x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2013
|
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT |
For the transition period from _______________ to _______________ |
(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) | (Issuer’s Telephone Number) | |
N/A | ||
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) |
INDEX
|
||||
Page
|
||||
PART I - FINANCIAL INFORMATION
|
||||
Item. 1
|
Financial Statements
|
|||
3
|
||||
4
|
||||
5
|
||||
6
|
||||
7
|
||||
22
|
||||
31
|
||||
31
|
||||
PART II - OTHER INFORMATION
|
||||
32
|
||||
32
|
||||
32
|
||||
32
|
||||
32
|
||||
32
|
||||
33
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
June 30,
|
||||||||
2013
|
December 31,
|
|||||||
(unaudited)
|
2012
|
|||||||
ASSETS | ||||||||
Current Assets:
|
||||||||
Cash and cash equivalents
|
$ | 5,981,143 | $ | 5,413,848 | ||||
Accounts receivable, net of allowance for doubtful accounts of $0 and $80,235, respectively
|
251,911 | 367,742 | ||||||
Other current assets
|
204,928 | 194,592 | ||||||
Total current assets
|
6,437,982 | 5,976,182 | ||||||
Property and equipment, net of accumulated depreciation of $3,485,598 and $2,726,234, respectively
|
7,215,809 | 7,861,537 | ||||||
Other Assets:
|
||||||||
Intangible assets, net of accumulated amortization of $2,783,199 and $2,772,772, respectively
|
219,129 | 208,974 | ||||||
Other assets
|
1,700,432 | 2,019,856 | ||||||
1,919,561 | 2,228,830 | |||||||
Total assets
|
$ | 15,573,352 | $ | 16,066,549 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
Current Liabilities:
|
||||||||
Accounts payable
|
$ | 181,376 | $ | 166,373 | ||||
Revolving line of credit
|
683,644 | — | ||||||
Notes payable, net of debt discount of $0 and $32,988, respectively
|
443,574 | 410,586 | ||||||
Mandatorily redeemable equity in joint venture, net of debt discount of $0 and $32,988, respectively
|
443,574 | 410,586 | ||||||
Accrued interest
|
98,061 | 59,872 | ||||||
Other current liabilities
|
873,836 | 802,528 | ||||||
Total current liabilities
|
2,724,065 | 1,849,945 | ||||||
Long-term Liabilities:
|
||||||||
Senior secured convertible notes, net of debt discount of $16,961,908 and $17,791,104, respectively
|
15,187,263 | 12,439,154 | ||||||
Warrant liability
|
668,859 | — | ||||||
Lease liability, net of current portion
|
17,216 | 25,824 | ||||||
Total long-term liabilities
|
15,873,338 | 12,464,978 | ||||||
Total liabilities
|
18,597,403 | 14,314,923 | ||||||
Commitments and Contingencies
|
||||||||
Stockholders' Equity (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; 138,746,042 and 132,526,042 issued and outstanding, respectively
|
138,746 | 132,526 | ||||||
Additional paid in capital
|
70,191,596 | 67,224,170 | ||||||
Accumulated deficit
|
(72,972,639 | ) | (65,275,518 | ) | ||||
Total CareView Communications Inc. stockholders' equity (deficit)
|
(2,642,297 | ) | 2,081,178 | |||||
Noncontrolling interest
|
(381,754 | ) | (329,552 | ) | ||||
Total stockholders' equity (deficit)
|
(3,024,051 | ) | 1,751,626 | |||||
Total liabilities and stockholders' equity (deficit)
|
$ | 15,573,352 | $ | 16,066,549 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2013 AND 2012
|
(Unaudited)
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30, 2013
|
June 30, 2012
|
June 30, 2013
|
June 30, 2012
|
|||||||||||||
Revenues, net
|
$ | 560,587 | $ | 442,266 | $ | 921,417 | $ | 829,621 | ||||||||
Operating expenses:
|
||||||||||||||||
Network operations
|
558,734 | 665,021 | 1,293,087 | 1,477,445 | ||||||||||||
General and administration
|
707,293 | 1,054,518 | 1,601,881 | 2,374,987 | ||||||||||||
Sales and marketing
|
287,856 | 519,364 | 562,997 | 980,512 | ||||||||||||
Research and development
|
222,600 | 241,905 | 463,316 | 459,282 | ||||||||||||
Depreciation and amortization
|
395,904 | 538,491 | 771,988 | 1,090,268 | ||||||||||||
Total operating expense
|
2,172,387 | 3,019,299 | 4,693,269 | 6,382,494 | ||||||||||||
Operating loss
|
(1,611,800 | ) | (2,577,033 | ) | (3,771,852 | ) | (5,552,873 | ) | ||||||||
Other income and (expense):
|
||||||||||||||||
Interest expense
|
(1,997,884 | ) | (1,930,240 | ) | (3,982,060 | ) | (3,752,121 | ) | ||||||||
Interest income
|
800 | 2,881 | 1,336 | 3,035 | ||||||||||||
Other income
|
2,201 | 1,010 | 3,253 | 2,638 | ||||||||||||
Total other income (expense)
|
(1,994,883 | ) | (1,926,349 | ) | (3,977,471 | ) | (3,746,448 | ) | ||||||||
Loss before taxes
|
(3,606,683 | ) | (4,503,382 | ) | (7,749,323 | ) | (9,299,321 | ) | ||||||||
Provision for income taxes
|
— | — | — | — | ||||||||||||
Net loss
|
(3,606,683 | ) | (4,503,382 | ) | (7,749,323 | ) | (9,299,321 | ) | ||||||||
Net loss attributable to noncontrolling interest
|
(26,423 | ) | (45,604 | ) | (52,202 | ) | (84,033 | ) | ||||||||
Net loss attributable to CareView Communications, Inc.
