanding, plus previously accrued but unpaid interest and charges, together with the interest then scheduled to accrue (calculated at the default rate described in the immediately preceding sentence) through the end of the First Five Year Note Period or the Second Five Year Note Period, as applicable.

 

At any time after April 21, 2011, HealthCor is entitled to convert any portion of the outstanding and unpaid accrued interest on and principal balances of the 2011 HealthCor Notes into fully paid and non-assessable shares of our Common Stock at a conversion rate of $1.25 per share, subject to adjustment in accordance with anti-dilution provisions set forth in the 2011 HealthCor Notes. As of March 31, 2016, the underlying shares of our Common Stock related to the 2011 HealthCor Notes totaled approximately 30,000,000.

 

On January 31, 2012, we entered into the Second Amendment to the HealthCor Purchase Agreement with HealthCor (the “Second Amendment”) amending the HealthCor Purchase Agreement, and sold Senior Secured Convertible Notes to HealthCor in the principal amounts of $2,329,000 and $2,671,000, respectively (collectively the “2012 HealthCor Notes”). As provided by the Second Amendment, the 2012 HealthCor Notes are in substantially the same form as the 2011 HealthCor Notes, with changes to the “Issuance Date,” “Maturity Date,” “First Five Year Note Period” and other terms to take into account the timing of the issuance of the 2012 HealthCor Notes. The 2012 HealthCor Notes have a maturity date of January 30, 2022. In addition, the provisions regarding interest payments, interest acceleration, optional conversion, negative covenants, and events of default, preemptive rights and registration rights are the same as those of the 2011 HealthCor Notes. At any time after January 30, 2012, HealthCor is entitled to convert any portion of the outstanding and unpaid accrued interest on and principal balances of the 2012 HealthCor Notes into fully paid and non-assessable shares of our Common Stock at a conversion rate of $1.25 per share, subject to adjustment in accordance with anti-dilution provisions set forth in the 2012 HealthCor Notes. As of March 31, 2016, the underlying shares of our Common Stock related to the 2012 HealthCor Notes totaled approximately 7,000,000.

 

 

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CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 11 – AGREEMENT WITH HEALTHCOR (Continued)

 

On August 20, 2013, we entered into a Third Amendment to the HealthCor Purchase Agreement with HealthCor (the “Third Amendment”) to redefine our minimum cash balance requirements. Previously we were required to maintain a minimum cash balance of $5,000,000 and should we drop below that balance, it triggered a default. The Third Amendment allowed for a reduced minimum cash period, as defined in the HealthCor Purchase Agreement, which allowed us to drop below $5,000,000, but not below $4,000,000. All other terms and conditions of the HealthCor Purchase Agreement, including all amendments thereto, remain the same. Upon entering the reduced minimum cash period (which occurred on October 7, 2013), we had 120 days to return our minimum cash balance to the original $5,000,000. On January 16, 2014, we increased our cash balance to in excess of the original $5,000,000 minimum allowable balance.

 

On January 16, 2014, we entered into a Fourth Amendment to the HealthCor Purchase Agreement with HealthCor (the “Fourth Amendment”) and sold Senior Secured Convertible Notes to HealthCor in the principal amounts of $2,329,000 and $2,671,000 (collectively the ‘‘2014 HealthCor Notes’’). As provided by the Fourth Amendment, the 2014 HealthCor Notes are in substantially the same form as the 2011 HealthCor Notes, with changes to the “Issuance Date,” “Maturity Date,” “First Five Year Note Period” and other terms to take into account the timing of the issuance of the 2014 HealthCor Notes. The 2014 HealthCor Notes have a maturity date of January 15, 2024. In addition, the provisions regarding interest payments, interest acceleration, optional conversion, negative covenants, and events of default, preemptive rights and registration rights are the same as those of the 2011 HealthCor Notes. At any time after January 16, 2014, HealthCor is entitled to convert any portion of the outstanding and unpaid accrued interest on and principal balances of the 2014 HealthCor Notes into fully paid and non-assessable shares of our Common Stock at a conversion rate of $0.40 per share, subject to adjustment in accordance with anti-dilution provisions set forth in the 2014 HealthCor Notes. Additionally we issued Warrants to HealthCor for the purchase of an aggregate of up to 4,000,000 shares of our Common Stock at an exercise price of $0.40 per share (collectively the “2014 HealthCor Warrants”). As of March 31, 2016, the underlying shares of our Common Stock related to the 2014 HealthCor Notes totaled approximately 16,000,000.

 

On December 4, 2014, we entered into a Fifth Amendment to the HealthCor Purchase Agreement (the “Fifth Amendment”) with HealthCor and certain additional investors (such additional investors, the “New Investors” and, collectively with HealthCor Partners Fund, LP, the “Investors”) and agreed to sell and issue (i) additional notes in the initial aggregate principal amount of $6,000,000,with a conversion price per share of $0.52 (subject to adjustment as described therein) (the “Fifth Amendment Notes”) and (ii) additional Warrants for an aggregate of up to 3,692,308 shares of our Common Stock at an exercise price per share of $0.52 (subject to adjustment as described therein) (the “Fifth Amendment Warrants”). As provided by the Fifth Amendment, the Fifth Amendment Notes are in substantially the same form as the 2011 HealthCor Notes, with changes to the “Issuance Date,” “Maturity Date,” “First Five Year Note Period” and other terms to take into account the timing of the issuance of the Fifth Amendment Notes. The Fifth Amendment Notes have a maturity date of February 16, 2025. In addition, the provisions regarding interest payments, interest acceleration, optional conversion, negative covenants, and events of default, preemptive rights and registration rights are the same as those of the 2011 HealthCor Notes. The New Investors are composed of all but one of our current directors and one of our officers. On February 17, 2015, the Company and the Investors closed on the transactions contemplated by the Fifth Amendment. In connection with this closing, the Company and the Investors entered into an Amended and Restated Pledge and Security Agreement (the “Amended Security Agreement”), amending and restating that certain Pledge and Security Agreement dated as of April 20, 2011, and an Amended and Restated Intellectual Property Security Agreement (the “Amended IP Security Agreement”), amending and restating that certain Intellectual Property Security Agreement dated as of April 20, 2011. As of March 31, 2016, the underlying shares of our Common Stock related to the Fifth Amendment Notes totaled approximately 2,000,000 to HealthCor and 11,000,000 to the New Investors.

 

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CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 11 – AGREEMENT WITH HEALTHCOR (Continued)

 

On March 31, 2015, we entered into the Sixth Amendment to the HealthCor Purchase Agreement (the “Sixth Amendment”) pursuant to which, among other things, (i) the requirement to maintain a minimum cash balance of $5,000,000 was reduced to a minimum cash balance of $2,000,000 and (ii) the amendment provision was revised to permit the HealthCor Purchase Agreement to be amended by the Company and the holders of the majority of the Common Stock underlying the outstanding notes and warrants to purchase shares of our Common Stock sold pursuant to the HealthCor Purchase Agreement. On March 31, 2015, we also issued a warrant to HealthCor to purchase up to an aggregate of 1,000,000 shares of our Common Stock in consideration for certain prior waivers of the minimum cash balance requirement in the HealthCor Purchase Agreement (the “Sixth Amendment Warrant”). The Sixth Amendment Warrant has an exercise price per share of $0.53 (subject to adjustment as described therein) and an expiration date of March 31, 2025.

 

On June 26, 2015, we (i) entered into a Seventh Amendment to the HealthCor Purchase Agreement (the “Seventh Amendment”) pursuant to which the HealthCor Purchase Agreement was amended to permit the Company to enter into and perform its obligations under the Credit Agreement entered into with PDL BioPharma, Inc., as administrative agent and lender (the “Lender”) (the “PDL Credit Agreement”); (ii) executed an Amendment to the Registration Rights Agreement between the Company and HealthCor dated April 21, 2011 (the “RR Agreement”) pursuant to which the RR Agreement was amended to make its priority of registration consistent with the Registration Rights Agreement executed by the Company and Lender (as detailed in NOTE 12); (iii) amended the 2011 HealthCor Notes to extend the maturity date, in the event that Tranche Two of the PDL Credit Agreement is funded, for such notes to 90 days after the earlier of the Tranche Two maturity date or repayment date, but not later than December 31, 2022, (iv) amended the 2012 HealthCor Notes, to set the maturity date at January 30, 2022 and, in the event that Tranche Two of the PDL Credit Agreement is funded, to extend such maturity date to 90 days after the earlier of the Tranche Two maturity date or repayment date, but later than December 31, 2022; and (v) amended each of the Senior Secured Convertible Notes issued under the HealthCor Purchase Agreement (the “HealthCor Notes”) to, among other things, subordinate the HealthCor Notes to the loans under the PDL Credit Agreement (as detailed in NOTE 12) and to increase certain event of default acceleration and payment thresholds.

 

Accounting Treatment

 

When issuing debt or equity securities convertible into common stock at a discount to the fair value of the common stock at the date the debt or equity financing is committed, a company is required to record a beneficial conversion feature (“BCF”) charge. We had three separate issuances of equity securities convertible into common stock that qualify under this accounting treatment, (i) the 2011 HealthCor Notes, (ii) the 2012 HealthCor Notes and (iii) the 2014 HealthCor Notes. Because the conversion option and the 2011 HealthCor Warrants on the 2011 HealthCor Notes were originally classified as a liability when issued due to the down round provision and the removal of the provision requiring liability treatment, and subsequently reclassified to equity on December 31, 2011 when the 2011 HealthCor Notes were amended, only the accrued interest capitalized as payment in kind (‘‘PIK’’) since reclassification qualifies under this accounting treatment. The face amount of the 2012 and 2014 HealthCor Notes and all accrued PIK interest also qualify for this accounting treatment. During the three months ended March 31, 2016 and 2015, we recorded a BCF of $516,844 and $456,987, respectively. The BCF was recorded as a charge to debt discount and a credit to additional paid in capital, with the debt discount, using the effective interest method, amortized to interest expense over the term of the notes. As Warrants were issued with the Fifth Amendment Notes, the proceeds were allocated to the instruments based on relative fair value as the Warrants did not contain any features requiring liability treatment and therefore were classified as equity. The Warrants issued with the Sixth Amendment also did not contain features requiring liability accounting and were recorded at fair value on the date of issuance with the offsetting credit recorded in equity. The value allocated to the Fifth Amendment Warrants was $1,093,105, which was

 

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CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 11 – AGREEMENT WITH HEALTHCOR (Continued)

 

Accounting Treatment (continued)

 

recorded as debt discount with the credit to additional paid in capital. We recorded an aggregate of $592,688 and $552,066 in interest expense for the three months ended March 31, 2016 and 2015, respectively, related to these transactions. The carrying value of the debt with HealthCor and the New Investors at March 31, 2016 approximates fair value as the interest rates used are those currently available to us and would be considered level 3 inputs under the fair value hierarchy.

 

The value allocated to the Sixth Amendment Warrant was $378,000, which was recorded as deferred debt costs with the credit to additional paid in capital. We recorded an aggregate of $14,450 in financing costs for the three months ended March 31, 2016 related to this transaction.

 

NOTE 12 – AGREEMENT WITH PDL BIOPHARMA, INC.

 

On June 26, 2015, we entered into a Credit Agreement with PDL BioPharma, Inc., as administrative agent and lender (“PDL” or the “Lender”) (the “PDL Credit Agreement”). Under the PDL Credit Agreement the Lender made available to us up to $40 million in two tranches of $20 million each.

 

Certain covenants of the PDL Credit Agreement include (a) in the event that a milestone relating to the placement of 9,000 billable units occurs on or before October 31, 2015, the Lender will fund us $20 million (the “Tranche One Loan”) and (b) in the event that additional milestones relating to (i) the placement of 27,750 billable units and (ii) the Company recording earnings before interest, tax, depreciation, and amortization (EBITDA) of not less than $7,000,000 on an annualized basis for the three calendar month period prior to the funding (on or before June 30, 2017), the Lender will fund us an additional $20 million (the “Tranche Two Loan” and, together with the Tranche One Loan, the “Loans”). Outstanding borrowings under the Tranche One Loan bear interest at the rate of 13.5% per annum, payable quarterly in arrears. Outstanding borrowings under the Tranche Two Loan bear interest at the rate of 13.0% per annum, payable quarterly in arrears. From the date any event of default occurs, the interest rate shall be increased by five percent (5%) per annum. The PDL Credit Agreement includes a minimum cash balance requirement of $3,250,000 and should we drop below $3,250,000, it will trigger a default. The $3,250,000 has been recorded as restricted cash on the condensed consolidated balance sheets at March 31, 2016 and December 31, 2015.

 

On October 7, 2015, the Company entered into a First Amendment (the “First Amendment”) to the PDL Credit Agreement. The First Amendment modified the conditions precedent to the funding of each tranche, such that, among other things, we no longer need to attain a specified milestone relating to the placement of our products in order for the Lender to fund us the Tranche One Loan. Contemporaneously with the execution of the First Amendment we borrowed the Tranche One Loan and issued to the Lender a term note in the principal amount of $20 million (the “Tranche One Term Note”), payable in accordance with the terms of the Credit Agreement, as amended. The First Amendment also included a revision to the Tranche Two Milestone, which changed from a minimum of 27,750 billable units (defined as one unit for each room control platform and two units for each nurse station monitor) to 31,500 Bed Equivalent Units (defined as a billable unit plus 14 units for each head-end server operating as the communication center and fractional units for mobile assets as applicable).

 

 

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CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 12 – AGREEMENT WITH PDL BIOPHARMA, INC. (Continued)

 

Once funded, the PDL Credit Agreement requires interest only payments for the first eight interest payment dates and principal plus interest payments will commence on the ninth interest payment date. We may elect to pay a portion of the interest due in the form of additional loans (interest paid in kind) during the first eight interest payment dates. The first principal payment on the Tranche One Term Note is due on January 8, 2018 in the amount of $1,666,667, with similar amounts due quarterly thereafter with the final payment due on October 8, 2020. Each tranche will mature on the fifth anniversary of the date borrowed. We may elect to prepay the Loans at any time without any premium or penalty, subject to certain conditions.

 

The obligations under the PDL Credit Agreement are secured by a pledge of substantially all of the assets of the Company and certain of its domestic subsidiaries. We executed a Subordination and Intercreditor Agreement (the “Subordination and Intercreditor Agreement”), with the Lender, HealthCor and the New Investors (as defined in NOTE 11) pursuant to which we granted first-priority liens on our pledged assets to the Lender and second-priority liens on such pledged assets to HealthCor and the New Investors.

 

The PDL Credit Agreement contains customary affirmative covenants for transactions of this type and other affirmative covenants agreed to by the Company and the Lender, including, among others, the provision of annual and quarterly reports, maintenance of property, insurance, compliance with laws and contractual obligations and payment of taxes. The PDL Credit Agreement contains customary negative covenants for transactions of this type and other negative covenants agreed to by the Company and the Lender, including, among others, restrictions on the incurrence of indebtedness, the granting of liens, making restricted payments and investments, entering into affiliate transactions and transferring assets. The PDL Credit Agreement also provides for a number of customary events of default, including payment, bankruptcy, covenant, representation and warranty and judgment defaults.

 

Contemporaneously with the execution of the PDL Credit Agreement, we issued to the Lender a warrant to purchase 4,444,445 shares of our Common Stock at an exercise price of $0.45 per share, subject to adjustment as described therein (the “PDL Warrant”). The PDL Warrant expires on June 26, 2025. Pursuant to the terms of the First Amendment we amended and restated the PDL Warrant, reducing the exercise price per share from $0.45 to $0.40 (the “Amended Warrant”). All other provisions of the Amended Warrant remained unchanged.

 

In addition, contemporaneously with the execution of the PDL Credit Agreement the Company and the Lender executed (i) a Registration Rights Agreement pursuant to which the Company agreed to provide the Lender with certain registration rights with respect to the shares of Common Stock issuable upon exercise of the PDL Warrant (the “PDL RRA”), (ii) a Guarantee and Collateral Agreement (the “Guarantee and Collateral Agreement”) pursuant to which certain of our subsidiaries guaranteed the performance of our obligations under the PDL Credit Agreement and granted the Lender a security interest in such subsidiaries’ tangible and intangible assets securing our performance of the same, and (iii) a Patent Security Agreement and a Trademark Security Agreement pursuant to which we granted the Lender a security interest in a certain subsidiary’s tangible and intangible assets securing the performance of our obligations under the PDL Credit Agreement.

 

 

21 
 

CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 12 – AGREEMENT WITH PDL BIOPHARMA, INC. (Continued)

 

Accounting Treatment

 

In connection with the Credit Agreement, we issued the PDL Warrant to the Lender. The fair value of the PDL Warrant at issuance was $1,257,778, which has been recorded as deferred issuance costs in the accompanying condensed consolidated financial statements. The deferred debt issuance costs associated with the PDL Credit Agreement are recorded as assets in accordance with the accounting standards as the PDL Credit Agreement is considered to be a credit facility and the warrants were payment for the facility and not the drawdowns. These costs are amortized to interest expense using the straight line method over the term of the Credit Agreement. Upon amendment of the PDL Warrant, we evaluated whether there was an increase in fair value which would require recognition of additional costs. No such increase in fair value was noted and no adjustment to the PDL Warrant valuation was necessary. For the three months ended March 31, 2016, $44,922 was amortized to interest expense. For the period from June 25, 2015 through December 31, 2015, $91,840 was amortized to interest expense. The PDL Warrant has not been exercised. We also incurred certain financing costs totaling $805,917 in the accompanying condensed consolidated financial statements. These costs have been recorded as deferred financing costs and are being amortized to interest expense over the term of the Credit Agreement. For the three months ended March 31, 2016, $27,849 was amortized to interest expense. For the period from June 25, 2015 through December 31, 2015, $74,071 has been amortized.

 

22 
 

 

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

 

General

The following discussion and analysis provides information which our management believes to be relevant to an assessment and understanding of our results of operations and financial condition. This discussion should be read together with our financial statements and the notes to the financial statements, which are included in this Quarterly Report on Form 10-Q (the “Report”). This information should also be read in conjunction with the information contained in our Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 30, 2016, including the audited consolidated financial statements and notes included therein as of and for the year ended December 31, 2015. The reported results will not necessarily reflect future results of operations or financial condition.

 

Throughout this Annual Report on Form 10-K (the “Report”), the terms “we,” “us,” “our,” “CareView,” or “Company” refers to CareView Communications, Inc., a Nevada corporation, and unless otherwise specified, includes our wholly owned subsidiaries, CareView Communications, Inc., a Texas corporation (“CareView-TX”) and CareView Operations, LLC, a Nevada limited liability company (“CareView Operations”) (collectively known as the “Company’s Subsidiaries”) and its LLCs, CareView-Hillcrest and CareView-Saline, determined to be variable interest entities (“VIEs”) in which the Company exercises control and is deemed the Primary Beneficiary (collectively known as the “Company’s LLCs”).

 

We maintain a website at www.care-view.com and our Common Stock trades on the OTCQB under the symbol “CRVW.’’

 

Company Overview

 

Our mission is to be the leading provider of products and on-demand application services for the healthcare industry, specializing in bedside video monitoring, software tools to improve hospital communications and operations, and patient education and entertainment packages. Our proprietary, high-speed data network system is the next generation of patient care monitoring that allows real-time bedside and point-of-care video monitoring designed to improve patient safety and overall hospital costs. The entertainment packages and patient education enhance the patient’s quality of stay. Reported results from CareView-driven hospitals prove that our products reduce falls, reduce the cost of sitter fees, increase patient satisfaction and reduce bed turnaround time to increase patient flow. For patients, we have a convenient in-room, entertainment package that includes high-speed Internet, access to first-run on-demand movies and visual connectivity to family and friends from anywhere in the world. For the hospital, we offer tools to provide superior patient care, peace of mind and customer service satisfaction.

 

Our CareView System® suite of video monitoring, guest services and related applications connect patients, families and healthcare providers. Through the use of telecommunications technology and the Internet, our evolving products and on-demand services greatly increase the access to quality medical care and education for patients/consumers and healthcare professionals. We understand the importance of providing high quality patient care in a safe environment and believe in partnering with hospitals to improve the quality of patient care and safety by providing a system that monitors and records continuously. We are committed to providing an affordable video monitoring tool to improve the practice of nursing, create a better work environment and make the patient’s hospital stay more informative and satisfying. Our suite of products and services can simplify and streamline the task of preventing and managing patients’ falls, enhance patient safety, improve quality of care and reduce costs associated with bringing information technology directly to patients, families and healthcare providers. Our products and services can be used in all types of hospitals, nursing homes, adult living centers and selected outpatient care facilities domestically and internationally.

 

 

23 
 

 

CareView’s secure video monitoring system connects the patient room to a touch-screen monitor at the nursing station or a mobile handheld device, allowing the nursing staff to maintain a level of visual contact with each patient. This configuration enhances the use of the nurse call system, reduces unnecessary steps to and from patient rooms, and facilitates a host of modules for patient safety and workflow improvements. The CareView System suite can be easily configured to meet the individual privacy and security requirements of any hospital or nursing facility. The Health Insurance Portability and Accountability Act of 1996 (“HIPAA’) compliant, patient approved video record can be included as part of the patient’s medical record and serves as additional documentation of bedside care, procedures performed, patient and hospital ancillary activities, safety or care incidents, support to necessitate additional clinical services, and, if necessary, as evidence. Additional HIPAA-compliance features allow privacy options to be enabled at any time by the patient, nurse or physician.

 

In addition to patient safety and security, we also provides a suite of services to increase patient satisfaction scores and enhance the overall image of the hospital including first-run on-demand movies, Internet access via the patient’s television, and video visits with family and friends from most places throughout the world. Through continued investment in patient care technology, our products and services help hospitals and assisted living facilities build a safe, high quality healthcare delivery system that best serves the patient, while striving for the highest level of satisfaction and comfort.

 

Events Occurring During First Quarter 2016

 

During the three months ended March 31, 2016, we granted options to purchase 20,000 shares of our Common Stock (the ‘‘Option(s)’’) to an employee. Also during the same three month period, 65,002 Options were canceled and 66,667 Options expired.

 

Summary of Product and Service Usage

 

The following table shows the number of healthcare facilities using our products and services including the number of deployed units, installed units and billable units as of April 30, 2016. The table also shows the number of pilot programs in place and hospital proposals pending approval, estimated bed count if the pilot programs and pending proposals result in executed contracts, and the estimated total number of licensed beds available under the pilot programs and hospital proposals. There are no assurances that the pilot programs will be extended or the pending proposals will be approved to ultimately result in the number of estimated beds. Further, there are no assurances that we will have access to the total number of licensed beds in each healthcare facility.

 

Installed Hospitals   Installed Units   Billable Units   Total Staffed Beds in
Contracted/ Pilot Hospitals
  Potential Units Available Under Current Contract/Pilot Contracts(*)   Units in Negotiation Prior to Contract/ Pilot
  106       9,160       8,148       131,158         56,239         36,750  

 

______________________

(*) This number represents management’s best estimate of the number of units available to us in hospitals that are currently under contract. We assume that in any given acute care facility, our products and services are appropriate for deployment in approximately 70% of the total staffed beds. If we have specific information from a current contracted or pilot hospital that the number of potential units in that hospital is either higher or lower than 70%, specific number has been used in the aggregate estimate.

 

 

24 
 

 

Results of Operations

 

Three months ended March 31, 2016 compared to three months ended March 31, 2015

 

    Three months ended
March 31,
   
    2016   2015   Change
    (000’s)
Revenue   $ 1,496     $ 1,001     $ 495  
Operating expenses     3,123       2,507       616  
     Operating loss     (1,627 )     (1,506 )     (121 )
Other, net     (3,057 )     (2,282 )     (775 )
     Net loss     (4,684 )     (3,788 )     (896 )
                       
Net income (loss) attributable to noncontrolling interest     (16 )     (16 )     —    
     Net loss attributed to CareView   $ (4,668 )   $ (3,772 )   $ (896 )

 

Revenue

 

Revenue increased approximately $495,000 for the three months ended March 31, 2016 as compared to the same period in 2015. This increase is a direct result of hospitals with billable units improving from 93 on March 31, 2015 to 94 on March 31, 2016. Of the 94 hospitals with billable units on March 31, 2016, two hospital groups accounted for 46% of the total. Billable units (RCPs and Nurse Stations) for all hospitals totaled 8,227 (7,658 and 569, respectively) on March 31, 2016 as compared to 5,411 (5,091 and 320, respectively) on March 31, 2015.

 

Operating Expenses

 

Our principal operating costs include the following items as a percentage of total operating expense.

 

    Three Months Ended
March 31,
    2016   2015
Human resource costs, including non-cash compensation     48 %     48 %
Professional and consulting costs     8 %     2 %
Depreciation and amortization     14 %     17 %
Oher product deployment costs     10 %     7 %
Travel and entertainment expense     9 %     12 %
Other expenses, net     11 %     14 %

 

Operating expenses increased by 25% as a result of the following items:

 

      (000’s)
Increase:        
   Human resource costs, including benefits   $ 283  
   Professional and consulting costs     189  
Other product deployment costs, excluding human resources and travel and entertainment expense     148  
   Depreciation and amortization     30  
Decrease:        
   Travel and entertainment expense     (14 )
   Other expenses     (20 )
    $ 616  

 

 

25 
 

 

Human resource related costs (including salaries and benefits) increased primarily as a result of a higher average head count during the three months ended March 31, 2016 compared to the same period in 2015. While we had 72 employees at March 31, 2016 as compared to 56 for the comparable date for the prior year, on average we employed 74 employees over the course of current period as compared to 54 for the comparable prior year period. Professional and consulting fees increased approximately $189,000. The increase in product deployment costs is primarily a result of a $48,000 accrual for product removal costs recorded during the three months ended March 31, 2016 coupled with a reversal of $98,500 in previously accrued product removal costs recovered during the three months ended March 31, 2015.

 

Other, net

 

Other non-operating income and expense increased by $775,000, or 34%, for the three months ended March 31, 2016 in comparison to the same period in 2015, primarily a result of an increase in interest expense related to the HealthCor and PLD funding transactions, partially offset by the favorable change in fair value of warrant liability related to warrants sold in conjunction with our April 2013 private placement totaling approximately $323,000.

 

Net Loss Attributable to CareView Communications, Inc.

 

As a result of the factors above, and after applying the $16,000 net loss attributed to noncontrolling interests, our first quarter 2016 net loss of $4,668,000 increased $896,000, or 24%, as compared to the $3,772,000 net loss for the first quarter of 2015.

 

Liquidity and Capital Resources

 

Our cash position at March 31, 2016 was approximately $15,569,000. We also have $3,250,000 recorded as restricted cash related to a debt covenant in our credit agreement with PDL BioPharma, Inc.

 

Pursuant to the terms of a Note and Warrant Purchase Agreement dated April 21, 2011 (as subsequently amended) with HealthCor Partners Fund, LP and HealthCor Hybrid Offshore Master Fund, LP (“HealthCor”) we are required to maintain a minimum cash balance $2,000,000 (see NOTE 11 for further details), and we are in compliance with the minimum cash balance as of the date of this filing.

 

Our continued successful operation is dependent upon us achieving positive cash flow through operations while maintaining adequate liquidity. We expect that the cash on hand, as well as our existing and projected cash flow from billable contracts, will enable us to continue to operate for the next twelve month period. We believe that our sales and marketing plan to attract new business and our ongoing deployment and installation of units under existing hospital agreements, will meet our near-term cash needs and will help us achieve future operating profitability.

 

At present, we have sufficient inventory to install and service a select number of large customers, but eventually we will need to address additional capital requirements. To that end, on June 26, 2015, we entered into a Credit Agreement with PDL Biopharma, Inc., as administrative agent and lender (the “PDL or the “Lender”), (the “PDL Credit Agreement”) pursuant to which the Lender made available to us up to $40 million in two tranches of $20 million each, with each tranche contingent upon us meeting certain milestones. On October 7, 2015, pursuant to the First Amendment to the PDL Credit Agreement (the “First Amendment”) the Lender made the first tranche of $20 million available and funded us $19,533,992, net of fees. As of March 31, 2016, we are including $20 million in long-term liabilities on the accompanying condensed consolidated financial statements. Pursuant to the terms of the PDL Credit Agreement, we are required to maintain a minimum cash balance $3,250,000, and we are in compliance with the minimum cash balance as of the date of this filing (see NOTE 13 for further details). No funds under the second tranche of the PDL Credit Agreement were available to us as of March 31, 2016.

 

 

26 
 

 

Off-Balance Sheet Arrangements

 

As of March 31, 2016, we had no material off-balance sheet arrangements.

 

In the ordinary course of business, we enter into agreements with third parties that include indemnification provisions which, in our judgment, are normal and customary for companies in our industry sector. These agreements are typically with business partners, clinical sites, and suppliers. Pursuant to these agreements, we generally agree to indemnify, hold harmless, and reimburse indemnified parties for losses suffered or incurred by the indemnified parties with respect to our product candidates, use of such product candidates, or other actions taken or omitted by us. The maximum potential amount of future payments we could be required to make under these indemnification provisions is unlimited. We have not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. As a result, the estimated fair value of liabilities relating to these provisions is minimal. Accordingly, we have no liabilities recorded for these provisions as of March 31, 2016.

 

In the normal course of business, we may be confronted with issues or events that may result in a contingent liability. These generally relate to lawsuits, claims, environmental actions or the actions of various regulatory agencies. We consult with counsel and other appropriate experts to assess the claim. If, in our opinion, we have incurred a probable loss as set forth by accounting principles generally accepted in the U.S., an estimate is made of the loss and the appropriate accounting entries are reflected in our financial statements. After consultation with legal counsel, we do not anticipate that liabilities arising out of currently threatened lawsuits and claims, if any, will have a material adverse effect on our financial position, results of operations or cash flows.

 

Critical Accounting Estimates

 

Please refer to our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the Commission on March 30, 2016 and incorporated herein by reference, for detailed explanations of our critical accounting estimates, which have not changed significantly during the three months ended March 31, 2016.

 

New Accounting Pronouncements

 

In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”). The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. We are evaluating the impact that ASU 2016-03 will have on our consolidated financial statements and related disclosures.

 

There have been no material changes to our significant accounting policies as summarized in NOTE 2 of our Annual Report on Form 10-K for the year ended December 31, 2015. We do not expect that the adoption of any recent accounting pronouncements will have a material impact on our accompanying condensed consolidated financial statements.

 

Recent Events

 

None.

 

 

27 
 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

None.

 

Item 4. Controls and Procedures

 

Disclosure Controls and Procedures

 

Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported, within the time period specified in the SEC’s rules and forms and is accumulated and communicated to our management, as appropriate, in order to allow timely decisions in connection with required disclosure.

 

Evaluation of Disclosure Controls and Procedures

 

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), we carried out an evaluation, with the participation of our management, including Steve G. Johnson, our Chief Executive Officer (“CEO”) and principal executive officer, and L. Allen Wheeler, our principal financial officer and chief accounting officer, of the effectiveness of our disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this Report.

 

Based upon that evaluation, our CEO and Chief Accounting Officer concluded that our disclosure controls and procedures were effective as of March 31, 2016 to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our CEO and Chief Accounting Officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Changes in Internal Controls

 

During the three months ended March 31, 2016, there were no changes in our internal control over financial reporting that occurred that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

None.

 

Item 1A. Risk Factors.

 

Our Company is a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act, and as such, is not required to provide the information required under this Item.

 

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

 

None.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

 

28 
 

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

Item 6. Exhibits.

 

Exhibit No. Date of Document Name of Document
     
31.1 5/13/16 Certification of Chief Executive Officer of Periodic Report pursuant to Rule 13a-14a and Rule 14d-14(a).*
31.2 5/13/16 Certification of Chief Financial Officer of Periodic Report pursuant to Rule 13a-14a and Rule 15d-14(a).*
32.1 5/13/16 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.*
32.2 5/13/16 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.*
101.INS n/a XBRL Instance Document*
101.SCH n/a XBRL Taxonomy Extension Schema Document*
101.CAL n/a XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF n/a XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB n/a XBRL Taxonomy Extension Label Linkbase Document*
101.PRE n/a XBRL Taxonomy Extension Presentation Linkbase Document*

___________________

* Filed herewith.

 

 

29 
 

 

SIGNATURES

 

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

 

DATE:     May 13, 2016

 

  CAREVIEW COMMUNICATIONS, INC.
     