|
$ | (3,580,260 | ) | $ | (4,457,778 | ) | $ | (7,697,121 | ) | $ | (9,215,288 | ) | ||||
Net loss per share attributable to CareView Communications, Inc., basic and diluted
|
$ | (0.03 | ) | $ | (0.03 | ) | $ | (0.06 | ) | $ | (0.07 | ) | ||||
Weighted average number of common shares outstanding, basic and diluted
|
138,677,691 | 132,086,376 | 135,618,860 | 131,932,859 |
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
|
FOR THE PERIOD FROM JANUARY 1, 2013 TO JUNE 30, 2013
|
(Unaudited)
|
Additional
|
||||||||||||||||||||||||
Common Stock
|
Paid in
|
Accumulated
|
Noncontrolling
|
|||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Deficit
|
Interest
|
Total
|
|||||||||||||||||||
Balance, January 1, 2013
|
132,526,042 | $ | 132,526 | $ | 67,224,170 | $ | (65,275,518 | ) | $ | (329,552 | ) | $ | 1,751,626 | |||||||||||
Options granted as compensation
|
— | — | 139,567 | — | — | 139,567 | ||||||||||||||||||
Warrants issued for services
|
— | — | 23,764 | — | — | 23,764 | ||||||||||||||||||
Warrants issued for financing costs (revalued)
|
— | — | 64,286 | — | — | 64,286 | ||||||||||||||||||
Beneficial conversion features for senior secured convertible notes
|
— | — | 690,809 | — | — | 690,809 | ||||||||||||||||||
Sale of common stock, net of costs
|
6,220,000 | 6,220 | 2,049,000 | — | — | 2,055,220 | ||||||||||||||||||
Net loss
|
— | — | — | (7,697,121 | ) | (52,202 | ) | (7,749,323 | ) | |||||||||||||||
Balance, June 30, 2013
|
138,746,042 | $ | 138,746 | $ | 70,191,596 | $ | (72,972,639 | ) | $ | (381,754 | ) | $ | (3,024,051 | ) |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
FOR THE SIX MONTHS ENDED JUNE 30, 2013 AND 2012
|
(Unaudited)
|
Six Months Ended
|
||||||||
June 30, 2013
|
June 30, 2012
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net loss
|
$ | (7,749,323 | ) | $ | (9,299,321 | ) | ||
Adjustments to reconcile net loss to net cash flows used in operating activities:
|
||||||||
Depreciation
|
761,561 | 807,887 | ||||||
Amortization of intangible assets
|
10,427 | 282,381 | ||||||
Amortization of debt discount
|
1,585,981 | 1,685,521 | ||||||
Amortization of prepaid consulting costs
|
76,535 | 201,411 | ||||||
Amortization of installation costs
|
156,700 | 92,415 | ||||||
Amortization of deferred distribution/service costs
|
— | 27,666 | ||||||
Amortization of deferred debt issuance costs
|
284,694 | 263,265 | ||||||
Interest incurred and paid in kind
|
1,918,913 | 1,645,063 | ||||||
Stock based compensation related to options granted
|
139,567 | 407,699 | ||||||
Stock based costs related to warrants issued for services
|
23,764 | 131,676 | ||||||
Change in value of warrant liability
|
(4,050 | ) | — | |||||
Loss on disposal of assets
|
4,660 | — | ||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
115,831 | (66,636 | ) | |||||
Other current assets
|
(10,336 | ) | 77,588 | |||||
Other assets
|
52,647 | 80,761 | ||||||
Accounts payable
|
15,003 | (956,949 | ) | |||||
Accrued expenses and other current liabilities
|
109,497 | 287,894 | ||||||
Other liabilities
|
(8,608 | ) | — | |||||
Net cash flows used in operating activities
|
(2,516,537 | ) | (4,331,679 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Purchase of property and equipment
|
(120,493 | ) | (520,593 | ) | ||||
Payment for deferred installation costs
|
(186,866 | ) | (375,802 | ) | ||||
Patent and trademark costs
|
(20,582 | ) | — | |||||
Net cash flows used in investing activities
|
(327,941 | ) | (896,395 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Proceeds from sale of common stock and warrants, net
|
2,728,129 | — | ||||||
Proceeds from notes payable and line of credit
|
683,644 | 5,000,000 | ||||||
Proceeds from exercise of options and warrants
|
— | 20,635 | ||||||
Repayment of notes payable
|
— | (42,252 | ) | |||||
Net cash flows provided by financing activities
|
3,411,773 | 4,978,383 | ||||||
Increase (decrease) in cash
|
567,295 | (249,691 | ) | |||||
Cash and cash equivalents, beginning of period
|
5,413,848 | 8,526,857 | ||||||
Cash and cash equivalents, end of period
|
$ | 5,981,143 | $ | 8,277,166 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
|
||||||||
Cash paid for interest
|
$ | 75,112 | $ | 50,050 | ||||
Cash paid for income taxes
|
$ | — | $ | — | ||||
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES:
|
||||||||
Warrants issued for financing costs (revalued)
|
$ | 64,286 | $ | — | ||||
Beneficial conversion features for senior secured convertible notes
|
$ | 690,809 | $ | — | ||||
Number of
Shares Under Options |
Weighted
Average Exercise Price |
Weighted
Average
Remaining
Contractual
Life
|
Aggregate
Intrinsic Value |
|||||||||||||
Balance at December 31, 2012
|
9,093,977 | $ | 0.66 | 6.6 | $ | 2,376,961 | ||||||||||
Granted
|
-0- | -0- | ||||||||||||||
Exercised
|
-0- | -0- | ||||||||||||||
Expired
|
(5,000 | ) | $ | 1.51 | ||||||||||||
Cancelled
|
(129,168 | ) | $ | 1.06 | ||||||||||||
Balance at June 30, 2013
|
8,959,809 | $ | 0.65 | 6.1 | $ | 399,963 | ||||||||||
Vested and Exercisable at June 30, 2013
|
7,876,474 | $ | 0.59 | 5.7 | $ | 399,963 |
Six Months
Ended June 30,
2013 |
Year Ended
December 31, 2012 |
|||||||
Risk-free interest rate
|
N/A | 0.34 | % | |||||
Volatility
|
N/A | 101.90 | % | |||||
Expected life
|
N/A | 3 | ||||||
Dividend yield
|
N/A | 0.00 | % |
June 30,
2013
|
December 31, 2012
|
|||||||
Prepaid expenses
|
$ | 141,500 | $ | 130,825 | ||||
Other current assets
|
63,428 | 63,767 | ||||||
TOTAL OTHER CURRENT ASSETS
|
$ | 204,928 | $ | 194,592 |
June 30,
2013
|
December 31,
2012
|
|||||||
Network equipment
|
$ | 10,286,301 | $ | 10,170,480 | ||||
Vehicles
|
132,382 | 136,082 | ||||||
Office equipment
|
121,345 | 119,830 | ||||||
Furniture
|
75,673 | 75,673 | ||||||
Test equipment
|
73,719 | 73,719 | ||||||
Warehouse equipment
|
6,866 | 6,866 | ||||||
Leasehold improvements
|
5,121 | 5,121 | ||||||
10,701,407 | 10,587,771 | |||||||
Less: accumulated depreciation
|
(3,485,598 | ) | (2,726,234 | ) | ||||
TOTAL PROPERTY AND EQUIPMENT
|
$ | 7,215,809 | $ | 7,861,537 |
June 30, 2013
|
||||||||||||
Cost
|
Accumulated
Amortization |
Net
|
||||||||||
Patents and trademarks
|
$ | 203,175 | $ | 9,311 | $ | 193,864 | ||||||
Computer software
|
46,220 | 20,955 | 25,265 | |||||||||
Software development costs
|
2,002,933 | 2,002,933 | -0- | |||||||||
Other intellectual property
|
750,000 | 750,000 | -0- | |||||||||
TOTAL INTANGIBLE ASSETS
|
$ | 3,002,328 | $ | 2,783,199 | $ | 219,129 |
December 31, 2012
|
||||||||||||
Cost
|
Accumulated
Amortization |
Net
|
||||||||||
Patents and trademarks
|
$ | 182,593 | $ | 6,525 | $ | 176,068 | ||||||
Other tangible assets
|
46,220 | 13,314 | 32,906 | |||||||||
Software development costs
|
2,002,933 | 2,002,933 | -0- | |||||||||
Other intellectual property
|
750,000 | 750,000 | -0- | |||||||||
TOTAL INTANGIBLE ASSETS
|
$ | 2,981,746 | $ | 2,772,772 | $ | 208,974 |
June 30, 2013
|
||||||||||||
Cost
|
Accumulated
Amortization |
Net
|
||||||||||
Deferred debt issuance costs
|
$ | 1,600,000 | $ | 1,030,614 | $ | 569,386 | ||||||
Deferred installation costs
|
989,904 | 370,221 | 619,683 | |||||||||
Prepaid consulting
|
1,131,300 | 1,131,300 | -0- | |||||||||
Deferred closing costs
|
556,712 | 348,918 | 207,794 | |||||||||
Prepaid license fee
|
249,999 | 30,054 | 219.945 | |||||||||
Security deposit
|
83,624 | -0- | 83,624 | |||||||||
TOTAL OTHER ASSETS
|
$ | 4,611,539 | $ | 2,911,107 | $ | 1,700,432 |
December 31,2012
|
||||||||||||
Cost
|
Accumulated
Amortization |
Net
|
||||||||||
Deferred debt issuance costs
|
$ | 1,535,714 | $ | 745,920 | $ | 789,794 | ||||||
Deferred installation costs
|
799,114 | 209,598 | 589,516 | |||||||||
Deferred closing costs
|
516,050 | 247,413 | 268,637 | |||||||||
Prepaid license fee
|
233,606 | 21,857 | 211,749 | |||||||||
Security deposit
|
83,624 | -0- | 83,624 | |||||||||
Prepaid consulting
|
1,131,300 | 1,054,764 | 76,536 | |||||||||
Deferred distribution/service costs
|
166,000 | 166,000 | -0- | |||||||||
TOTAL OTHER ASSETS
|
$ | 4,465,408 | $ | 2,445,552 | $ | 2,019,856 |
June 30,
2013
|
December 31,
2012
|
|||||||
Accrued taxes
|
$ | 391,042 | $ | 360,587 | ||||
Other accrued liabilities
|
482,794 | 441,941 | ||||||
TOTAL OTHER CURRENT LIABILITIES
|
$ | 873,836 | $ | 802,528 |
June 30,
2013
|
December 31,
2012 |
|||||||
Assets
|
||||||||
Cash
|
$ | 577 | $ | 956 | ||||
Receivables
|
5,041 | 5,221 | ||||||
Total current assets
|
5,618 | 6,177 | ||||||
Property, net
|
144,828 | 189,003 | ||||||
Total assets
|
$ | 150,446 | $ | 195,180 | ||||
Liabilities
|
||||||||
Accounts payable
|
$ | 109,583 | $ | 103,217 | ||||
Notes payable, net of debt discount of $0 and $32,988, respectively
|
443,574 | 410,586 | ||||||
Mandatorily redeemable interest, net of debt discount of $0 and $32,988, respectively
|
443,574 | 410,586 | ||||||
Accrued interest
|
94,170 | 59,872 | ||||||
Other current liabilities
|
40,935 | 53,371 | ||||||
Total current liabilities
|
1,131,836 | 1,037,632 | ||||||
Total liabilities
|
$ | 1,131,836 | $ | 1,037,632 |
June 30,
2013 |
June 30,
2012 |
|||||||
|
||||||||
Revenue
|
$ | 14,573 | $ | 49,220 | ||||
Network operations expense
|
8,462 | 14,531 | ||||||
General and administrative expense
|
(9,101 | ) | 10,923 | |||||
Depreciation
|
28,631 | 51,767 | ||||||
Total operating costs
|
27,992 | 77,221 | ||||||
Operating loss
|
(13,419 | ) | (28,001 | ) | ||||
Other income (expense)
|
(90,986 | ) | (140,065 | ) | ||||
Loss before taxes
|
(104,405 | ) | (168,066 | ) | ||||
Provision for taxes
|
-0- | -0- | ||||||
Net loss
|
(104,405 | ) | (168,066 | ) | ||||
Net loss attributable to noncontrolling interest
|
(52,203 | ) | (84,033 | ) | ||||
Net loss attributable to CareView Communications, Inc.