     
  By: /s/ Steven G. Johnson
    Steven G. Johnson
    Chief Executive Officer
    Principal Executive Officer
     
  By: /s/ L. Allen Wheeler
    L. Allen Wheeler
    Principal Financial Officer
    Chief Accounting Officer

 

30 
 
EX-31.1 2 ex31-1.htm CERTIFICATION OF CHIEF EXECUTIVE OFFICER
 

CareView Communications, Inc. 10-Q

 

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

 

I, Steven G. Johnson, certify that:

 

(1)I have reviewed this quarterly report on Form 10-Q of CareView Communications, Inc.;
   
(2)Based on my knowledge, this report does not contain any untrue statements of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report’
   
(3)Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
(4)The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
   
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
   
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
   
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and
   
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
   
(5)The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
   
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
   
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

May 13, 2016 /s/ Steven G. Johnson
  Steven G. Johnson
  Chief Executive Officer
  Principal Executive Officer

 

 

 
 
EX-31.2 3 ex31-2.htm CERTIFICATION OF CHIEF FINANCIAL OFFICER
 

CareView Communications, Inc. 10-Q

 

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

 

I, L. Allen Wheeler, certify that:

 

(1)I have reviewed this quarterly report on Form 10-Q of CareView Communications, Inc.;
   
(2)Based on my knowledge, this report does not contain any untrue statements of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report’
   
(3)Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
(4)The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
   
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
   
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
   
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and
   
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
   
(5)The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
   
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
   
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

May 13, 2016 /s/ L. Allen Wheeler
  L. Allen Wheeler
  Principal Financial Officer
  Chief Account Officer

 

 

 

 

 
EX-32.1 4 ex32-1.htm CERTIFICATION OF CHIEF EXECUTIVE OFFICER
 

CareView Communications, Inc. 10-Q

 

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 CareView Communications, Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2016, as filed with the Securities and Exchange Commission (the “Report”), I, Steven G. Johnson, Chief Executive 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/ Steven G. Johnson
Steven G. Johnson
Chief Executive Officer
May 13, 2016

 

 

A signed original of this certification has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

 

 

 

 
EX-32.2 5 ex32-2.htm CERTIFICATION OF CHIEF FINANCIAL OFFICER
 

CareView Communications, Inc. 10-Q

 

EXHIBIT 32.2

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 CareView Communications, Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2016, as filed with the Securities and Exchange Commission (the “Report”), I, L. Allen Wheeler, Principal 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/ L. Allen Wheeler
L. Allen Wheeler
Principal Financial Officer
May 13, 2016

 

 

A signed original of this certification has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

 

 

 

 
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(Details Narrative) link:presentationLink link:calculationLink link:definitionLink EX-101.CAL 8 crvw-20160331_cal.xml XBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT EX-101.DEF 9 crvw-20160331_def.xml XBRL TAXONOMY EXTENSION DEFINITION LINKBASE DOCUMENT EX-101.LAB 10 crvw-20160331_lab.xml XBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT Common Stock [Member] Equity Components [Axis] Additional Paid in Capital [Member] Accumulated Deficit [Member] Noncontrolling Interest [Member] 2011 Senior Secured Convertible Note#1 [Member] Long-term Debt, Type [Axis] HealthCor Purchase Agreement [Member] Counterparty Name [Axis] 2011 Senior Secured Convertible Notes [Member] Second Five Year Note Period [Member] Variable Rate [Axis] First Five Year Note Period [Member] Recurring Measurement [Member] Measurement Frequency [Axis] Significant Other Unobservable Inputs (Level 3) [Member] Fair Value, Hierarchy [Axis] Fair Value [Member] Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] Significant Other Observable Inputs (Level 2) [Member] PDL BioPharma, Inc (Administrative Agent and Lender) [Member] Legal Entity [Axis] Tranche One Debt [Member] Debt Instrument [Axis] Tranche Two Debt [Member] Stock Options [Member] Award Type [Axis] Lower Range [Member] Range [Axis] Upper Range [Member] HealthCor Second Amendment Purchase Agreement [Member] Senior Convertible Notes - 2014 Issuance [Member] Warrants Revalued [Member] Class of Warrant or Right [Axis] HealthCor Partners Fund [Member] Purchase Agreement Warrants [Member] Warrants [Member] Employees and Board of Directors [Member] Title of Individual [Axis] Network Equipment [Member] Property, Plant and Equipment, Type [Axis] Office Equipment [Member] Vehicles [Member] Test Equipment [Member] Furniture [Member] Warehouse Equipment [Member] Leasehold Improvements [Member] Patents and Trademarks [Member] Finite-Lived Intangible Assets by Major Class [Axis] Other Intangible Assets [Member] Deferred Debt Issuance Costs [Member] BalanceSheetLocation [Axis] Prepaid Financing Costs [Member] Deferred Installation Costs [Member] Prepaid License Fee [Member] Security Deposit [Member] Deferred Financing Costs [Member] Joint Venture - Rockwell [Member] Variable Interest Entity [Member] Variable Interest Entities [Axis] PDL BioPharma, Inc (Administrative Agent and Lender) - First Amendment [Member] PDL BioPharma, Inc (Administrative Agent and Lender) - Restated Amendment [Member] 2011 Senior Secured Convertible Note#2 [Member] 2012 Senior Secured Convertible Notes [Member] 2012 Senior Secured Convertible Note#1 [Member] 2012 Senior Secured Convertible Note#2 [Member] HealthCor Third Amendment Purchase Agreement [Member] HealthCor Fourth Amendment Purchase Agreement [Member] 2014 Senior Secured Convertible Note#2 [Member] 2014 Senior Secured Convertible Note#1 [Member] 2014 Senior Secured Convertible Notes [Member] HealthCor Fifth Amendment Purchase Agreement [Member] New Investors [Member] HealthCor [Member] HealthCor Sixth Amendment Purchase Agreement [Member] Document And Entity Information Entity Registrant Name Entity Central Index Key Document Type Document Period End Date Amendment Flag Current Fiscal Year End Date Entity a Well-known Seasoned Issuer Entity a Voluntary Filer Entity's Reporting Status Current Entity Filer Category Entity Public Float Entity Common Stock, Shares Outstanding Document Fiscal Period Focus Document Fiscal Year Focus Statement of Financial Position [Abstract] ASSETS Current Assets: Cash and cash equivalents Accounts receivable, net Other current assets Total current assets Property and equipment, net Other Assets: Restricted cash Intangible assets, net Other assets Total other assets Total assets LIABILITIES AND STOCKHOLDERS' DEFICIT Current Liabilities: Accounts payable Notes payable Mandatorily redeemable equity in joint venture Accrued interest Other current liabilities Total current liabilities Long-term Liabilities: Senior secured convertible notes, net of debt discount and debt costs of $22,951,069 and $23,041,363, respectively Loan payable Fair value of warrant liability Total long-term liabilities Total liabilities Commitments and Contingencies Stockholders' Deficit: Preferred stock - par value $0.001; 20,000,000 shares authorized; no shares issued and outstanding Common stock - par value $0.001; 300,000,000 shares authorized; 139,380,748 issued and outstanding Additional paid in capital Accumulated deficit Total CareView Communications Inc. stockholders' deficit Noncontrolling interest Total stockholders' deficit Total liabilities and stockholders' deficit Statement [Table] Statement [Line Items] Schedule of Financial Instruments Subject to Mandatory Redemption by Settlement Terms [Axis] Debt discount and debt issuance costs (in dollars) Preferred stock, par value (in dollars per share) Preferred stock, shares authorized Preferred stock, shares issued Preferred stock, shares outstanding Common stock, par value (in dollars per share) Common stock, shares authorized Common stock, shares issued Common stock, shares outstanding Income Statement [Abstract] Revenues, net Operating expenses: Network operations General and administration Sales and marketing Research and development Depreciation and amortization Total operating expense Operating loss Other income and (expense) Interest expense Change in fair value of warrant liability Interest income Other income Total other income (expense) Loss before taxes Provision for income taxes Net loss Net loss attributable to noncontrolling interest Net loss attributable to CareView Communications, Inc. Net loss per share attributable to CareView Communications, Inc., basic and diluted (in dollars per share) Weighted average number of common shares outstanding, basic and diluted (in shares) Increase (Decrease) in Stockholders' Equity [Roll Forward] Balance, beginning Balance, beginning (in shares) Stock options granted as compensation Beneficial conversion features for senior secured convertible notes Net loss Balance, ending Balance, ending (in shares) Statement of Cash Flows [Abstract] CASH FLOWS FROM OPERATING ACTIVITES Adjustments to reconcile net loss to net cash flows used in operating activities: Depreciation Amortization of debt discount and debt costs Amortization of deferred installation costs Amortization of deferred debt issuance and debt financing costs Amortization of intangible assets Interest incurred and paid in kind Stock based compensation related to options granted (Gain) loss on disposal of assets Change in fair value of warrant liability Changes in operating assets and liabilities: Accounts receivable Other current assets Other assets Accounts payable Accrued expenses and other current liabilities Net cash flows used in operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment Payment for deferred installation costs Patent and trademark costs Net cash flows used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from notes and loan payable Net cash flows provided by financing activities Increase (decrease) in cash Cash and cash equivalent, beginning of period Cash and cash equivalents, end of period SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for interest Cash paid for income taxes SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES: Beneficial conversion features for senior secured convertible notes Warrants issued in connection with senior secured convertible notes Organization, Consolidation and Presentation of Financial Statements [Abstract] BASIS OF PRESENTATION AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS LIQUIDITY AND MANAGEMENT'S PLAN Stockholders' Equity Note [Abstract] STOCKHOLDERS' EQUITY Other Current Assets OTHER CURRENT ASSETS Property, Plant and Equipment [Abstract] PROPERTY AND EQUIPMENT Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] OTHER ASSETS Payables and Accruals [Abstract] OTHER CURRENT LIABILITIES Income Tax Disclosure [Abstract] INCOME TAXES Equity Method Investments and Joint Ventures [Abstract] JOINT VENTURE AGREEMENT Variable Interest Entities VARIABLE INTEREST ENTITIES Agreement With Healthcor AGREEMENT WITH HEALTHCOR Agreement With Pdl Biopharma Inc. AGREEMENT WITH PDL BIOPHARMA Basis Of Presentation And Recently Issued Accounting Pronouncements Policies Interim Financial Statements Fair Value of Financial Instruments Earnings Per Share Recently Issued and Newly Adopted Accounting Pronouncements Accounting Policies [Abstract] Schedule of financial assets and liabilities reported at fair value and measured on a recurring basis Schedule of summary of changes in fair value associated with the Level 3 liabilities Schedule of stock option activity Schedule of assumptions used in the Black-Scholes Model Schedule of other current assets Schedule of property and equipment Schedule of intangible assets Schedule of other assets Schedule of other current liabilities Schedule of VIE assets and liabilities and results of operations Anti-dilutive common share equivalents excluded from EPS calculation Fair value of warrant liability Change in Fair Value of Level 3 Liabilities Balance, beginning of period Issuances of derivative liabilities Change in fair value of warrant liability Transfers in and/out of Level 3 Balance, end of period Minimum cash balance required under existing loan documents Debt face amount Proceeds from issuance of debt, net Fair value of warrants at re-value Fair value adjustment recorded as non-cash costs Warrants outstanding Warrant exercise price (in dollars per share) Fair value of the warrants Warrant expiration date Senior secured convertible notes Fair value of convertible debt Debt conversion rate Warrants issued for financing costs, warrants Noncash exercise of warrants, shares forfeited for exercise Options granted Options shares expired Options shares cancelled Share-based compensation expense Unrecognized estimated compensation expense Period for recognization of unrecognized compensation expense Companys stock option activity and related information Number Options Stock Options Outstanding, Beginning Granted Exercised Expired Cancelled Stock Options Outstanding, Ending Stock Options, vested and exercisable Weighted Average Exercise Price Stock Options Outstanding, Beginning Granted Exercised Expired Cancelled Stock Options Outstanding, Ending Stock Options, vested and exercisable Weighted Average Remaining Contractual Life Stock Options Outstanding, Beginning Granted Stock Options Outstanding, Ending Stock Options, vested and exercisable Aggregate Intrinsic Value Stock Options Outstanding, Beginning Black-Scholes Model: Risk-free interest rate Volatility Expected life Dividend yield Other Current Assets Details Prepaid expenses Other current assets TOTAL OTHER CURRENT ASSETS Depreciation expense Property, Plant and Equipment [Table] Property, Plant and Equipment [Line Items] Property and equipment, gross Less: accumulated depreciation Schedule of Finite-Lived Intangible Assets [Table] Finite-Lived Intangible Assets [Line Items] Cost Accumulated Amortization Intangible assets, Net Balance Sheet Location [Axis] Cost Accumulated Amortization Other assets OTHER CURRENT LIABILITIES: Accrued taxes Accrued insurance Allowance for system removal Accrued paid time off Accrued professional services Other accrued liabilities TOTAL OTHER CURRENT LIABILITIES Percentage owned by company of each joint venture Funding by Rockwell into the Joint Venture, cash Promissory note amounts Investment Interest issued to Rockwell as Preferential Return Interest rate on project notes and preferential returns, per investment agreement Fair value of warrants issued to Rockwell for providing funding Discount on debt recorded Monthly revenue lost due to Hillcrest termination De-installation costs incurred Number of units remaining at Hillcrest site Assets Cash Receivables Total current assets Property, net Total assets Liabilities Notes payable Mandatorily redeemable interest Total liabilities Revenue Network operations expense General and administrative expense Depreciation Total operating costs Operating loss Other expense Loss before taxes Provision for taxes Net loss Net loss attributable to CareView Communications, Inc. Note amount Debt Maturity Date Issuance of warrants Exercise price of warrants Interest rate, provided no default Increase in interest rate (per annum) should default occur Debt conversion price Number of shares the note may be converted into Debt discount Interest Expense Deferred debt costs Aggregate financing costs Description of debt milestone placement Interest rate Description of payment terms Description of collateral Number common stock called Exercise price (in dollars per shares) Warrant expiration date Fair value Amortized interest expense Deferred financing costs Amortized deferred financing costs Number of billable units Earning before interest, tax, depreciation, and amortization milestone Date of first required debt repyment Debt periodic repayment Increase of interest rate if default occurs Periodic amortization of installation costs. Periodic amortization of deferred debt issuance costs. Cash outflow for the payment of deferred installation costs during the period. Refers the amount of warrants issued in connection with the credit facility during the reporting period. The entire disclosure regarding the Agreement with Healthcor. The entire disclosure regarding the Agreement with PDL BioPharma, Inc. Information pertaining to HealthCor Partners Fund, LP. Information pertaining to HealthCor Purchase Agreement. It represents as long term debt 1 member. Information pertaining to HealthCor Partners Management, L.P. (the consolidated entity of HealthCor). Health Cor New Investors [Member]. Information pertaining to HealthCor Partners Management, L.P. (the consolidated entity of HealthCor). The number of warrants issued for financing costs in the period. PDL Bio Pharma Inc [Member]. Secured debt 1 [Member]. Accumulated Amortization It represents as sharebased compensation arrangement by sharebased payment award options outstanding weighted average remaining contractual term begining. The weighted average period between the balance sheet date and expiration for all awards granted during the period. It represents as sharebased compensation arrangement by sharebased payment award options outstanding weighted average remaining contractual termending. AGREEMENT WITH HEALTHCOR Security that gives the holder the right to purchase shares of stock in accordance with the terms of the instrument, usually upon payment of a specified amount. Warrant Purchase Agreement [Member]. Fair value of warrants at date of revalue. The number of shares forfeited to exercise the noncash provision of warrants to purchase shares of common stock. Information by title of individual or nature of relationship to individual or group of individuals. Information pertaining to Network Equipment. Network Equipment is tangible personal property used to produce goods and services. Information pertaining to test equipment. Test equipment is tangible personal property used to produce goods and services. Information pertaining to patents and trademarks. Information pertaining to deferred debt issuance costs. Information about prepaid financing costs. Information pertaining to deferred installation costs. Information preferred to prepaid license fees. Information pertaining to security deposit. Information about deferred financing costs. Aggregate gross amount, as of the balance sheet date, of noncurrent assets not separately disclosed in the balance sheet. Noncurrent assets are expected to be realized or consumed after one year (or the normal operating cycle, if longer). Accumulated Amortization related to other assets. Carrying value as of the balance sheet date of obligations incurred through that date and payable for allowance for system removal. Used to reflect the current portion of the liabilities (due within one year or within the normal operating cycle if longer). Information pertaining to the Joint Venture Agreement with Rockwell. The amount of initial funding provided in cash by Rockwell Holdings I, LLC to the Master Investment Agreement. The fair value of warrants, at issuance, to purchase shares of company common stock issued to Rockwell Holdings as additional consideration for providing the funding for the Master Investment Agreement. The monthly revenue lost due to the termination of the Hillcrest Agremeent. The amount of de-installation costs incurred due to the termination of the hospital agreement with Hillcrest. It represents as numbers of units remaining. Assets Liabilities The set of legal entities associated with a report. It refers to the name of an entity. Date class of warrants or rights will expire. Refers the amount of amortization of interest expense during the reporting period. Milestone set for billable units in order to receive funding. Earning Before Interest Tax Depreciation Amortization milestone for funding The name for the particular debt instrument or borrowing that distinguishes it from other debt instruments or borrowings, including draws against credit facilities. The name for the particular debt instrument or borrowing that distinguishes it from other debt instruments or borrowings, including draws against credit facilities. Borrowing which can be exchanged for a specified number of another security at the option of the issuer or the holder, for example, but not limited to, the entity's common stock. The issuance of warrants (shares). Borrowing which can be exchanged for a specified number of another security at the option of the issuer or the holder, for example, but not limited to, the entity's common stock. Borrowing which can be exchanged for a specified number of another security at the option of the issuer or the holder, for example, but not limited to, the entity's common stock. Borrowing which can be exchanged for a specified number of another security at the option of the issuer or the holder, for example, but not limited to, the entity's common stock. Borrowing which can be exchanged for a specified number of another security at the option of the issuer or the holder, for example, but not limited to, the entity's common stock. Information pertaining to HealthCor Purchase Agreement. Borrowing which can be exchanged for a specified number of another security at the option of the issuer or the holder, for example, but not limited to, the entity's common stock. Borrowing which can be exchanged for a specified number of another security at the option of the issuer or the holder, for example, but not limited to, the entity's common stock. Borrowing which can be exchanged for a specified number of another security at the option of the issuer or the holder, for example, but not limited to, the entity's common stock. Information pertaining to HealthCor Purchase Agreement. Information pertaining to HealthCor Purchase Agreement. Assets, Noncurrent Liabilities, Current Liabilities, Noncurrent Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest Stockholders' Equity Attributable to Parent Liabilities and Equity Interest and Debt Expense Shares, Outstanding Gain (Loss) on Disposition of Property Plant Equipment, Excluding Oil and Gas Property and Timber Property Unrealized Gain (Loss) on Derivatives and Commodity Contracts Increase (Decrease) in Accounts Receivable Increase (Decrease) in Other Current Assets Increase (Decrease) in Other Operating Assets Increase (Decrease) in Accounts Payable Net Cash Provided by (Used in) Operating Activities, Continuing Operations Payments to Acquire Property, Plant, and Equipment PaymentsForDeferredInstallationCosts Payments to Acquire Intangible Assets Net Cash Provided by (Used in) Investing Activities, Continuing Operations Net Cash Provided by (Used in) Financing Activities, Continuing Operations Cash and Cash Equivalents, Period Increase (Decrease) Debt Instrument, Convertible, Beneficial Conversion Feature Fair Value, Measurement with Unobservable Inputs Reconciliations, Recurring Basis, Liability Value Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Issuances Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Number Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price Share-based Compensation Arrangements by Share-based Payment Award, Options, Exercises in Period, Weighted Average Exercise Price Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Exercise Price SharebasedCompensationArrangementBySharebasedPaymentAwardOptionsGrantsWeightedAverageRemainingContractualTerm Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Intrinsic Value Other Prepaid Expense, Current Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment OtherAssetsNoncurrentGross OtherAssetsAccumulatedAmortization Noncontrolling Interest in Joint Ventures Other Notes Payable, Current Other Expenses Net Income (Loss), Including Portion Attributable to Noncontrolling Interest ClassOfWarrantOrRighstDateFromWhichWarrantsOrRightsExpiration EX-101.PRE 11 crvw-20160331_pre.xml XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENT XML 12 R1.htm IDEA: XBRL DOCUMENT v3.4.0.3
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2016
May. 13, 2016
Document And Entity Information    
Entity Registrant Name CareView Communications Inc  
Entity Central Index Key 0001377149  
Document Type 10-Q  
Document Period End Date Mar. 31, 2016  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity a Well-known Seasoned Issuer No  
Entity a Voluntary Filer No  
Entity's Reporting Status Current Yes  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   139,380,742
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2016  
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CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) - USD ($)
Mar. 31, 2016
Dec. 31, 2015
Current Assets:    
Cash and cash equivalents $ 15,568,573 $ 17,678,969
Accounts receivable, net 1,185,132 1,176,404
Other current assets 493,179 471,075
Total current assets 17,246,884 19,326,448
Property and equipment, net 4,534,718 4,483,440
Other Assets:    
Restricted cash 3,250,000 3,250,000
Intangible assets, net 530,519 380,765
Other assets 2,548,282 2,689,758
Total other assets 6,328,801 6,320,523
Total assets 28,110,403 30,130,411
Current Liabilities:    
Accounts payable 387,303 332,402
Notes payable 441,498 441,498
Mandatorily redeemable equity in joint venture 441,498 441,498
Accrued interest 276,508 261,450
Other current liabilities 586,043 479,226
Total current liabilities 2,132,850 1,956,074
Long-term Liabilities:    
Senior secured convertible notes, net of debt discount and debt costs of $22,951,069 and $23,041,363, respectively 35,593,463 33,729,093
Loan payable 20,000,000 20,000,000
Fair value of warrant liability 84,308 168,805
Total long-term liabilities 55,677,771 53,897,898
Total liabilities $ 57,810,621 $ 55,853,972
Commitments and Contingencies
Stockholders' Deficit:    
Preferred stock - par value $0.001; 20,000,000 shares authorized; no shares issued and outstanding
Common stock - par value $0.001; 300,000,000 shares authorized; 139,380,748 issued and outstanding $ 139,381 $ 139,381
Additional paid in capital 83,142,148 82,434,461
Accumulated deficit (112,463,946) (107,795,712)
Total CareView Communications Inc. stockholders' deficit (29,182,417) (25,221,870)
Noncontrolling interest (517,801) (501,691)
Total stockholders' deficit (29,700,218) (25,723,561)
Total liabilities and stockholders' deficit $ 28,110,403 $ 30,130,411
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CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (Parenthetical) - USD ($)
Mar. 31, 2016
Dec. 31, 2015
Preferred stock, par value (in dollars per share) $ 0.001 $ 0.001
Preferred stock, shares authorized 20,000,000 20,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Common stock, par value (in dollars per share) $ 0.001 $ 0.001
Common stock, shares authorized 300,000,000 300,000,000
Common stock, shares issued 139,380,748 139,380,748
Common stock, shares outstanding 139,380,748 139,380,748
2011 Senior Secured Convertible Note#1 [Member]    
Debt discount and debt issuance costs (in dollars) $ 22,951,069 $ 23,041,363
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Income Statement [Abstract]    
Revenues, net $ 1,495,793 $ 1,000,554
Operating expenses:    
Network operations 1,152,107 830,094
General and administration 1,054,858 838,309
Sales and marketing 221,688 197,622
Research and development 249,098 225,196
Depreciation and amortization 445,416 415,904
Total operating expense 3,123,167 2,507,125
Operating loss (1,627,374) (1,506,571)
Other income and (expense)    
Interest expense (3,151,557) (2,045,901)
Change in fair value of warrant liability 84,497 (238,101)
Interest income 4,970 1,143
Other income 5,120 1,125
Total other income (expense) (3,056,970) (2,281,734)
Loss before taxes $ (4,684,344) $ (3,788,305)
Provision for income taxes
Net loss $ (4,684,344) $ (3,788,305)
Net loss attributable to noncontrolling interest (16,110) (16,222)
Net loss attributable to CareView Communications, Inc. $ (4,668,234) $ (3,772,083)
Net loss per share attributable to CareView Communications, Inc., basic and diluted (in dollars per share) $ (0.03) $ (0.03)
Weighted average number of common shares outstanding, basic and diluted (in shares) 139,380,748 139,380,748
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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (Unaudited) - 3 months ended Mar. 31, 2016 - USD ($)
Common Stock [Member]
Additional Paid in Capital [Member]
Accumulated Deficit [Member]
Noncontrolling Interest [Member]
Total
Balance, beginning at Dec. 31, 2015 $ 139,381 $ 82,434,461 $ (107,795,712) $ (501,691) $ (25,723,561)
Balance, beginning (in shares) at Dec. 31, 2015 139,380,748        
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Stock options granted as compensation   190,843     190,843
Beneficial conversion features for senior secured convertible notes   516,844     516,844
Net loss     (4,668,234) (16,110) (4,684,344)
Balance, ending at Mar. 31, 2016 $ 139,381 $ 83,142,148 $ (112,463,946) $ (517,801) $ (29,700,218)
Balance, ending (in shares) at Mar. 31, 2016 139,380,748        
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
CASH FLOWS FROM OPERATING ACTIVITES    
Net loss $ (4,684,344) $ (3,788,305)
Adjustments to reconcile net loss to net cash flows used in operating activities:    
Depreciation 423,560 409,634
Amortization of debt discount and debt costs 607,138 552,066
Amortization of deferred installation costs 102,541 66,631
Amortization of deferred debt issuance and debt financing costs 72,772  
Amortization of intangible assets 21,856 6,270
Interest incurred and paid in kind 1,774,076 1,471,707
Stock based compensation related to options granted 190,843 190,106
(Gain) loss on disposal of assets   43,740
Change in fair value of warrant liability (84,497) 238,101
Changes in operating assets and liabilities:    
Accounts receivable (8,728) 8,639
Other current assets (18,929) (238,795)
Other assets 4,098 4,098
Accounts payable 54,901 183,405
Accrued expenses and other current liabilities 121,875 (77,177)
Net cash flows used in operating activities (1,422,838) (929,880)
CASH FLOWS FROM INVESTING ACTIVITIES    
Purchase of property and equipment (474,838) (103,098)
Payment for deferred installation costs (37,935) (47,371)
Patent and trademark costs (174,785) (10,273)
Net cash flows used in investing activities (687,558) (160,742)
CASH FLOWS FROM FINANCING ACTIVITIES    
Proceeds from notes and loan payable   5,931,520
Net cash flows provided by financing activities   5,931,520
Increase (decrease) in cash (2,110,396) 4,840,898
Cash and cash equivalent, beginning of period 17,678,969 2,546,262
Cash and cash equivalents, end of period 15,568,573 7,387,160
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:    
Cash paid for interest 682,150 5,150
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES:    
Beneficial conversion features for senior secured convertible notes $ 516,844 456,987
Warrants issued in connection with senior secured convertible notes   $ 1,471,105
XML 18 R7.htm IDEA: XBRL DOCUMENT v3.4.0.3
BASIS OF PRESENTATION AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
3 Months Ended
Mar. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
BASIS OF PRESENTATION AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

NOTE 1 – BASIS OF PRESENTATION AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

 

Interim Financial Statements

 

The accompanying unaudited interim condensed consolidated financial statements of CareView Communications, Inc. (“CareView”, the “Company”, “we”, “us” or “our”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, such financial statements include all adjustments (consisting solely of normal recurring adjustments) necessary for the fair statement of the financial information included herein in accordance with GAAP and the rules and regulations of the Securities and Exchange Commission (the “SEC”). The balance sheet at December 31, 2015 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Results of operations for interim periods are not necessarily indicative of results for the full year. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2015 as filed with the SEC on March 30, 2016.

 

Fair Value of Financial Instruments

 

Our financial instruments consist primarily of receivables, accounts payable, accrued expenses and short- and long-term debt. The carrying amount of receivables, accounts payable and accrued expenses approximates our fair value because of the short-term maturity of such instruments. We have elected not to carry our debt instruments at fair value. The carrying amount of our debt approximates fair value. Interest rates that are currently available to us for issuance of short- and long-term debt with similar terms and remaining maturities are used to estimate the fair value of the our short- and long-term debt and would be considered Level 3 inputs under the fair value hierarchy.

 

We have categorized our assets and liabilities that are valued at fair value on a recurring basis into a three-level fair value hierarchy in accordance with GAAP. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and lowest priority to unobservable inputs (Level 3).

 

Assets and liabilities recorded in the condensed consolidated balance sheets at fair value are categorized based on a hierarchy of inputs, as follows:

 

Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 - Quoted prices for similar assets or liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

Level 3 - Unobservable inputs for the asset or liability.

 

The Company’s financial assets and liabilities recorded at fair value on a recurring basis include the fair value of warrant liability as detailed below. The fair value of this warrant liability is included in long-term liabilities on the accompanying condensed consolidated financial statements.

 

The following table provides the financial assets and liabilities reported at fair value and measured on a recurring basis:

 

Description   Assets/
(Liabilities)
Measured at Fair Value
  Quoted Prices in Active Markets for Identical Assets
(Level 1)
  Significant Other Observable Inputs
(Level 2)
  Significant Other Unobservable Inputs
(Level 3)
Fair value of warrant liability   $ (84,308 )   $ —       $ —       $ (84,308 )

 

The following table provides a summary of changes in fair value associated with the Level 3 liabilities for the three months ended March 31, 2016

 

    Fair Value Measurements Using Significant Unobservable Inputs
(Level 3)
Balance at January 1, 2016   $ (168,805 )
Issuances of derivative liabilities     —    
Change in fair value of warrant liability     (84,497 )
Transfers in and/out of Level 3     —    
Ending balance at March 31, 2016   $ (84,308 )

 

The above table of Level 3 liabilities begins with the prior period balance and adjusts the balance for changes that occurred during the current period. The ending balance of the Level 3 securities presented above represent our best estimates and may not be substantiated by comparisons to independent markets and, in many cases, could not be realized in immediate settlement of the instruments.

 

Earnings Per Share

 

We calculate earnings per share (“EPS”) in accordance with GAAP, which requires the computation and disclosure of two EPS amounts, basic and diluted. Basic EPS is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted EPS is computed based on the weighted average number of common shares outstanding plus all potentially dilutive common shares outstanding during the period under the treasury stock method. Such potential dilutive common shares consist of stock options, warrants and convertible debt. Potential common shares totaling 110,156,518 and 104,333,559 at March 31, 2016 and 2015, respectively, have been excluded from the diluted earnings per share calculation as they are anti-dilutive due to our reported net loss.

 

Recently Issued and Newly Adopted Accounting Pronouncements

 

In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”). The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. We are evaluating the impact that ASU 2016-03 will have on our consolidated financial statements and related disclosures.

 

There have been no material changes to our significant accounting policies as summarized in NOTE 2 of our Annual Report on Form 10-K for the year ended December 31, 2015. We do not expect that the adoption of any recent accounting pronouncements will have a material impact on our accompanying condensed consolidated financial statements.

XML 19 R8.htm IDEA: XBRL DOCUMENT v3.4.0.3
LIQUIDITY AND MANAGEMENT'S PLAN
3 Months Ended
Mar. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
LIQUIDITY AND MANAGEMENT'S PLAN

NOTE 2 – LIQUIDITY AND MANAGEMENT’S PLAN

 

Our cash position at March 31, 2016 was approximately $15,569,000. We also have $3,250,000 recorded as restricted cash related to a debt covenant in our credit agreement with PDL BioPharma, Inc. as discussed below.

 

Pursuant to the terms of a Note and Warrant Purchase Agreement dated April 21, 2011 (as subsequently amended) with HealthCor Partners Fund, LP and HealthCor Hybrid Offshore Master Fund, LP (“HealthCor”) we are required to maintain a minimum cash balance $2,000,000 (see NOTE 11 for further details), and we are in compliance with the minimum cash balance as of the date of this filing.

 

Our continued successful operation is dependent upon us achieving positive cash flow through operations while maintaining adequate liquidity. We expect that the cash on hand, as well as our existing and projected cash flow from billable contracts, will enable us to continue to operate for the next twelve month period. We believe that our sales and marketing plan to attract new business and our ongoing deployment and installation of units under existing hospital agreements, will meet our near-term cash needs and will help us achieve future operating profitability.

 

At present, we have sufficient inventory to install and service a select number of large customers, but eventually we will need to address additional capital requirements. To that end, on June 26, 2015, we entered into a Credit Agreement with PDL Biopharma, Inc., as administrative agent and lender (“the Lender”), (the “PDL Credit Agreement”) pursuant to which the Lender made available to us up to $40 million in two tranches of $20 million each, with each tranche contingent upon us meeting certain milestones. On October 7, 2015, pursuant to the First Amendment to the PDL Credit Agreement (the “First Amendment”) the Lender made the first tranche of $20 million available and funded us $19,533,992, net of fees. As of March 31, 2016, we are including $20 million in long-term liabilities on the accompanying condensed consolidated financial statements. Pursuant to the terms of the PDL Credit Agreement, we are required to maintain a minimum cash balance $3,250,000, and we are in compliance with the minimum cash balance as of the date of this filing (see NOTE13 for further details). No funds under the second tranche of the PDL Credit Agreement were available to us as of March 31, 2016.

XML 20 R9.htm IDEA: XBRL DOCUMENT v3.4.0.3
STOCKHOLDERS' EQUITY
3 Months Ended
Mar. 31, 2016
Stockholders' Equity Note [Abstract]  
STOCKHOLDERS' EQUITY

NOTE 3 – STOCKHOLDERS’ EQUITY

 

Warrants to Purchase Common Stock of the Company

 

We use the Black-Scholes-Merton option pricing model (the “Black-Scholes Model”) to determine the fair value of warrants to purchase Common Stock of the Company (“Warrants”) (except certain Warrants issued to HealthCor in 2011 as discussed in NOTE 11 and the warrants issued in connection with a private placement completed in April 2013 (the “Private Placement Warrants”). The Private Placement Warrants contain provisions that protect the holders from a decline in the issue price of our common stock or “down round” provisions. In accordance with the accounting standards, we determined that these instruments qualify as derivative liabilities and should be recorded at their fair value on the date of issuance and re-measured at fair value each reporting period with the change reported in earnings). The Black-Scholes Model is an acceptable model in accordance with the GAAP. The Black-Scholes Model requires the use of a number of assumptions including volatility of the stock price, the weighted average risk-free interest rate, and the weighted average term of the Warrant. The fair value of the Warrants issued to HealthCor and the Private Placement Warrants was computed using the Binomial Lattice model, incorporating transaction details such as the price of our Common Stock, contractual terms, maturity and risk free rates, as well as assumptions about future financings, volatility, and holder behavior. Due to the down round provisions associated with the exercise price of these Warrants, we determined that the Binomial Lattice model was the most appropriate model for valuing these instruments. As discussed in NOTE 11, the Warrants issued to HealthCor in 2011 were substantially amended and no longer contain down round provisions. The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds whose maturity period is appropriate for the term of the Warrants and is calculated by using the average daily historical stock prices through the day preceding the grant date. Estimated volatility is a measure of the amount by which our stock price is expected to fluctuate each year during the expected life of the award. Our estimated volatility is an average of the historical volatility of our stock prices (and that of peer entities whose stock prices were publicly available). Our calculation of estimated volatility is based on historical stock prices over a period equal to the expected life of the awards. Where appropriate we used the historical volatility of peer entities due to the lack of sufficient historical data of our stock price during 2007-2009.

 

Warrant Activity during the Three Months Ended March 31, 2016

 

During the three months ended March 31, 2016, no Warrants were issued and none were exercised or expired.

 

As of December 31, 2015, we recorded a warrant liability of $168,805 in our consolidated financial statements. At March 31, 2016, the Private Placement Warrants were re-valued with a fair value determination of $84,308, resulting in a difference of $84,497, which was included as change in fair value of warrant liability in other income and expense in the accompanying condensed consolidated financial statements.