|
$ | (52,202 | ) | $ | (84,033 | ) |
● | The U.S. Census Bureau's prediction of a growing and aging U.S. population wherein the majority of the "baby boom" population (28% of the total U.S. population) will begin to turn 65 between 2010 and 2020. | |
● | An increase in consumer expectations for improved healthcare. | |
● | The effects of The Patient Protection and Affordable Care Act ("ObamaCare" or Affordable Care Act"), which effects have yet to be determined, and may or may not have a negative effect on our business. | |
● | The decline of reimbursement and coverage of medical expenses by insurance companies and employers resulting in patients having to contribute more money toward their personal care. | |
● | Technological advancements that are giving rise to new clinical therapies to address an increased number of medical ailments to aid in the earlier diagnosis and prevention of diseases. |
Three months ended
June 30,
|
||||||||||||
2013
|
2012
|
Change
|
||||||||||
(000’s)
|
||||||||||||
Revenue
|
$ | 560 | $ | 443 | $ | 117 | ||||||
Operating expenses
|
2,170 | 3,019 | (849 | ) | ||||||||
Operating loss
|
(1,610 | ) | (2,576 | ) | 966 | |||||||
Other, net
|
(1,996 | ) | (1,927 | ) | (69 | ) | ||||||
Net loss
|
(3,606 | ) | (4,503 | ) | 897 | |||||||
Net loss attributable to noncontrolling interest
|
(26 | ) | (46 | ) | 20 | |||||||
Net loss attributed to CareView
|
$ | (3,580 | ) | $ | (4,457 | ) | $ | 877 |
Three Months Ended
June 30,
|
||||||||
2013
|
2012
|
|||||||
Human resource costs, including non-cash compensation
|
45 | % | 44 | % | ||||
Professional and consulting
|
9 | % | 11 | % | ||||
Depreciation and amortization
|
18 | % | 18 | % | ||||
Product deployment costs
|
5 | % | 7 | % | ||||
Travel
|
10 | % | 8 | % | ||||
Other
|
13 | % | 12 | % |
(000’s) | ||||
Decrease in human resource costs
|
$ | (56 | ) | |
Increase in non-cash compensation (options and warrants)
|
(301 | ) | ||
Decrease in professional and consulting
|
(139 | ) | ||
Decrease in depreciation and amortization
|
(143 | ) | ||
Decrease in deployment costs
|
(103 | ) | ||
Decrease in travel
|
(35 | ) | ||
Decrease in all other, net
|
(72 | ) | ||
$ | (849 | ) |
Six months ended
June 30,
|
||||||||||||
2013
|
2012
|
Change
|
||||||||||
(000’s)
|
||||||||||||
Revenue
|
$ | 921 | $ | 830 | $ | 91 | ||||||
Operating expenses
|
4,691 | 6,382 | (1,691 | ) | ||||||||
Operating loss
|
(3,770 | ) | (5,552 | ) | 1,782 | |||||||
Other, net
|
(3,979 | ) | (3,747 | ) | (232 | ) | ||||||
Net loss
|
(7,749 | ) | (9,299 | ) | 1,550 | |||||||
Net loss attributable to noncontrolling interest
|
(52 | ) | (84 | ) | 32 | |||||||
Net loss attributed to CareView
|
$ | (7,697 | ) | $ | (9,215 | ) | $ | 1,518 |
Six Months Ended
June 30,
|
||||||||
2013
|
2012
|
|||||||
Human resource costs, including non-cash compensation
|
45 | % | 41 | % | ||||
Professional and consulting
|
9 | % | 14 | % | ||||
Depreciation and amortization
|
16 | % | 17 | % | ||||
Product deployment costs
|
7 | % | 9 | % | ||||
Travel
|
9 | % | 8 | % | ||||
Other
|
14 | % | 11 | % |
(000’s) | ||||
Decrease in human resource costs
|
$ | (28 | ) | |
Increase in non-cash compensation (options and warrants)
|
(505 | ) | ||
Decrease in professional and consulting
|
(438 | ) | ||
Decrease in depreciation and amortization
|
(318 | ) | ||
Decrease in deployment costs
|
(215 | ) | ||
Decrease in travel
|
(64 | ) | ||
Decrease in all other, net
|
(123 | ) | ||
$ | (1,691 | ) |
Exhibit No.