 

Warrant Activity during the Three Months Ended March 31, 2015

 

On February 17, 2015, we entered into a Fifth Amendment to the Note and Warrant Purchase Agreement with HealthCor and certain other investors and agreed to sell and issue (i) additional notes in the initial aggregate principal amount of $6,000,000, with a conversion price per share equal to $0.52 (subject to adjustment for standard anti-dilution provisions) and (ii) additional Warrants for an aggregate of up to 3,692,307 shares of our Common Stock at an exercise price per share equal to $0.52 (subject to adjustment for standard anti-dilution provisions) (the “Fifth Amendment Warrants”). The fair value of the convertible debt and the Fifth Amendment Warrants was determined to be $7,336,615, resulting in a relative fair value of $1,093,105 for the Fifth Amendment Warrants on the date of grant. (See NOTE 11 for further details.)

 

On March 31, 2015, we issued HealthCor a Warrant for up to an aggregate of 1,000,000 shares of our Common Stock in consideration for certain prior waivers of the minimum cash balance requirement in the Purchase Agreement. This Warrant has an exercise price of $0.53 per share and an expiration date of March 31, 2025. (See NOTE 11 for further details).

 

During the three months ended March 31, 2015, warrants to purchase an aggregate of 2,882,626 shares of our Common Stock expired.

 

Options to Purchase Common Stock of the Company

 

During the three months ended March 31, 2016, we granted options to purchase 20,000 shares of our Common Stock (the ‘‘Option(s)’’) to an employee. During the three months ended March 31, 2015, we granted 1,815,000 Options to certain employees and members of our board of directors. During those same three month periods, 65,002 and 41,002 Options, respectively, were canceled and 66,667 and 6,231,310 Options, respectively, expired.

 

A summary of our stock option activity and related information follows:

 

    Number of Shares Under Options   Weighted Average Exercise Price   Weighted
Average
Remaining
Contractual Life
  Aggregate Intrinsic Value
Balance at December 31, 2015     9,350,667     $ 0.58       7.6     $ 15,705  
   Granted     20,000     $ 0.30       10.0     $ —    
   Expired     (66,667 )                        
   Canceled     (65,002 )                        
Balance at March 31, 2016     9,238,998     $ 0.58       7.4     $ —    
Vested and Exercisable at   March 31, 2016     5,547,825     $ 0.62       6.7     $ —    

 

The valuation methodology used to determine the fair value of the Options issued was the Black-Scholes Model.

 

The assumptions used in the Black-Scholes Model are set forth in the table below.

 

    Three Months
Ended
March 31, 2016
  Year Ended
December 31, 2015
Risk-free interest rate     1.39 %     1.41-1.74 %
Volatility     63.49 %     61.00-71.86 %
Expected life in years     6       6  
Dividend yield     0.00 %     0.00 %

  

The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds whose maturity period is appropriate for the expected term of the Option and is calculated by using the average daily historical stock prices through the day preceding the grant date. Estimated volatility is a measure of the amount by which our stock price is expected to fluctuate each year during the expected life of the award. Our estimated volatility is an average of the historical volatility of our stock prices. Our calculation of estimated volatility is based on historical stock prices over a period equal to the expected life of the awards.

 

Share-based compensation expense for Options charged to our operating results for the three months ended March 31, 2016 and 2015 ($190,843 and $190,106, respectively) is based on awards vested. The estimate of forfeitures are to be recorded at the time of grant and revised in subsequent periods if actual forfeitures differ from the estimates. We have not included an adjustment to our stock based compensation expense based on the nominal amount of the historical forfeiture rate. We do, however, revise our stock based compensation expense based on actual forfeitures during each reporting period.

 

At March 31, 2016, total unrecognized estimated compensation expense related to non-vested Options granted prior to that date was approximately $842,000, which is expected to be recognized over a weighted-average period of 1.5 years. No tax benefit was realized due to a continued pattern of operating losses.

XML 21 R10.htm IDEA: XBRL DOCUMENT v3.4.0.3
OTHER CURRENT ASSETS
3 Months Ended
Mar. 31, 2016
Other Current Assets  
OTHER CURRENT ASSETS

NOTE 4 – OTHER CURRENT ASSETS

 

Other current assets consist of the following:

 

    March 31,
2016
  December 31,
2015
Prepaid expenses   $ 490,119     $ 467,137  
Other current assets     3,060       3,938  
          TOTAL OTHER CURRENT ASSETS   $ 493,179     $ 471,075  
XML 22 R11.htm IDEA: XBRL DOCUMENT v3.4.0.3
PROPERTY AND EQUIPMENT
3 Months Ended
Mar. 31, 2016
Property, Plant and Equipment [Abstract]  
PROPERTY AND EQUIPMENT

NOTE 5 – PROPERTY AND EQUIPMENT

 

Property and equipment consist of the following:

 

    March 31,
2016
  December 31,
2015
Network equipment   $ 11,762,725     $ 11,310,494  
Office equipment     218,875       200,683  
Vehicles     158,803       158,803  
Test equipment     117,871       115,712  
Furniture     84,094       81,838  
Warehouse equipment     9,524       9,524  
Leasehold improvements     5,121       5,121  
      12,357,013       11,882,175  
Less: accumulated depreciation     (7,822,295 )     (7,398,735 )
TOTAL PROPERTY AND EQUIPMENT   $ 4,534,718     $ 4,483,440  

 

Depreciation expense for the three months ended March 31, 2016 and 2015 was $423,560 and $409,634, respectively.

XML 23 R12.htm IDEA: XBRL DOCUMENT v3.4.0.3
OTHER ASSETS
3 Months Ended
Mar. 31, 2016
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
OTHER ASSETS

NOTE 6 – OTHER ASSETS

 

Intangible assets consist of the following:

 

    March 31, 2016
    Cost   Accumulated Amortization   Net
Patents and trademarks   $ 591,747     $ 74,018     $ 517,729  
Other intangible assets     56,263       43,473       12,790  
     TOTAL INTANGIBLE ASSETS   $ 648,010     $ 117,491     $ 530,519  

 

    December 31, 2015
    Cost   Accumulated Amortization   Net
Patents and trademarks   $ 420,137     $ 53,706     $ 366,431  
Other intangible assets     56,263       41,929       14,334  
     TOTAL INTANGIBLE ASSETS   $ 476,400     $ 95,635     $ 380,765  

 

Other assets consist of the following:

 

    March 31, 2016
    Cost   Accumulated Amortization   Net
Deferred debt issuance costs   $ 1,257,778     $ 136,763     $ 1,121,015  
Prepaid financing costs     805,917       101,919       703,998  
Deferred installation costs     1,825,804       1,323,523       502,281  
Prepaid license fee     249,999       75,135       174,864  
Security deposit     46,124       —         46,124  
     TOTAL OTHER ASSETS   $ 4,185,622     $ 1,637,340     $ 2,548,282  

 

Other assets consist of the following:

 

    December 31, 2015
    Cost   Accumulated Amortization   Net
Deferred debt issuance costs   $ 1,257,778     $ 91,840     $ 1,165,938  
Deferred financing costs     805,917       74,070       731,847  
Deferred installation costs     1,787,869       1,220,982       566,887  
Prepaid license fee     249,999       71,037       178,962  
Security deposit     46,124       —         46,124  
     TOTAL OTHER ASSETS   $ 4,147,687     $ 1,457,929     $ 2,689,758  
XML 24 R13.htm IDEA: XBRL DOCUMENT v3.4.0.3
OTHER CURRENT LIABILITIES
3 Months Ended
Mar. 31, 2016
Payables and Accruals [Abstract]  
OTHER CURRENT LIABILITIES

NOTE 7 – OTHER CURRENT LIABILITIES

 

Other current liabilities consist of the following:

 

    March 31,
2016
  December 31,
2015
Accrued taxes   $ 243,683     $ 235,162  
Accrued insurance     135,059       —    
Allowance for system removal     102,800       54,771  
Accrued paid time off     68,007       108,526  
Accrued professional services     11,284       67,500  
Other accrued liabilities     25,210       13,267  
TOTAL OTHER CURRENT LIABILITIES   $ 586,043     $ 479,226  
XML 25 R14.htm IDEA: XBRL DOCUMENT v3.4.0.3
INCOME TAXES
3 Months Ended
Mar. 31, 2016
Income Tax Disclosure [Abstract]  
INCOME TAXES

NOTE 8 – INCOME TAXES

 

Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. We do not expect to pay any significant federal or state income tax for 2016 as a result of the losses recorded during the three months ended March 31, 2016 and the additional losses expected for the remainder of 2016 and net operating loss carry forwards from prior years. Accounting standards require the consideration of a valuation allowance for deferred tax assets if it is “more likely than not” that some component or all of the benefits of deferred tax assets will not be realized. As of March 31, 2016, we maintained a full valuation allowance for all deferred tax assets. Based on these requirements, no provision or benefit for income taxes has been recorded. There were no recorded unrecognized tax benefits at the end of the reporting period.

XML 26 R15.htm IDEA: XBRL DOCUMENT v3.4.0.3
JOINT VENTURE AGREEMENT
3 Months Ended
Mar. 31, 2016
Equity Method Investments and Joint Ventures [Abstract]  
JOINT VENTURE AGREEMENT

NOTE 9 – JOINT VENTURE AGREEMENT

 

On November 16, 2009, we entered into a Master Investment Agreement (the “Rockwell Agreement”) with Rockwell Holdings I, LLC, a Wisconsin limited liability (“Rockwell”). Under the terms of the Rockwell Agreement, we used funds from Rockwell to fully implement the CareView System™ in Hillcrest Medical Center in Tulsa, Oklahoma (“Hillcrest”) and Saline Memorial Hospital in Benton, Arkansas (“Saline”) (the “Project Hospital(s)”). CareView-Hillcrest, LLC and CareView-Saline, LLC were created as the operating entities for the Project Hospitals under the Rockwell Agreement (the “Project LLC(s) “).

 

Rockwell and the Company own 50% of each Project LLC. We contributed our intellectual property rights and hospital contract with each Project Hospital and Rockwell contributed cash to be used for the purchase of equipment for the Project LLCs. Rockwell provided $1,151,205 as the initial funding, $575,603 was provided under promissory notes (the “Project Notes”) and $575,602 was provided under an investment interest (“Rockwell’s Preferential Return”). We classified Rockwell’s Preferential Return as a liability since it represents an unconditional obligation by us and is recorded in mandatorily redeemable equity in joint venture on the accompanying consolidated financial statements. The Project Notes and Rockwell’s Preferential Returns both earn interest at the rate of ten percent (10%) and are secured by a security interest in all of the equipment in the Project Hospitals, intellectual property rights, and the Project Hospital Contract

 

In accordance with GAAP, we determined the Project LLCs are VIEs based on the fact that the total equity investment at risk was not sufficient to finance the entities activities without additional financial support. We consolidate the Project LLCs as we have the power to direct the activities and an obligation to absorb losses of the VIEs. We have no contractual liability to Rockwell with respect to the repayment obligations of the Project LLCs.

 

As additional consideration to Rockwell for providing the funding, we granted Rockwell 1,151,206 Warrants on the date of the Rockwell Agreement, and using the Black-Scholes Model valued the Warrants at $1,124,728 (the “Project Warrant”). The Project Warrant is classified as equity and is included in additional paid-in-capital on the accompanying condensed consolidated financial statements. We allocated the proceeds to the Project Warrant, the Project Notes and Preferential Returns based on the relative fair value. The originally recorded debt discount of $636,752 was amortized over the expected life of the debt and was fully amortized as of March 31, 2013.

 

Hillcrest notified us of its desire to terminate its hospital agreement effective January 27, 2012. This termination resulted in the loss of monthly revenue totaling approximately $20,000, which revenue was used to make payments on our indebtedness to Rockwell. To date, we have incurred system removal costs of approximately $3,000 for removing our equipment from the hospital premises. We currently have approximately 100 units remaining on site at Hillcrest. Included in other current liabilities in the accompanying condensed consolidated financial statements is an allowance for system removal totaling $10,250 to reserve for the removal of the remaining units.

 

As of March 31, 2016, the Project LLCs’ indebtedness to Rockwell, including principal and interest totaled approximately $1,200,000. On February 19, 2015, the Project Notes and Rockwell’s Preferential Returns due dates were extended to June 30, 2016. In October 2015, the expiration date of the Project Warrants was extended to November 16, 2017. All other provisions of the Project Warrant remained unchanged. The Project Warrant were revalued in October 2015 resulting in a $102,457 increase in fair value, which has been recorded as non-cash costs included in general and administration expense in the accompanying condensed consolidated financial statements. CareView, as 50% owner of the LLCs, is currently negotiating with Rockwell to settle the debt of the LLCs through the issuance of shares of CareView’s Common Stock. Although CareView anticipates that this settlement will be forthcoming in the near future, CareView and the LLCs can give no assurances that a settlement will be negotiated, or if negotiated and settled, that it will be through the issuance of CareView’s Common Stock.

XML 27 R16.htm IDEA: XBRL DOCUMENT v3.4.0.3
VARIABLE INTEREST ENTITIES
3 Months Ended
Mar. 31, 2016
Variable Interest Entities  
VARIABLE INTEREST ENTITIES

NOTE 10 – VARIABLE INTEREST ENTITIES

 

The Company consolidates VIEs of which it is the primary beneficiary. The liabilities recognized as a result of consolidating these VIEs do not necessarily represent additional claims on our general assets; rather, they represent claims against the specific assets of the consolidated VIEs. Conversely, assets recognized as a result of consolidating these VIEs do not represent additional assets that could be used to satisfy claims against our general assets.

 

The total consolidated VIE assets and liabilities reflected on our condensed consolidated balance sheets at March 31, 2016 and December 31, 2015 are as follows:

 

    March 31,
2016
  December 31,
2015
Assets        
Cash   $ 332     $ 2,146  
Receivables     4,731       4,731  
    Total current assets     5,063       6,877  
Property, net     43,463       50,382  
     Total assets   $ 48,526     $ 57,259  
                 
Liabilities                
Accounts payable   $ 134,573     $ 132,170  
Accrued interest     276,508       261,450  
Other current liabilities     27,749       26,936  
Notes payable     441,498       441,498  
Mandatorily redeemable interest     441,498       441,498  
            Total liabilities   $ 1,321,826     $ 1,303,552  

 

The financial performance of the consolidated VIEs reflected on our condensed consolidated statements of operations for the three months ended March 31, 2016 and 2015 is as follows:

 

    March 31,
    2016   2015
Revenue   $ 7,097     $ 7,097  
Network operations expense     4,164       4,164  
General and administrative expense     813       1,130  
Depreciation     12,133       12,467  
    Total operating costs     17,110       17,761  
      Operating loss     (10,013 )     (10,664 )
Other expense     (22,207 )     (21,780 )
Loss before taxes     (32,220 )     (32,444 )
Provision for taxes     —         —    
Net loss     (32,220 )     (32,444 )
Net loss attributable to noncontrolling interest     (16,110 )     (16,222 )
Net loss attributable to CareView Communications, Inc.   $ (16,110 )   $ (16,222 )
XML 28 R17.htm IDEA: XBRL DOCUMENT v3.4.0.3
AGREEMENT WITH HEALTHCOR
3 Months Ended
Mar. 31, 2016
Agreement With Healthcor  
AGREEMENT WITH HEALTHCOR

NOTE 11 – AGREEMENT WITH HEALTHCOR

 

On April 21, 2011, we entered into a Note and Warrant Purchase Agreement (as subsequently amended) (the “HealthCor Purchase Agreement”) with HealthCor. Pursuant to the terms HealthCor Purchase Agreement, we sold Senior Secured Convertible Notes to HealthCor in the principal amount of $9,316,000 and $10,684,000, respectively (collectively the “2011 HealthCor Notes”). The 2011 HealthCor Notes have a maturity date of April 20, 2021. We also issued Warrants to HealthCor for the purchase of an aggregate of up to 5,488,456 and 6,294,403 shares, respectively, of our Common Stock at an exercise price of $1.40 per share (collectively the “2011 HealthCor Warrants”).

 

So long as no event of default has occurred, the outstanding principal balances of the 2011 HealthCor Notes accrue interest from April 21, 2011 through April 20, 2016 (the “First Five Year Note Period”) at the rate of 12.5% per annum, compounding quarterly and shall be added to the outstanding principal balances of the 2011 HealthCor Notes on the last day of each calendar quarter. Interest accruing from April 21, 2016 through April 20, 2021 (the “Second Five Year Note Period”) at a rate of 10% per annum, compounding quarterly, may be paid quarterly in arrears in cash or, at our option, such interest may be added to the outstanding principal balances of the 2011 HealthCor Notes on the last day of each calendar quarter.

 

From the date any event of default occurs, the interest rate, then applicable, shall be increased by five percent (5%) per annum. HealthCor has the right, upon an event of default, to declare due and payable any unpaid principal amount of the 2011 HealthCor Notes then outstanding, plus previously accrued but unpaid interest and charges, together with the interest then scheduled to accrue (calculated at the default rate described in the immediately preceding sentence) through the end of the First Five Year Note Period or the Second Five Year Note Period, as applicable.

 

At any time after April 21, 2011, HealthCor is entitled to convert any portion of the outstanding and unpaid accrued interest on and principal balances of the 2011 HealthCor Notes into fully paid and non-assessable shares of our Common Stock at a conversion rate of $1.25 per share, subject to adjustment in accordance with anti-dilution provisions set forth in the 2011 HealthCor Notes. As of March 31, 2016, the underlying shares of our Common Stock related to the 2011 HealthCor Notes totaled approximately 30,000,000.