|
Date of Document
|
Name of Document
|
|
2.0
|
09/27/07
|
Securities Exchange Agreement by and between Ecogate, Inc., CareView Communications, Inc. and Shareholders of CareView Communications, Inc.(1)
|
|
3.0
|
07/08/97
|
Articles of Incorporation filed in State of California under Purpose, Inc. (1)
|
|
3.1
|
04/30/99
|
Certificate of Amendment filed in State of California (to change name to Ecogate, Inc. and to increase authorized shares to 100,000 shares) (1)
|
|
3.2
|
04/03/01
|
Certificate of Amendment filed in State of California (to (i) increase the capital stock of the Company to 25,000,000 shares at no par value [20,000,000 authorized common shares and 5,000,000 authorized preferred shares], and (ii) to add provisions for indemnification for officers and directors) (1)
|
|
3.3
|
08/05/04
|
Certificate of Amendment filed in State of California (to amend Articles of Incorporation to increase the capital stock of the Company to 105,000,000 shares at no par value [100,000,000 authorized common shares and 5,000,000 authorized preferred shares]) (1)
|
|
3.4
|
09/20/07
|
Certificate of Amendment filed in State of California (to amend Articles of Incorporation to increase the capital stock of the Company to 320,000,000 shares at no par value [300,000,000 authorized common shares and 20,000,000 authorized preferred shares]) (1)
|
|
3.5
|
09/25/07
|
Certificate of Amendment filed in State of California (to amend Articles of Incorporation to designate 1,000,000 shares of Series A Preferred(1)
|
|
3.6
|
09/25/07
|
Certificate of Amendment filed in State of California (to amend Articles of Incorporation to designate 3,000,000 shares of Series B Preferred Stock) (1)
|
|
3.7
|
10/30/07
|
Certificate of Amendment filed in State of California (to amend Articles of Incorporation to change name to CareView Communications, Inc.) (1)
|
|
3.8
|
11/06/07
|
Notice of Conversion filed in State of Nevada (to convert CareView Communications, Inc. from a California corporation to a Nevada corporation) (1)
|
|
3.9
|
11/06/07
|
Articles of Incorporation for CareView Communications, Inc. filed in State of Nevada(1)
|
|
3.10
|
11/21/07
|
Domestic Stock Corporation Certificate of Election to Wind Up and Dissolve filed in State of California(1)
|
|
3.11
|
11/21/07
|
Domestic Stock Corporation Certificate of Dissolution filed in State of California(1)
|
|
3.12
|
n/a
|
Bylaws of CareView Communications, Inc., a Nevada corporation(1)
|
|
10.01
|
n/a
|
Products and Services Agreement (a/k/a Hospital Agreement), form of(1)
|
|
10.09
|
12/03/07
|
CareView Communications, Inc. 2007 Stock Incentive Plan(1)
|
|
10.10
|
12/03/07
|
Non-Qualified Stock Option, form of(1)
|
|
10.11
|
12/13/07
|
Audit Committee Charter(1)
|
|
10.12
|
12/13/07
|
Compensation Committee Charter(1)
|
|
10.14
|
02/13/08
|
Advisory Board Charter(1)
|
|
10.26
|
10/02/08
|
Common Stock Purchase Warrant, form of(1)
|
|
10.34
|
06/01/09
|
Webb & Webb Retainer Agreement(1)
|
|
10.42
|
09/11/09
|
CareView Communications, Inc. 2009 Stock Incentive Plan(1)
|
|
10.43
|
10/01/09
|
Commercial Lease Agreement (for Lewisville location) (1)
|
|
10.44
|
11/16/09
|
Rockwell JV – Master Investment Agreement(1)
|
|
10.45
|
11/16/09
|
Rockwell JV – Project Hospital Contract Assignment, form of(1)
|
|
10.46
|
11/16/09
|
Rockwell JV – Project Escrow Deposit Agreement, form of(1)
|
|
10.47
|
11/16/09
|
Rockwell JV – Limited License of Intellectual Property Rights,, form of(1)
|
|
10.48
|
11/16/09
|
Rockwell JV – Project Note, form of (1)
|
|
10.49
|
11/16/09
|
Rockwell JV – Amended and Restated Project Note, form of(1)
|
|
10.50
|
11/16/09
|
Rockwell JV – Project LLC Operating Agreement, form of(1)
|
|
10.51
|
11/16/09
|
Rockwell JV – Project Security Agreement, form of(1)
|
|
10.52
|
11/16/09
|
Rockwell JV – Project Services Subcontract Agreement, form of(1)
|
|
10.53
|
11/16/09
|
Rockwell JV – Project Warrant, form of(1)
|
|
10.54
|
01/14/10
|
Extension Agreement with Noteholders of Bridge Loans(1)
|
|
10.55
|
01/29/10
|
Master Lease between the Company and Fountain Fund 2 LP(1)
|
|
10.56
|
01/09/10
|
Distribution Agreement between the Company and Foundation Medical(1)
|
10.61
|
06/21/10
|
Indemnification Agreement, form of(1)
|
|
10.62
|
06/29/10
|
First Amendment to Commercial Lease Agreement(1)
|
|
10.63
|
08/17/10
|
Letter of Waiver from Tommy G. Thompson(1)
|
|
10.64
|
09/20/10
|
Revocation and Substitution Agreement(1)
|
|
10.65
|
09/20/10
|
Agreement Regarding Gross Income Interests with Tommy G. Thompson(1)
|
|
10.66
|
09/20/10
|
Agreement Regarding Gross Income Interests with Gerald L. Murphy(1)
|
|
10.67
|
09/20/10
|
Agreement Regarding Gross Income Interests with Dennis M. Langley(1)
|
|
10.68
|
11/01/10
|
Promissory Note with Plato & Associates, LLC(2)
|
|
10.69
|
12/17/10
|
Consulting Agreement with Gregory Mastroieni(3)
|
|
10.72
|
04/21/11
|
Note and Warrant Purchase Agreement between the Company and HealthCor Partners Fund, LP and HealthCor Hybrid Offshore Master Fund, LP(4)
|
|
10.73
|
04/21/11
|
Senior Secured Convertible Note of the Company payable to HealthCor Partners Fund, LP(4)
|
|
10.74
|
04/21/11
|
Senior Secured Convertible Note of the Company payable to HealthCor Hybrid Offshore Master Fund, LP(4)