 

On January 31, 2012, we entered into the Second Amendment to the HealthCor Purchase Agreement with HealthCor (the “Second Amendment”) amending the HealthCor Purchase Agreement, and sold Senior Secured Convertible Notes to HealthCor in the principal amounts of $2,329,000 and $2,671,000, respectively (collectively the “2012 HealthCor Notes”). As provided by the Second Amendment, the 2012 HealthCor Notes are in substantially the same form as the 2011 HealthCor Notes, with changes to the “Issuance Date,” “Maturity Date,” “First Five Year Note Period” and other terms to take into account the timing of the issuance of the 2012 HealthCor Notes. The 2012 HealthCor Notes have a maturity date of January 30, 2022. In addition, the provisions regarding interest payments, interest acceleration, optional conversion, negative covenants, and events of default, preemptive rights and registration rights are the same as those of the 2011 HealthCor Notes. At any time after January 30, 2012, HealthCor is entitled to convert any portion of the outstanding and unpaid accrued interest on and principal balances of the 2012 HealthCor Notes into fully paid and non-assessable shares of our Common Stock at a conversion rate of $1.25 per share, subject to adjustment in accordance with anti-dilution provisions set forth in the 2012 HealthCor Notes. As of March 31, 2016, the underlying shares of our Common Stock related to the 2012 HealthCor Notes totaled approximately 7,000,000.

 

On August 20, 2013, we entered into a Third Amendment to the HealthCor Purchase Agreement with HealthCor (the “Third Amendment”) to redefine our minimum cash balance requirements. Previously we were required to maintain a minimum cash balance of $5,000,000 and should we drop below that balance, it triggered a default. The Third Amendment allowed for a reduced minimum cash period, as defined in the HealthCor Purchase Agreement, which allowed us to drop below $5,000,000, but not below $4,000,000. All other terms and conditions of the HealthCor Purchase Agreement, including all amendments thereto, remain the same. Upon entering the reduced minimum cash period (which occurred on October 7, 2013), we had 120 days to return our minimum cash balance to the original $5,000,000. On January 16, 2014, we increased our cash balance to in excess of the original $5,000,000 minimum allowable balance.

 

On January 16, 2014, we entered into a Fourth Amendment to the HealthCor Purchase Agreement with HealthCor (the “Fourth Amendment”) and sold Senior Secured Convertible Notes to HealthCor in the principal amounts of $2,329,000 and $2,671,000 (collectively the ‘‘2014 HealthCor Notes’’). As provided by the Fourth Amendment, the 2014 HealthCor Notes are in substantially the same form as the 2011 HealthCor Notes, with changes to the “Issuance Date,” “Maturity Date,” “First Five Year Note Period” and other terms to take into account the timing of the issuance of the 2014 HealthCor Notes. The 2014 HealthCor Notes have a maturity date of January 15, 2024. In addition, the provisions regarding interest payments, interest acceleration, optional conversion, negative covenants, and events of default, preemptive rights and registration rights are the same as those of the 2011 HealthCor Notes. At any time after January 16, 2014, HealthCor is entitled to convert any portion of the outstanding and unpaid accrued interest on and principal balances of the 2014 HealthCor Notes into fully paid and non-assessable shares of our Common Stock at a conversion rate of $0.40 per share, subject to adjustment in accordance with anti-dilution provisions set forth in the 2014 HealthCor Notes. Additionally we issued Warrants to HealthCor for the purchase of an aggregate of up to 4,000,000 shares of our Common Stock at an exercise price of $0.40 per share (collectively the “2014 HealthCor Warrants”). As of March 31, 2016, the underlying shares of our Common Stock related to the 2014 HealthCor Notes totaled approximately 16,000,000.

 

On December 4, 2014, we entered into a Fifth Amendment to the HealthCor Purchase Agreement (the “Fifth Amendment”) with HealthCor and certain additional investors (such additional investors, the “New Investors” and, collectively with HealthCor Partners Fund, LP, the “Investors”) and agreed to sell and issue (i) additional notes in the initial aggregate principal amount of $6,000,000,with a conversion price per share of $0.52 (subject to adjustment as described therein) (the “Fifth Amendment Notes”) and (ii) additional Warrants for an aggregate of up to 3,692,308 shares of our Common Stock at an exercise price per share of $0.52 (subject to adjustment as described therein) (the “Fifth Amendment Warrants”). As provided by the Fifth Amendment, the Fifth Amendment Notes are in substantially the same form as the 2011 HealthCor Notes, with changes to the “Issuance Date,” “Maturity Date,” “First Five Year Note Period” and other terms to take into account the timing of the issuance of the Fifth Amendment Notes. The Fifth Amendment Notes have a maturity date of February 16, 2025. In addition, the provisions regarding interest payments, interest acceleration, optional conversion, negative covenants, and events of default, preemptive rights and registration rights are the same as those of the 2011 HealthCor Notes. The New Investors are composed of all but one of our current directors and one of our officers. On February 17, 2015, the Company and the Investors closed on the transactions contemplated by the Fifth Amendment. In connection with this closing, the Company and the Investors entered into an Amended and Restated Pledge and Security Agreement (the “Amended Security Agreement”), amending and restating that certain Pledge and Security Agreement dated as of April 20, 2011, and an Amended and Restated Intellectual Property Security Agreement (the “Amended IP Security Agreement”), amending and restating that certain Intellectual Property Security Agreement dated as of April 20, 2011. As of March 31, 2016, the underlying shares of our Common Stock related to the Fifth Amendment Notes totaled approximately 2,000,000 to HealthCor and 11,000,000 to the New Investors.

 

On March 31, 2015, we entered into the Sixth Amendment to the HealthCor Purchase Agreement (the “Sixth Amendment”) pursuant to which, among other things, (i) the requirement to maintain a minimum cash balance of $5,000,000 was reduced to a minimum cash balance of $2,000,000 and (ii) the amendment provision was revised to permit the HealthCor Purchase Agreement to be amended by the Company and the holders of the majority of the Common Stock underlying the outstanding notes and warrants to purchase shares of our Common Stock sold pursuant to the HealthCor Purchase Agreement. On March 31, 2015, we also issued a warrant to HealthCor to purchase up to an aggregate of 1,000,000 shares of our Common Stock in consideration for certain prior waivers of the minimum cash balance requirement in the HealthCor Purchase Agreement (the “Sixth Amendment Warrant”). The Sixth Amendment Warrant has an exercise price per share of $0.53 (subject to adjustment as described therein) and an expiration date of March 31, 2025.

 

On June 26, 2015, we (i) entered into a Seventh Amendment to the HealthCor Purchase Agreement (the “Seventh Amendment”) pursuant to which the HealthCor Purchase Agreement was amended to permit the Company to enter into and perform its obligations under the Credit Agreement entered into with PDL BioPharma, Inc., as administrative agent and lender (the “Lender”) (the “PDL Credit Agreement”); (ii) executed an Amendment to the Registration Rights Agreement between the Company and HealthCor dated April 21, 2011 (the “RR Agreement”) pursuant to which the RR Agreement was amended to make its priority of registration consistent with the Registration Rights Agreement executed by the Company and Lender (as detailed in NOTE 12); (iii) amended the 2011 HealthCor Notes to extend the maturity date, in the event that Tranche Two of the PDL Credit Agreement is funded, for such notes to 90 days after the earlier of the Tranche Two maturity date or repayment date, but not later than December 31, 2022, (iv) amended the 2012 HealthCor Notes, to set the maturity date at January 30, 2022 and, in the event that Tranche Two of the PDL Credit Agreement is funded, to extend such maturity date to 90 days after the earlier of the Tranche Two maturity date or repayment date, but later than December 31, 2022; and (v) amended each of the Senior Secured Convertible Notes issued under the HealthCor Purchase Agreement (the “HealthCor Notes”) to, among other things, subordinate the HealthCor Notes to the loans under the PDL Credit Agreement (as detailed in NOTE 12) and to increase certain event of default acceleration and payment thresholds.

 

Accounting Treatment

 

When issuing debt or equity securities convertible into common stock at a discount to the fair value of the common stock at the date the debt or equity financing is committed, a company is required to record a beneficial conversion feature (“BCF”) charge. We had three separate issuances of equity securities convertible into common stock that qualify under this accounting treatment, (i) the 2011 HealthCor Notes, (ii) the 2012 HealthCor Notes and (iii) the 2014 HealthCor Notes. Because the conversion option and the 2011 HealthCor Warrants on the 2011 HealthCor Notes were originally classified as a liability when issued due to the down round provision and the removal of the provision requiring liability treatment, and subsequently reclassified to equity on December 31, 2011 when the 2011 HealthCor Notes were amended, only the accrued interest capitalized as payment in kind (‘‘PIK’’) since reclassification qualifies under this accounting treatment. The face amount of the 2012 and 2014 HealthCor Notes and all accrued PIK interest also qualify for this accounting treatment. During the three months ended March 31, 2016 and 2015, we recorded a BCF of $516,844 and $456,987, respectively. The BCF was recorded as a charge to debt discount and a credit to additional paid in capital, with the debt discount, using the effective interest method, amortized to interest expense over the term of the notes. As Warrants were issued with the Fifth Amendment Notes, the proceeds were allocated to the instruments based on relative fair value as the Warrants did not contain any features requiring liability treatment and therefore were classified as equity. The Warrants issued with the Sixth Amendment also did not contain features requiring liability accounting and were recorded at fair value on the date of issuance with the offsetting credit recorded in equity. The value allocated to the Fifth Amendment Warrants was $1,093,105, which was recorded as debt discount with the credit to additional paid in capital. We recorded an aggregate of $592,688 and $552,066 in interest expense for the three months ended March 31, 2016 and 2015, respectively, related to these transactions. The carrying value of the debt with HealthCor and the New Investors at March 31, 2016 approximates fair value as the interest rates used are those currently available to us and would be considered level 3 inputs under the fair value hierarchy.

 

The value allocated to the Sixth Amendment Warrant was $378,000, which was recorded as deferred debt costs with the credit to additional paid in capital. We recorded an aggregate of $14,450 in financing costs for the three months ended March 31, 2016 related to this transaction.

XML 29 R18.htm IDEA: XBRL DOCUMENT v3.4.0.3
AGREEMENT WITH PDL BIOPHARMA, INC.
3 Months Ended
Mar. 31, 2016
Agreement With Pdl Biopharma Inc.  
AGREEMENT WITH PDL BIOPHARMA

NOTE 12 – AGREEMENT WITH PDL BIOPHARMA, INC.

 

On June 26, 2015, we entered into a Credit Agreement with PDL BioPharma, Inc., as administrative agent and lender (“PDL” or the “Lender”) (the “PDL Credit Agreement”). Under the PDL Credit Agreement the Lender made available to us up to $40 million in two tranches of $20 million each.

 

Certain covenants of the PDL Credit Agreement include (a) in the event that a milestone relating to the placement of 9,000 billable units occurs on or before October 31, 2015, the Lender will fund us $20 million (the “Tranche One Loan”) and (b) in the event that additional milestones relating to (i) the placement of 27,750 billable units and (ii) the Company recording earnings before interest, tax, depreciation, and amortization (EBITDA) of not less than $7,000,000 on an annualized basis for the three calendar month period prior to the funding (on or before June 30, 2017), the Lender will fund us an additional $20 million (the “Tranche Two Loan” and, together with the Tranche One Loan, the “Loans”). Outstanding borrowings under the Tranche One Loan bear interest at the rate of 13.5% per annum, payable quarterly in arrears. Outstanding borrowings under the Tranche Two Loan bear interest at the rate of 13.0% per annum, payable quarterly in arrears. From the date any event of default occurs, the interest rate shall be increased by five percent (5%) per annum. The PDL Credit Agreement includes a minimum cash balance requirement of $3,250,000 and should we drop below $3,250,000, it will trigger a default. The $3,250,000 has been recorded as restricted cash on the condensed consolidated balance sheets at March 31, 2016 and December 31, 2015.

 

On October 7, 2015, the Company entered into a First Amendment (the “First Amendment”) to the PDL Credit Agreement. The First Amendment modified the conditions precedent to the funding of each tranche, such that, among other things, we no longer need to attain a specified milestone relating to the placement of our products in order for the Lender to fund us the Tranche One Loan. Contemporaneously with the execution of the First Amendment we borrowed the Tranche One Loan and issued to the Lender a term note in the principal amount of $20 million (the “Tranche One Term Note”), payable in accordance with the terms of the Credit Agreement, as amended. The First Amendment also included a revision to the Tranche Two Milestone, which changed from a minimum of 27,750 billable units (defined as one unit for each room control platform and two units for each nurse station monitor) to 31,500 Bed Equivalent Units (defined as a billable unit plus 14 units for each head-end server operating as the communication center and fractional units for mobile assets as applicable). 

 

Once funded, the PDL Credit Agreement requires interest only payments for the first eight interest payment dates and principal plus interest payments will commence on the ninth interest payment date. We may elect to pay a portion of the interest due in the form of additional loans (interest paid in kind) during the first eight interest payment dates. The first principal payment on the Tranche One Term Note is due on January 8, 2018 in the amount of $1,666,667, with similar amounts due quarterly thereafter with the final payment due on October 8, 2020. Each tranche will mature on the fifth anniversary of the date borrowed. We may elect to prepay the Loans at any time without any premium or penalty, subject to certain conditions.

 

The obligations under the PDL Credit Agreement are secured by a pledge of substantially all of the assets of the Company and certain of its domestic subsidiaries. We executed a Subordination and Intercreditor Agreement (the “Subordination and Intercreditor Agreement”), with the Lender, HealthCor and the New Investors (as defined in NOTE 11) pursuant to which we granted first-priority liens on our pledged assets to the Lender and second-priority liens on such pledged assets to HealthCor and the New Investors.

 

The PDL Credit Agreement contains customary affirmative covenants for transactions of this type and other affirmative covenants agreed to by the Company and the Lender, including, among others, the provision of annual and quarterly reports, maintenance of property, insurance, compliance with laws and contractual obligations and payment of taxes. The PDL Credit Agreement contains customary negative covenants for transactions of this type and other negative covenants agreed to by the Company and the Lender, including, among others, restrictions on the incurrence of indebtedness, the granting of liens, making restricted payments and investments, entering into affiliate transactions and transferring assets. The PDL Credit Agreement also provides for a number of customary events of default, including payment, bankruptcy, covenant, representation and warranty and judgment defaults.

 

Contemporaneously with the execution of the PDL Credit Agreement, we issued to the Lender a warrant to purchase 4,444,445 shares of our Common Stock at an exercise price of $0.45 per share, subject to adjustment as described therein (the “PDL Warrant”). The PDL Warrant expires on June 26, 2025. Pursuant to the terms of the First Amendment we amended and restated the PDL Warrant, reducing the exercise price per share from $0.45 to $0.40 (the “Amended Warrant”). All other provisions of the Amended Warrant remained unchanged.

 

In addition, contemporaneously with the execution of the PDL Credit Agreement the Company and the Lender executed (i) a Registration Rights Agreement pursuant to which the Company agreed to provide the Lender with certain registration rights with respect to the shares of Common Stock issuable upon exercise of the PDL Warrant (the “PDL RRA”), (ii) a Guarantee and Collateral Agreement (the “Guarantee and Collateral Agreement”) pursuant to which certain of our subsidiaries guaranteed the performance of our obligations under the PDL Credit Agreement and granted the Lender a security interest in such subsidiaries’ tangible and intangible assets securing our performance of the same, and (iii) a Patent Security Agreement and a Trademark Security Agreement pursuant to which we granted the Lender a security interest in a certain subsidiary’s tangible and intangible assets securing the performance of our obligations under the PDL Credit Agreement.

 

Accounting Treatment

 

In connection with the Credit Agreement, we issued the PDL Warrant to the Lender. The fair value of the PDL Warrant at issuance was $1,257,778, which has been recorded as deferred issuance costs in the accompanying condensed consolidated financial statements. The deferred debt issuance costs associated with the PDL Credit Agreement are recorded as assets in accordance with the accounting standards as the PDL Credit Agreement is considered to be a credit facility and the warrants were payment for the facility and not the drawdowns. These costs are amortized to interest expense using the straight line method over the term of the Credit Agreement. Upon amendment of the PDL Warrant, we evaluated whether there was an increase in fair value which would require recognition of additional costs. No such increase in fair value was noted and no adjustment to the PDL Warrant valuation was necessary. For the three months ended March 31, 2016, $44,922 was amortized to interest expense. For the period from June 25, 2015 through December 31, 2015, $91,840 was amortized to interest expense. The PDL Warrant has not been exercised. We also incurred certain financing costs totaling $805,917 in the accompanying condensed consolidated financial statements. These costs have been recorded as deferred financing costs and are being amortized to interest expense over the term of the Credit Agreement. For the three months ended March 31, 2016, $27,849 was amortized to interest expense. For the period from June 25, 2015 through December 31, 2015, $74,071 has been amortized.