|
|
10.75
|
04/21/11
|
Warrant to Purchase 5,488,456 shares of the Company issued to HealthCor Partners Fund, LP(4)
|
|
10.76
|
04/21/11
|
Warrant to Purchase 6,293,403 shares of the Company issued to HealthCor Hybrid Offshore Master Fund, LP(4)
|
|
10.77
|
04/21/11
|
Registration Rights Agreements between the Company and HealthCor Partners Fund, LP and HealthCor Hybrid Offshore Master Fund, LP(4)
|
|
10.78
|
04/21/11
|
Pledge and Security Agreement between the Company and HealthCor Partners Fund, LP and HealthCor Hybrid Offshore Master Fund, LP(4)
|
|
10.79
|
04/21/11
|
Intellectual Property Security Agreement between the Company and HealthCor Partners Fund, LP and HealthCor Hybrid Offshore Master Fund, LP(4)
|
|
10.83
|
08/31/11
|
Loan and Security Agreement between Comerica Bank and Bridge Bank and CareView Communications, Inc., a Nevada corporation, CareView Communications, Inc., a Texas corporation, and CareView Operations, LLC, a Texas limited liability company(6)
|
|
10.84
|
08/31/11
|
Prime Referenced Rated Addendum between the Company and Comerica Bank as Collateral Agent for the Banks(6)
|
|
10.85
|
08/31/11
|
Subordination Agreement between Comerica Bank and HealthCor Partners Fund, L.P. and HealthCor Hybrid Offshore Master Fund, L.P. (6)
|
|
10.86
|
08/31/11
|
Intellectual Property Security Agreement, form of(6)
|
|
10.87
|
08/31/11
|
Warrant issued to Comerica Bank to purchase 714,286 shares of the Company's Common Stock(6)
|
|
10.88
|
08/31/11
|
Warrant issued to Bridge Bank to purchase 714,286 shares of Company's Common Stock(6)
|
|
10.90
|
12/31/11
|
Note and Warrant Amendment Agreement with HealthCor(8)
|
|
10.92
|
12/31/11
|
Note and Warrant Amendment Agreement(2)
|
|
10.94
|
01/31/12
|
Second Amendment to Note and Warrant Purchase Agreement(10)
|
|
10.95
|
01/31/12
|
Senior Secured Convertible Note of the Company payable to HealthCor Partners Fund, LP(10)
|
|
10.96
|
01/31/12
|
Senior Secured Convertible Note of the Company payable to HealthCor Hybrid Offshore Master Fund, LP(10)
|
|
10.97
|
01/31/12
|
First Amendment to Loan and Security Agreement among the Company, certain of its subsidiaries, Comerica Bank and Bridge Bank, National Association(10)
|
|
10.98
|
01/31/12
|
Amendment to and Affirmation of Subordination Agreement(10)
|
|
10.99
|
3/01/12
|
Sales Consulting Agreement with among the Company, Don Shirley and Foundation Medical, LLC(11)
|
|
10.100
|
n/a
|
Insider Trading Policy, form of(11)
|
|
10.101
|
n/a
|
Whistleblower Policy(11)
|
|
10.102
|
n/a
|
Related Party Transactions Policy(11)
|
|
10.103
|
04/29/12
|
Consulting Agreement between the Company and Heartland Energy Partners, LLC(12)
|
|
10.104
|
05/04/12
|
Advisory Services Agreement between the Company and Stonegate Securities, Inc.(12)
|
|
10.105
|
05/31/12
|
Addendum to Consulting Agreement with Foundation Medical(13)
|
|
10.106
|
03/2011
|
Master Agreement with Health Management Associates, Inc. (15)
|
10.108
|
03/27/13
|
Securities Purchase Agreement, form of(16)
|
|
10.109
|
n/a
|
Common Stock Purchase Warrant, form of(16)
|
|
10.110
|
11/13/12
|
First Addendum to Consulting Agreement between the Company and Heartland Energy Partners, LLC(17)
|
|
10.111
|
01/15/13
|
Second Amendment to Loan and Security Agreement among the Company, certain of its subsidiaries, Comerica Bank and Bridge Bank, National Association(17)
|
|
10.112
|
01/15/13
|
Amendment to and Affirmation of Subordination Agreement(17)
|
|
05/24/13
|
Extension of Maturity Date for Promissory Note and Investment Interest (related to Hillcrest)*
|
||
07/19/13
|
Extension of Maturity Date for Promissory Note and Investment Interest (related to Saline)*
|
||
14.00
|
n/a
|
2011 Code of Business Conduct and Ethics, form of(1)
|
|
14.01
|
n/a
|
2011 Code of Business Ethics for Financial Executives, form of(1)
|
|
21.00
|
04/01/13
|
Subsidiaries of the Registrant(17)
|
|
08/09/13
|
Certification of Chief Executive Officer of Periodic Report pursuant to Rule 13a-14a and Rule 14d-14(a).*
|
||
08/09/13
|
Certification of Chief Financial Officer of Periodic Report pursuant to Rule 13a-14a and Rule 15d-14(a).*
|
||
08/09/13
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.*
|
||
08/09/13
|
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*
|
|
|||
(1)
|
Filed as an exhibit to the Company's Form 10 filed with the SEC on August 23, 2010.
|
||
(2)
|
Filed as an exhibit to the Company's quarterly report on Form 10-Q filed with the SEC on November 7, 2010, which exhibits may have had a different exhibit number when originally filed.
|
||
(3)
|
Filed as an exhibit to the Company’s annual report on Form 10-K filed with the SEC on April 15, 2011.
|
||
(4)
|
Filed as an exhibit to the Company's Current Report on Form 8-K filed with the SEC on April 27, 2011.
|
||
(5)
|
Filed as an exhibit to the Company's quarterly report on Form 10-Q filed with the SEC on August 22, 2011, which exhibits may have had a different exhibit number when originally filed.
|
||
(6)
|
Filed as an exhibit to the Company's Current Report on Form 8-K filed with the SEC on September 7, 2011, which exhibits may have had a different exhibit number when originally filed.
|
||
(7)
|
Filed as an exhibit to the Company's Current Report on Form 8-K filed with the SEC on November 10, 2011, which exhibits may have had a different exhibit number when originally filed.
|
||
(8)
|
Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on January 5, 2012, which exhibits may have had a different exhibit number when originally filed.
|
||
(9)
|
Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on January 9, 2012, which exhibits may have had a different exhibit number when originally filed.
|
||
(10)
|
Filed as an exhibit to the Company's Current Report on Form 8-K filed with the SEC on February 2, 2012, which exhibits may have had a different exhibit number when originally filed.
|
||
(11)
|
Filed as an exhibit to the Company's annual report on Form 10-K filed with the SEC on March 15, 2012.
|
||
(12)
|
Filed as an exhibit to the Company's quarterly report on Form 10-Q filed with the SEC on May 9, 2012.
|
||
(13)
|
Filed as an exhibit to the Company's quarterly report on Form 10-Q filed with the SEC on August 8, 2012.
|
||
(14)
|
Filed as an exhibit to the Company's quarterly report on Form 10-Q filed with the SEC on November 8, 2012.
|
||
(15)
|
Filed as an exhibit to the Company's quarterly report on Form 10-Q, Amendment No. 1, filed with the SEC on February 1, 2013. Certain information in this exhibit has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.
|
||
(16)
|
Filed as an exhibit to the Company's Current Report on Form 8-K filed with the SEC on March 28, 2013.
|
||
(17)
|
Filed as an exhibit to the Company's annual report on Form 10-K filed with the SEC on April 1, 2013.
|
||
*
|
Filed herewith.
|
CAREVIEW COMMUNICATIONS, INC. | ||
By: | /s/ Samuel A. Greco | |
Samuel A. Greco | ||
Chief Executive Officer | ||
Principal Executive Officer | ||
By: | /s/ Anthony P. Piccin | |
Anthony P. Piccin | ||
Chief Financial Officer | ||
Chief Accounting Officer | ||
Principal Accounting Officer |
CAREVIEW-HILLCREST, LLC | ROCKWELL HOLDINGS I, LLC | |||
By: | /s/ Steve Johnson | By: | /s/ Matt Bluhm | |
Steve Johnson | Matt Bluhm | |||
Manager | Managing Member |
CAREVIEW-SALINE, LLC | ROCKWELL HOLDINGS I, LLC | |||
By: | /s/ Steve Johnson | By: | /s/ Matt Bluhm | |
Steve Johnson | Matt Bluhm | |||
Manager | Managing Member |
(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 statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
(3)
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
(4)
|
The registrant’s other certifying officer(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 evaluation; and
|
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
(5)
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of 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.
|
August 9, 2013
|
/s/ Samuel A. Greco
|
Samuel A. Greco
|
|
Chief Executive Officer
|
|
Principal Executive Officer |
(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 statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
(3)
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
(4)
|
The registrant’s other certifying officer(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 evaluation; and
|
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
(5)
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of 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.
|
August 9, 2013
|
/s/ Anthony P. Piccin
|
Anthony P. Piccin
|
|
Chief Financial Officer
|
|
Principal Financial Officer
|
|
Principal Accounting Officer
|
(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/ Samuel A. Greco | |
Samuel A. Greco | |
Chief Executive Officer
|
|
August 9, 2013
|
(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/ Anthony P. Piccin
|
|
Anthony P. Piccin
|
|
Chief Financial Officer
|
|
August 9, 2013
|
SERVICE AGREEMENTS
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Service Agreements | |
SERVICE AGREEMENTS | NOTE 11 – SERVICE AGREEMENTS
Advisory Services Agreement
On May 7, 2012, we entered into an Advisory Services Agreement with an unrelated entity (the “Advisor”) under which the Advisor will provide services related to micro-cap market research and investor relations. The Agreement is for a term of 12 months and may be terminated by either party upon thirty (30) days written notice. Compensation for the Advisor includes a retainer of $5,000 per month payable in advance. In addition, we issued a five-year Common Stock Purchase Warrant for the purchase of 240,000 shares of our Common Stock at an exercise price of $1.65 per share. Vesting of the underlying shares occurs at the rate of 20,000 shares on the monthly anniversary date of the Agreement and became fully vested on May 7, 2013. No Warrants have been exercised as of June 30, 2013.
Consulting Agreement
On April 29, 2012, as amended on November 13, 2012, we entered into a Consulting Agreement with Heartland Energy Partners (“Heartland” or the “Consultant”) to represent us and our products to the Department of Veteran Affairs. On May 1, 2013, we exercised our right to terminate the Consulting Agreement effective May 31, 2013 (the “Termination Date”).
Under
the terms of the Consulting Agreement, we paid the Consultant a monthly fee of $10,000, payable beginning immediately after we
obtained GSA Approval on October 4, 2012 and continuing through the Termination Date. Payments to Heartland totaled $80,000. In
addition, the Consultant was entitled to earn Warrants to purchase shares of our Common Stock (the “Consulting Warrants”)
during each successive ninety (90) period calculated from the first business day after receipt of GSA approval and continuing
for the 12 month period designated as the term of the Consulting Agreement, which would result in the issuance of four (4) Consulting
Warrants (totaling a maximum of 1,000,000 shares). On January 2, 2013 and April 2, 2013, our management determined that no Consulting
Warrants would be issued for the first and second ninety-day periods ending on January 2, 2013 and April 2, 2013, respectively,
and with the termination of the Consulting Agreement, we have no further obligation to issue Consulting Warrants.