XML 30 R19.htm IDEA: XBRL DOCUMENT v3.4.0.3
BASIS OF PRESENTATION AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (Policies)
3 Months Ended
Mar. 31, 2016
Basis Of Presentation And Recently Issued Accounting Pronouncements Policies  
Interim Financial Statements

Interim Financial Statements

 

The accompanying unaudited interim condensed consolidated financial statements of CareView Communications, Inc. (“CareView”, the “Company”, “we”, “us” or “our”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, such financial statements include all adjustments (consisting solely of normal recurring adjustments) necessary for the fair statement of the financial information included herein in accordance with GAAP and the rules and regulations of the Securities and Exchange Commission (the “SEC”). The balance sheet at December 31, 2015 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Results of operations for interim periods are not necessarily indicative of results for the full year. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2015 as filed with the SEC on March 30, 2016.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

 

Our financial instruments consist primarily of receivables, accounts payable, accrued expenses and short- and long-term debt. The carrying amount of receivables, accounts payable and accrued expenses approximates our fair value because of the short-term maturity of such instruments. We have elected not to carry our debt instruments at fair value. The carrying amount of our debt approximates fair value. Interest rates that are currently available to us for issuance of short- and long-term debt with similar terms and remaining maturities are used to estimate the fair value of the our short- and long-term debt and would be considered Level 3 inputs under the fair value hierarchy.

 

We have categorized our assets and liabilities that are valued at fair value on a recurring basis into a three-level fair value hierarchy in accordance with GAAP. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and lowest priority to unobservable inputs (Level 3).

 

Assets and liabilities recorded in the condensed consolidated balance sheets at fair value are categorized based on a hierarchy of inputs, as follows:

 

Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 - Quoted prices for similar assets or liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

Level 3 - Unobservable inputs for the asset or liability.

 

The Company’s financial assets and liabilities recorded at fair value on a recurring basis include the fair value of warrant liability as detailed below. The fair value of this warrant liability is included in long-term liabilities on the accompanying condensed consolidated financial statements. 

 

The following table provides the financial assets and liabilities reported at fair value and measured on a recurring basis:

 

Description   Assets/
(Liabilities)
Measured at Fair Value
  Quoted Prices in Active Markets for Identical Assets
(Level 1)
  Significant Other Observable Inputs
(Level 2)
  Significant Other Unobservable Inputs
(Level 3)
Fair value of warrant liability   $ (84,308 )   $ —       $ —       $ (84,308 )

 

The following table provides a summary of changes in fair value associated with the Level 3 liabilities for the three months ended March 31, 2016

 

    Fair Value Measurements Using Significant Unobservable Inputs
(Level 3)
Balance at January 1, 2016   $ (168,805 )
Issuances of derivative liabilities     —    
Change in fair value of warrant liability     (84,497 )
Transfers in and/out of Level 3     —    
Ending balance at March 31, 2016   $ (84,308 )

 

The above table of Level 3 liabilities begins with the prior period balance and adjusts the balance for changes that occurred during the current period. The ending balance of the Level 3 securities presented above represent our best estimates and may not be substantiated by comparisons to independent markets and, in many cases, could not be realized in immediate settlement of the instruments.

Earnings Per Share

Earnings Per Share

 

We calculate earnings per share (“EPS”) in accordance with GAAP, which requires the computation and disclosure of two EPS amounts, basic and diluted. Basic EPS is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted EPS is computed based on the weighted average number of common shares outstanding plus all potentially dilutive common shares outstanding during the period under the treasury stock method. Such potential dilutive common shares consist of stock options, warrants and convertible debt. Potential common shares totaling 110,156,518 and 104,333,559 at March 31, 2016 and 2015, respectively, have been excluded from the diluted earnings per share calculation as they are anti-dilutive due to our reported net loss

Recently Issued and Newly Adopted Accounting Pronouncements

Recently Issued and Newly Adopted Accounting Pronouncements

 

In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”). The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. We are evaluating the impact that ASU 2016-03 will have on our consolidated financial statements and related disclosures.

 

There have been no material changes to our significant accounting policies as summarized in NOTE 2 of our Annual Report on Form 10-K for the year ended December 31, 2015. We do not expect that the adoption of any recent accounting pronouncements will have a material impact on our accompanying condensed consolidated financial statements.

XML 31 R20.htm IDEA: XBRL DOCUMENT v3.4.0.3
BASIS OF PRESENTATION AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (Tables)
3 Months Ended
Mar. 31, 2016
Accounting Policies [Abstract]  
Schedule of financial assets and liabilities reported at fair value and measured on a recurring basis

The following table provides the financial assets and liabilities reported at fair value and measured on a recurring basis:

 

Description   Assets/
(Liabilities)
Measured at Fair Value
  Quoted Prices in Active Markets for Identical Assets
(Level 1)
  Significant Other Observable Inputs
(Level 2)
  Significant Other Unobservable Inputs
(Level 3)
Fair value of warrant liability   $ (84,308 )   $ —       $ —       $ (84,308 )
Schedule of summary of changes in fair value associated with the Level 3 liabilities

The following table provides a summary of changes in fair value associated with the Level 3 liabilities for the three months ended March 31, 2016

 

    Fair Value Measurements Using Significant Unobservable Inputs
(Level 3)
Balance at January 1, 2016   $ (168,805 )
Issuances of derivative liabilities     —    
Change in fair value of warrant liability     (84,497 )
Transfers in and/out of Level 3     —    
Ending balance at March 31, 2016   $ (84,308 )
XML 32 R21.htm IDEA: XBRL DOCUMENT v3.4.0.3
STOCKHOLDERS' EQUITY (Tables)
3 Months Ended
Mar. 31, 2016
Stockholders' Equity Note [Abstract]  
Schedule of stock option activity

A summary of our stock option activity and related information follows:

 

    Number of Shares Under Options   Weighted Average Exercise Price   Weighted
Average
Remaining
Contractual
Life
  Aggregate Intrinsic Value
Balance at December 31, 2015     9,350,667     $ 0.58       7.6     $ 15,705  
   Granted     20,000     $ 0.30       10.0     $ —    
   Expired     (66,667 )                        
   Canceled     (65,002 )                        
Balance at March 31, 2016     9,238,998     $ 0.58       7.4     $ —    
Vested and Exercisable at   March 31, 2016     5,547,825     $ 0.62       6.7     $ —    
Schedule of assumptions used in the Black-Scholes Model

The assumptions used in the Black-Scholes Model are set forth in the table below.

 

    Three Months
Ended
March 31, 2016
  Year Ended
December 31, 2015
Risk-free interest rate     1.39 %     1.41-1.74 %
Volatility     63.49 %     61.00-71.86 %
Expected life in years     6       6  
Dividend yield     0.00 %     0.00 %
XML 33 R22.htm IDEA: XBRL DOCUMENT v3.4.0.3
OTHER CURRENT ASSETS (Tables)
3 Months Ended
Mar. 31, 2016
Other Current Assets  
Schedule of other current assets

Other current assets consist of the following:

 

    March 31,
2016
  December 31,
2015
Prepaid expenses   $ 490,119     $ 467,137  
Other current assets     3,060       3,938  
          TOTAL OTHER CURRENT ASSETS   $ 493,179     $ 471,075
XML 34 R23.htm IDEA: XBRL DOCUMENT v3.4.0.3
PROPERTY AND EQUIPMENT (Tables)
3 Months Ended
Mar. 31, 2016
Property, Plant and Equipment [Abstract]  
Schedule of property and equipment

Property and equipment consist of the following:

 

    March 31,
2016
  December 31,
2015
Network equipment   $ 11,762,725     $ 11,310,494  
Office equipment     218,875       200,683  
Vehicles     158,803       158,803  
Test equipment     117,871       115,712  
Furniture     84,094       81,838  
Warehouse equipment     9,524       9,524  
Leasehold improvements     5,121       5,121  
      12,357,013       11,882,175  
Less: accumulated depreciation     (7,822,295 )     (7,398,735 )
TOTAL PROPERTY AND EQUIPMENT   $ 4,534,718     $ 4,483,440  
XML 35 R24.htm IDEA: XBRL DOCUMENT v3.4.0.3
OTHER ASSETS (Tables)
3 Months Ended
Mar. 31, 2016
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
Schedule of intangible assets

Intangible assets consist of the following:

 

    March 31, 2016
    Cost   Accumulated Amortization   Net
Patents and trademarks   $ 591,747     $ 74,018     $ 517,729  
Other intangible assets     56,263       43,473       12,790  
     TOTAL INTANGIBLE ASSETS   $ 648,010     $ 117,491     $ 530,519  

 

    December 31, 2015
    Cost   Accumulated Amortization   Net
Patents and trademarks   $ 420,137     $ 53,706     $ 366,431  
Other intangible assets     56,263       41,929       14,334  
     TOTAL INTANGIBLE ASSETS   $ 476,400     $ 95,635     $ 380,765  
Schedule of other assets

Other assets consist of the following:

 

    March 31, 2016
    Cost   Accumulated Amortization   Net
Deferred debt issuance costs   $ 1,257,778     $ 136,763     $ 1,121,015  
Prepaid financing costs     805,917       101,919       703,998  
Deferred installation costs     1,825,804       1,323,523       502,281  
Prepaid license fee     249,999       75,135       174,864  
Security deposit     46,124       —         46,124  
     TOTAL OTHER ASSETS   $ 4,185,622     $ 1,637,340     $ 2,548,282  

 

    December 31, 2015
    Cost   Accumulated Amortization   Net
Deferred debt issuance costs   $ 1,257,778     $ 91,840     $ 1,165,938  
Deferred financing costs     805,917       74,070       731,847  
Deferred installation costs     1,787,869       1,220,982       566,887  
Prepaid license fee     249,999       71,037       178,962  
Security deposit     46,124       —         46,124  
     TOTAL OTHER ASSETS   $ 4,147,687     $ 1,457,929     $ 2,689,758  
XML 36 R25.htm IDEA: XBRL DOCUMENT v3.4.0.3
OTHER CURRENT LIABILITIES (Tables)
3 Months Ended
Mar. 31, 2016
Payables and Accruals [Abstract]  
Schedule of other current liabilities

Other current liabilities consist of the following:

 

    March 31,
2016
  December 31,
2015
Accrued taxes   $ 243,683     $ 235,162  
Accrued insurance     135,059       —    
Allowance for system removal     102,800       54,771  
Accrued paid time off     68,007       108,526  
Accrued professional services     11,284       67,500  
Other accrued liabilities     25,210       13,267  
TOTAL OTHER CURRENT LIABILITIES   $ 586,043     $ 479,226  
XML 37 R26.htm IDEA: XBRL DOCUMENT v3.4.0.3
VARIABLE INTEREST ENTITIES (Tables)
3 Months Ended
Mar. 31, 2016
Variable Interest Entities  
Schedule of VIE assets and liabilities and results of operations

The total consolidated VIE assets and liabilities reflected on our condensed consolidated balance sheets at March 31, 2016 and December 31, 2015 are as follows:

 

    March 31,
2016
  December 31,
2015
Assets        
Cash   $ 332     $ 2,146  
Receivables     4,731       4,731  
    Total current assets     5,063       6,877  
Property, net     43,463       50,382  
     Total assets   $ 48,526     $ 57,259  
                 
Liabilities                
Accounts payable   $ 134,573     $ 132,170  
Accrued interest     276,508       261,450  
Other current liabilities     27,749       26,936  
Notes payable     441,498       441,498  
Mandatorily redeemable interest     441,498       441,498  
            Total liabilities   $ 1,321,826     $ 1,303,552  

 

The financial performance of the consolidated VIEs reflected on our condensed consolidated statements of operations for the three months ended March 31, 2016 and 2015 is as follows:

 

    March 31,
    2016   2015
Revenue   $ 7,097     $ 7,097  
Network operations expense     4,164       4,164  
General and administrative expense     813       1,130  
Depreciation     12,133       12,467  
    Total operating costs     17,110       17,761  
      Operating loss     (10,013 )     (10,664 )
Other expense     (22,207 )     (21,780 )
Loss before taxes     (32,220 )     (32,444 )
Provision for taxes     —         —    
Net loss     (32,220 )     (32,444 )
Net loss attributable to noncontrolling interest     (16,110 )     (16,222 )
Net loss attributable to CareView Communications, Inc.   $ (16,110 )   $ (16,222 )
XML 38 R27.htm IDEA: XBRL DOCUMENT v3.4.0.3
BASIS OF PRESENTATION AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (Details Narrative) - shares
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Accounting Policies [Abstract]    
Anti-dilutive common share equivalents excluded from EPS calculation 110,156,518 104,333,559
XML 39 R28.htm IDEA: XBRL DOCUMENT v3.4.0.3
BASIS OF PRESENTATION AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (Details) - USD ($)
Mar. 31, 2016
Dec. 31, 2015
Fair value of warrant liability $ (84,308) $ (168,805)
Recurring Measurement [Member] | Significant Other Unobservable Inputs (Level 3) [Member]    
Fair value of warrant liability (84,308)  
Recurring Measurement [Member] | Fair Value [Member]    
Fair value of warrant liability $ (84,308)  
XML 40 R29.htm IDEA: XBRL DOCUMENT v3.4.0.3
BASIS OF PRESENTATION AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (Details 1) - USD ($)
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Change in Fair Value of Level 3 Liabilities    
Balance, beginning of period $ (168,805)  
Change in fair value of warrant liability (84,497) $ 238,101
Balance, end of period $ (84,308)  
XML 41 R30.htm IDEA: XBRL DOCUMENT v3.4.0.3
LIQUIDITY AND MANAGEMENTS PLAN (Details Narrative) - USD ($)
Oct. 07, 2015
Mar. 31, 2016
Dec. 31, 2015
Jun. 26, 2015
Mar. 31, 2015
Dec. 31, 2014
Cash and cash equivalents   $ 15,568,573 $ 17,678,969   $ 7,387,160 $ 2,546,262
Restricted cash   3,250,000 $ 3,250,000      
Minimum cash balance required under existing loan documents   2,000,000        
Proceeds from issuance of debt, net $ 19,533,992          
PDL BioPharma, Inc (Administrative Agent and Lender) [Member]            
Minimum cash balance required under existing loan documents       $ 3,250,000    
Debt face amount       40,000,000    
PDL BioPharma, Inc (Administrative Agent and Lender) [Member] | Tranche One Debt [Member]            
Debt face amount   20,000,000   20,000,000    
PDL BioPharma, Inc (Administrative Agent and Lender) [Member] | Tranche Two Debt [Member]            
Debt face amount   $ 20,000,000   $ 20,000,000    
XML 42 R31.htm IDEA: XBRL DOCUMENT v3.4.0.3
STOCKHOLDERS' EQUITY (Details Narrative) - USD ($)
3 Months Ended
Mar. 31, 2015
Feb. 17, 2015
Mar. 31, 2016
Mar. 31, 2015
Dec. 31, 2015
Fair value of the warrants         $ 168,805
Senior secured convertible notes     $ 35,593,463   $ 33,729,093
HealthCor Second Amendment Purchase Agreement [Member]          
Fair value of the warrants   $ 1,093,105      
Senior secured convertible notes   6,000,000      
Fair value of convertible debt   $ 7,336,615      
Debt conversion rate   $ 0.52      
HealthCor Second Amendment Purchase Agreement [Member] | Senior Convertible Notes - 2014 Issuance [Member]          
Warrants issued for financing costs, warrants   3,692,307      
Warrants Revalued [Member]          
Fair value of warrants at re-value     84,308    
Fair value adjustment recorded as non-cash costs     $ 84,497    
Purchase Agreement Warrants [Member] | HealthCor Partners Fund [Member]          
Warrants outstanding 1,000,000     1,000,000  
Warrant exercise price (in dollars per share) $ 0.53     $ 0.53  
Warrant expiration date Mar. 31, 2025        
Warrants [Member]          
Noncash exercise of warrants, shares forfeited for exercise       2,882,626  
XML 43 R32.htm IDEA: XBRL DOCUMENT v3.4.0.3
STOCKHOLDERS' EQUITY (Details Narrative 1) - USD ($)
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Options granted 20,000  
Options shares expired (66,667) (6,231,310)
Options shares cancelled (65,002) (41,002)
Share-based compensation expense $ 190,843 $ 190,106
Unrecognized estimated compensation expense $ 842,000  
Period for recognization of unrecognized compensation expense 1 year 6 months  
Stock Options [Member] | Employees and Board of Directors [Member]    
Options granted   1,815,000
XML 44 R33.htm IDEA: XBRL DOCUMENT v3.4.0.3
STOCKHOLDERS' EQUITY (Details) - USD ($)
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Number Options    
Stock Options Outstanding, Beginning 9,350,667  
Granted 20,000  
Expired (66,667) (6,231,310)
Cancelled (65,002) (41,002)
Stock Options Outstanding, Ending 9,238,998  
Stock Options, vested and exercisable 5,547,825  
Weighted Average Exercise Price    
Stock Options Outstanding, Beginning $ 0.58  
Granted 0.3  
Stock Options Outstanding, Ending 0.58  
Stock Options, vested and exercisable $ 0.62  
Weighted Average Remaining Contractual Life    
Stock Options Outstanding, Beginning 7 years 7 months 6 days  
Granted 10 years  
Stock Options Outstanding, Ending 7 years 4 months 24 days  
Stock Options, vested and exercisable 6 years 8 months 12 days  
Aggregate Intrinsic Value    
Stock Options Outstanding, Beginning $ 15,705  
XML 45 R34.htm IDEA: XBRL DOCUMENT v3.4.0.3
STOCKHOLDERS' EQUITY (Details 1) - Stock Options [Member]
3 Months Ended 12 Months Ended
Mar. 31, 2016
Dec. 31, 2015
Black-Scholes Model:    
Risk-free interest rate 1.39%  
Volatility 63.49%  
Expected life 6 years 6 years
Dividend yield 0.00% 0.00%
Lower Range [Member]    
Black-Scholes Model:    
Risk-free interest rate   1.41%
Volatility   61.00%
Upper Range [Member]    
Black-Scholes Model:    
Risk-free interest rate   1.74%
Volatility   71.86%
XML 46 R35.htm IDEA: XBRL DOCUMENT v3.4.0.3
OTHER CURRENT ASSETS (Details) - USD ($)
Mar. 31, 2016
Dec. 31, 2015
Other Current Assets Details    
Prepaid expenses $ 490,119 $ 467,137
Other current assets 3,060 3,938
TOTAL OTHER CURRENT ASSETS $ 493,179 $ 471,075
XML 47 R36.htm IDEA: XBRL DOCUMENT v3.4.0.3
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($)
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Property, Plant and Equipment [Abstract]    
Depreciation expense $ 423,560 $ 409,634
XML 48 R37.htm IDEA: XBRL DOCUMENT v3.4.0.3
PROPERTY AND EQUIPMENT (Details) - USD ($)
Mar. 31, 2016
Dec. 31, 2015
Property, Plant and Equipment [Line Items]    
Property and equipment, gross $ 12,357,013 $ 11,882,175
Less: accumulated depreciation (7,822,295) (7,398,735)
Property and equipment, net 4,534,718 4,483,440
Network Equipment [Member]    
Property, Plant and Equipment [Line Items]    
Property and equipment, gross 11,762,725 11,310,494
Office Equipment [Member]    
Property, Plant and Equipment [Line Items]    
Property and equipment, gross 218,875 200,683
Vehicles [Member]    
Property, Plant and Equipment [Line Items]    
Property and equipment, gross 158,803 158,803
Test Equipment [Member]    
Property, Plant and Equipment [Line Items]    
Property and equipment, gross 117,871 115,712
Furniture [Member]    
Property, Plant and Equipment [Line Items]    
Property and equipment, gross 84,094 81,838
Warehouse Equipment [Member]    
Property, Plant and Equipment [Line Items]    
Property and equipment, gross 9,524 9,524
Leasehold Improvements [Member]    
Property, Plant and Equipment [Line Items]    
Property and equipment, gross $ 5,121 $ 5,121
XML 49 R38.htm IDEA: XBRL DOCUMENT v3.4.0.3
OTHER ASSETS (Details) - USD ($)
Mar. 31, 2016
Dec. 31, 2015
Finite-Lived Intangible Assets [Line Items]    
Cost $ 648,010 $ 476,400
Accumulated Amortization 117,491 95,635
Intangible assets, Net 530,519 380,765
Patents and Trademarks [Member]    
Finite-Lived Intangible Assets [Line Items]    
Cost 591,747 420,137
Accumulated Amortization 74,018 53,706
Intangible assets, Net 517,729 366,431
Other Intangible Assets [Member]    
Finite-Lived Intangible Assets [Line Items]    
Cost 56,263 56,263
Accumulated Amortization 43,473 41,929
Intangible assets, Net $ 12,790 $ 14,334
XML 50 R39.htm IDEA: XBRL DOCUMENT v3.4.0.3
OTHER ASSETS (Details 1) - USD ($)
Mar. 31, 2016
Dec. 31, 2015
Cost $ 4,185,622 $ 4,147,687
Accumulated Amortization 1,637,340 1,457,929
Other assets 2,548,282 2,689,758
Deferred Debt Issuance Costs [Member]    
Cost 1,257,778 1,257,778
Accumulated Amortization 136,763 91,840
Other assets 1,121,015 1,165,938
Prepaid Financing Costs [Member]    
Cost 805,917  
Accumulated Amortization 101,919  
Other assets 703,998  
Deferred Installation Costs [Member]    
Cost 1,825,804 1,787,869
Accumulated Amortization 1,323,523 1,220,982
Other assets 502,281 566,887
Prepaid License Fee [Member]    
Cost 249,999 249,999
Accumulated Amortization 75,135 71,037
Other assets 174,864 178,962
Security Deposit [Member]    
Cost $ 46,124 $ 46,124
Accumulated Amortization
Other assets $ 46,124 $ 46,124
Deferred Financing Costs [Member]    
Cost   805,917
Accumulated Amortization   74,070
Other assets   $ 731,847
XML 51 R40.htm IDEA: XBRL DOCUMENT v3.4.0.3
OTHER CURRENT LIABILITIES (Details) - USD ($)
Mar. 31, 2016
Dec. 31, 2015
OTHER CURRENT LIABILITIES:    
Accrued taxes $ 243,683 $ 235,162
Accrued insurance 135,059
Allowance for system removal 102,800 $ 54,771
Accrued paid time off 68,007 108,526
Accrued professional services 11,284 67,500
Other accrued liabilities 25,210 13,267
TOTAL OTHER CURRENT LIABILITIES $ 586,043 $ 479,226
XML 52 R41.htm IDEA: XBRL DOCUMENT v3.4.0.3
JOINT VENTURE AGREEMENT (Details Narrative)
1 Months Ended
Jan. 27, 2012
USD ($)
Number
Nov. 16, 2009
USD ($)
shares
Oct. 31, 2015
USD ($)
Mar. 31, 2016
USD ($)
Dec. 31, 2015
USD ($)
Other current liabilities       $ 586,043 $ 479,226
Joint Venture - Rockwell [Member]          
Percentage owned by company of each joint venture   50.00%      
Funding by Rockwell into the Joint Venture, cash   $ 1,151,205      
Promissory note amounts   575,603   1,200,000  
Investment Interest issued to Rockwell as Preferential Return   $ 575,602      
Interest rate on project notes and preferential returns, per investment agreement   10.00%      
Fair value of warrants issued to Rockwell for providing funding     $ 102,457    
Discount on debt recorded       636,752  
Monthly revenue lost due to Hillcrest termination $ 20,000        
De-installation costs incurred $ 3,000        
Number of units remaining at Hillcrest site | Number 100        
Other current liabilities       $ 10,250  
Joint Venture - Rockwell [Member] | Warrants [Member]          
Warrants issued for financing costs, warrants | shares   1,151,206      
Fair value of warrants issued to Rockwell for providing funding   $ 1,124,728      
XML 53 R42.htm IDEA: XBRL DOCUMENT v3.4.0.3
VARIABLE INTEREST ENTITIES (Details) - USD ($)
Mar. 31, 2016
Dec. 31, 2015
Assets    
Receivables $ 1,185,132 $ 1,176,404
Total current assets 17,246,884 19,326,448
Property, net 4,534,718 4,483,440
Total assets 28,110,403 30,130,411
Liabilities    
Accounts payable 387,303 332,402
Accrued interest 276,508 261,450
Other current liabilities 586,043 479,226
Total liabilities 57,810,621 55,853,972
Variable Interest Entity [Member]    
Assets    
Cash 332 2,146
Receivables 4,731 4,731
Total current assets 5,063 6,877
Property, net 43,463 50,382
Total assets 48,526 57,259
Liabilities    
Accounts payable 134,573 132,170
Accrued interest 276,508 261,450
Other current liabilities 27,749 26,936
Notes payable 441,498 441,498
Mandatorily redeemable interest 441,498 441,498
Total liabilities $ 1,321,826 $ 1,303,552
XML 54 R43.htm IDEA: XBRL DOCUMENT v3.4.0.3
VARIABLE INTEREST ENTITIES (Details 1) - USD ($)
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Revenue $ 1,495,793 $ 1,000,554
Network operations expense 1,152,107 830,094
General and administrative expense 1,054,858 838,309
Depreciation 445,416 415,904
Total operating costs 3,123,167 2,507,125
Operating loss (1,627,374) (1,506,571)
Loss before taxes $ (4,684,344) $ (3,788,305)
Provision for taxes
Net loss attributable to noncontrolling interest $ (16,110) $ (16,222)
Net loss attributable to CareView Communications, Inc. (4,668,234) (3,772,083)
Variable Interest Entity [Member]    
Revenue 7,097 7,097
Network operations expense 4,164 4,164
General and administrative expense 813 1,130
Depreciation 12,133 12,467
Total operating costs 17,110 17,761
Operating loss (10,013) (10,664)
Other expense (22,207) (21,780)
Loss before taxes $ (32,220) $ (32,444)
Provision for taxes
Net loss $ (32,220) $ (32,444)
Net loss attributable to noncontrolling interest (16,110) (16,222)
Net loss attributable to CareView Communications, Inc. $ (16,110) $ (16,222)
XML 55 R44.htm IDEA: XBRL DOCUMENT v3.4.0.3
AGREEMENT WITH HEALTHCOR (Details Narrative)
3 Months Ended
Jan. 31, 2012
USD ($)
$ / shares
Apr. 21, 2011
USD ($)
$ / shares
shares
Mar. 31, 2016
Number
Feb. 17, 2015
$ / shares
HealthCor Purchase Agreement [Member] | 2011 Senior Secured Convertible Notes [Member]        
Increase in interest rate (per annum) should default occur   5.00%    
Debt conversion price   $ 1.25    
Number of shares the note may be converted into | Number     30,000,000  
HealthCor Purchase Agreement [Member] | 2011 Senior Secured Convertible Notes [Member] | First Five Year Note Period [Member]        
Interest rate, provided no default   12.50%    
HealthCor Purchase Agreement [Member] | 2011 Senior Secured Convertible Notes [Member] | Second Five Year Note Period [Member]        
Interest rate, provided no default   10.00%    
HealthCor Purchase Agreement [Member] | 2011 Senior Secured Convertible Note#2 [Member]        
Note amount | $   $ 10,684,000    
Debt Maturity Date   Apr. 20, 2021    
Issuance of warrants | shares   6,294,403    
Exercise price of warrants   $ 1.40    
HealthCor Purchase Agreement [Member] | 2011 Senior Secured Convertible Note#1 [Member]        
Note amount | $   $ 9,316,000    
Debt Maturity Date   Apr. 20, 2021    
Issuance of warrants | shares   5,488,456    
Exercise price of warrants   $ 1.40    
HealthCor Second Amendment Purchase Agreement [Member]        
Debt conversion price       $ 0.52
HealthCor Second Amendment Purchase Agreement [Member] | 2012 Senior Secured Convertible Notes [Member]        
Debt conversion price $ 1.25      
Number of shares the note may be converted into | Number     7,000,000  
HealthCor Second Amendment Purchase Agreement [Member] | 2012 Senior Secured Convertible Note#1 [Member]        
Note amount | $ $ 2,329,000      
Debt Maturity Date Jan. 30, 2022      
HealthCor Second Amendment Purchase Agreement [Member] | 2012 Senior Secured Convertible Note#2 [Member]        
Note amount | $ $ 2,671,000      
Debt Maturity Date Jan. 30, 2022      
XML 56 R45.htm IDEA: XBRL DOCUMENT v3.4.0.3
AGREEMENT WITH HEALTHCOR (Details Narrative 1)
3 Months Ended
Mar. 31, 2015
USD ($)
$ / shares
shares
Dec. 04, 2014
USD ($)
$ / shares
shares
Jan. 16, 2014
USD ($)
$ / shares
shares
Mar. 31, 2016
USD ($)
Number
Mar. 31, 2015
USD ($)
$ / shares
Aug. 21, 2013
USD ($)
Minimum cash balance required under existing loan documents       $ 2,000,000    
Beneficial conversion features for senior secured convertible notes       516,844 $ 456,987  
Interest Expense       $ 3,151,557 2,045,901  
HealthCor Third Amendment Purchase Agreement [Member]            
Minimum cash balance required under existing loan documents           $ 5,000,000
HealthCor Third Amendment Purchase Agreement [Member] | Lower Range [Member]            
Minimum cash balance required under existing loan documents           4,000,000
HealthCor Third Amendment Purchase Agreement [Member] | Upper Range [Member]            
Minimum cash balance required under existing loan documents     $ 5,000,000     $ 5,000,000
HealthCor Fourth Amendment Purchase Agreement [Member] | 2014 Senior Secured Convertible Note#1 [Member]            
Note amount     2,329,000      
HealthCor Fourth Amendment Purchase Agreement [Member] | 2014 Senior Secured Convertible Note#2 [Member]            
Note amount     $ 2,671,000      
HealthCor Fourth Amendment Purchase Agreement [Member] | 2014 Senior Secured Convertible Notes [Member]            
Issuance of warrants | shares     4,000,000      
Exercise price of warrants | $ / shares     $ .40      
Debt conversion price | $ / shares     $ .40      
Number of shares the note may be converted into | Number       16,000,000    
HealthCor Fifth Amendment Purchase Agreement [Member]            
Note amount   $ 6,000,000        
Issuance of warrants | shares   3,692,308        
Exercise price of warrants | $ / shares   $ .52        
Debt conversion price | $ / shares   $ .52        
Debt discount   $ 1,093,105        
Interest Expense       $ 592,688 $ 552,066  
HealthCor Fifth Amendment Purchase Agreement [Member] | HealthCor [Member]            
Number of shares the note may be converted into | Number       2,000,000    
HealthCor Fifth Amendment Purchase Agreement [Member] | New Investors [Member]            
Number of shares the note may be converted into | Number       11,000,000    
HealthCor Sixth Amendment Purchase Agreement [Member]            
Issuance of warrants | shares 1,000,000          
Exercise price of warrants | $ / shares $ .53       $ .53  
Minimum cash balance required under existing loan documents $ 5,000,000       $ 5,000,000  
Deferred debt costs 378,000       378,000  
Aggregate financing costs 14,450          
HealthCor Sixth Amendment Purchase Agreement [Member] | Lower Range [Member]            
Minimum cash balance required under existing loan documents $ 2,000,000       2,000,000  
HealthCor Purchase Agreement [Member]            
Beneficial conversion features for senior secured convertible notes       $ 516,844 $ 456,987  
XML 57 R46.htm IDEA: XBRL DOCUMENT v3.4.0.3
AGREEMENT WITH PDL BIOPHARMA, INC. (Details Narrative)
3 Months Ended 6 Months Ended
Oct. 07, 2015
Number
$ / shares
Jun. 26, 2015
USD ($)
Number
$ / shares
shares
Mar. 31, 2016
USD ($)
Dec. 31, 2015
USD ($)
Fair value       $ 168,805
Minimum cash balance required under existing loan documents     $ 2,000,000  
Restricted cash     3,250,000 3,250,000
PDL BioPharma, Inc (Administrative Agent and Lender) [Member]        
Debt face amount   $ 40,000,000    
Description of payment terms  

Interest only payments for the first eight interest payment dates and principal plus interest payments will commence on the ninth interest payment date. We may elect to pay a portion of the interest due in the form of additional loans (interest paid in kind) during the first eight interest payment dates.Each tranche will mature on the fifth anniversary of the date borrowed. We may elect to prepay the Loans at any time without any premium or penalty, subject to certain conditions.

   
Description of collateral  

Secured by a pledge of substantially all of the assets of the Company and certain of its domestic subsidiaries.

   
Minimum cash balance required under existing loan documents   $ 3,250,000    
PDL BioPharma, Inc (Administrative Agent and Lender) [Member] | Warrants [Member]        
Number common stock called | shares   4,444,445    
Exercise price (in dollars per shares) | $ / shares   $ 0.40    
Warrant expiration date   Jun. 26, 2025    
Fair value   $ 1,257,778    
Amortized interest expense     44,922 91,840
Deferred financing costs     805,917  
Amortized deferred financing costs     27,849 $ 74,071
PDL BioPharma, Inc (Administrative Agent and Lender) [Member] | Tranche One Debt [Member]        
Debt face amount   $ 20,000,000 20,000,000  
Description of debt milestone placement  

In the event that a milestone relating to the placement of 9,000 billable units occurs on or before October 31, 2015.

   
Interest rate   13.50%    
Number of billable units | Number   9,000    
Date of first required debt repyment   Jan. 08, 2018    
Debt periodic repayment   $ 1,666,667    
PDL BioPharma, Inc (Administrative Agent and Lender) [Member] | Tranche Two Debt [Member]        
Debt face amount   $ 20,000,000 $ 20,000,000  
Description of debt milestone placement  

(i) the placement of 27,750 billable units and (ii) the Company recording earnings before interest, tax, depreciation, and amortization (EBITDA) of not less than $7,000,000 on an annualized basis for the three calendar month period prior to the funding (on or before June 30, 2017).

   
Interest rate   13.00%    
Number of billable units | Number   27,250    
Earning before interest, tax, depreciation, and amortization milestone   $ 7,000,000    
Increase of interest rate if default occurs   5.00%    
PDL BioPharma, Inc (Administrative Agent and Lender) - First Amendment [Member] | Warrants [Member]        
Exercise price (in dollars per shares) | $ / shares $ 0.45      
PDL BioPharma, Inc (Administrative Agent and Lender) - First Amendment [Member] | Tranche Two Debt [Member]        
Description of debt milestone placement

Tranche Two Milestone, which changed from a minimum of 27,750 billable units (defined as one unit for each room control platform and two units for each nurse station monitor) to 31,500 Bed Equivalent Units (defined as a billable unit plus 14 units for each head-end server operating as the communication center and fractional units for mobile assets as applicable). 

     
Number of billable units | Number 31,500      
PDL BioPharma, Inc (Administrative Agent and Lender) - Restated Amendment [Member] | Warrants [Member]        
Exercise price (in dollars per shares) | $ / shares $ 0.40      
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