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Percentage owned by Rockwell of each Project LLC formed for the Project Hospitals | ||||
Revenues, net | $ 560,587 | $ 442,266 | $ 921,417 | $ 829,621 |
Operating expenses: | ||||
Network operations | 558,734 | 665,021 | 1,293,087 | 1,477,445 |
General and administration | 707,293 | 1,054,518 | 1,601,881 | 2,374,987 |
Sales and marketing | 287,856 | 519,364 | 562,997 | 980,512 |
Research and development | 222,600 | 241,905 | 463,316 | 459,282 |
Depreciation and amortization | 395,904 | 538,491 | 771,988 | 1,090,268 |
Total operating expense | 2,172,387 | 3,019,299 | 4,693,269 | 6,382,494 |
Operating loss | (1,611,800) | (2,577,033) | (3,771,852) | (5,552,873) |
Other income and (expense): | ||||
Interest expense | (1,997,884) | (1,930,240) | (3,982,060) | (3,752,121) |
Interest income | 800 | 2,881 | 1,336 | 3,035 |
Other income | 2,201 | 1,010 | 3,253 | 2,638 |
Total other income (expense) | (1,994,883) | (1,926,349) | (3,977,471) | (3,746,448) |
Loss before taxes | (3,606,683) | (4,503,382) | (7,749,323) | (9,299,321) |
Provision for income taxes | ||||
Net loss | (3,606,683) | (4,503,382) | (7,749,323) | (9,299,321) |
Net loss attributable to noncontrolling interest | (26,423) | (45,604) | (52,202) | (84,033) |
Net loss attributable to CareView Communications, Inc. | $ (3,580,260) | $ (4,457,778) | $ (7,697,121) | $ (9,215,288) |
Net loss per share attributable to CareView Communications, Inc. basic and diluted | $ (0.03) | $ (0.03) | $ (0.06) | $ (0.07) |
Weighted average number of common shares outstanding, basic and diluted | 138,677,391 | 132,086,376 | 135,618,860 | 131,932,859 |
OTHER CURRENT ASSETS
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Other Current Assets | |||||||||||||||||||||||||||||||||||||
OTHER CURRENT ASSETS | NOTE 4 – OTHER CURRENT ASSETS
Other current assets consist of the following:
|
OTHER CURRENT ASSETS (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
|
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Other Current Assets Tables | |||||||||||||||||||||||||||||||||||||
Schedule of other current assets | Other current assets consist of the following:
|
SUBSCRIPTION AND INVESTORS RIGHTS AGREEMENT
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Subscription And Investors Rights Agreement | |
SUBSCRIPTION AND INVESTORS RIGHTS AGREEMENT | NOTE 12 – SUBSCRIPTION AND INVESTOR RIGHTS AGREEMENT
On August 20, 2010, in an effort to resolve all past, current and future claims due pursuant to a Subscription and Investor Rights Agreement (“Subscription Agreement”) with an entity known as T2 Consulting, LLC (“T2”), and the principals of T2, namely Tommy G. Thompson (“Thompson”), Gerald L. Murphy (“Murphy”) , and Dennis Langley (“Langley”), we entered into a Revocation and Substitution Agreement with T2, Thompson, Murphy and Langley (the “Agreement”). In exchange for the revocation of the Subscription Agreement by T2, Thompson, Murphy and Langley, we agreed to issue to each of Thompson, Murphy, and Langley a five-year Common Stock Purchase Warrant (“Warrant”) to purchase 1,000,000 shares of our Common Stock at an exercise price of $1.00 per share. The valuation methodology used to determine the fair value of the Warrants issued was the Black-Scholes Model, and accordingly calculated a fair value of $4,080,000 and reported as contract modification expense in general and administration during the year ended December 31, 2010. Our Board of Directors believes the Agreement is in the best interest of all of our shareholders and has determined that it was not necessary to obtain a ‘fairness’ opinion from an independent third-party.
As additional consideration for the revocation of the Subscription Agreement, we executed an Agreement Regarding Gross Income Interest (the “GII Agreement”) with each of Thompson, Murphy and Langley dated August 20, 2010. The GII Agreement does not have a termination date; however, it does provide that we have the right to acquire the GII of Thompson, Murphy and Langley from September 1, 2013 until December 31, 2015, and that Thompson, Murphy and Langley each have the right to require that their respective GII be purchased by the Company any time from September 1, 2011 until December 31, 2015. At June 30, 2013, we recorded a liability for the GII owner’s put of approximately $27,000 (the estimated fair value of the GII owner’s put). |
AGREEMENT WITH HMA (Details Narrative) (USD $)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Number Of HMA Hospitals | 66 hospitals | |||
Number Of Installations | 1050 units | |||
Number of installations currently in dispute | 2046 units | |||
Revenues, net | $ 560,587 | $ 442,266 | $ 921,417 | $ 829,621 |
HMA Group
|
||||
Revenues, net | $ 314,700 | $ 684,000 |
OTHER ASSETS (Details Narrative) (USD $)
|
6 Months Ended | |
---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Other Assets Details Narrative | ||
Amortization expense of intangible assets | $ 10,427 | $ 282,381 |
OTHER CURRENT LIABILITIES (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
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Other Current Liabilities Tables | |||||||||||||||||||||||||||||||||||||
Schedule of other current liabilities | Other current liabilities consist of the following:
|
OTHER ASSETS (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
|
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Other Assets Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of intangible assets | Intangible assets consist of the following:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of other assets | Other assets consist of the following:
|
SERVICE AGREEMENTS (Details Narrative) (USD $)
|
0 Months Ended | 8 Months Ended | ||
---|---|---|---|---|
May 07, 2012
Warrants Under AS Agreement
|
May 07, 2012
Advisory Services Agreement
|
Apr. 29, 2012
Heartland Energy Partners Consulting Agreement
|
May 31, 2013
Heartland Energy Partners Consulting Agreement
|
|
Monthly retainer amount | $ 5,000 | $ 10,000 | ||
Warrants issued for services, shares | 240,000 | |||
Warrants issued for services | 265,200 | |||
Exercise price of warrants granted | 1.65 | 1.51 | ||
Term of warrants granted | 5 years | 5 years | ||
Vesting terms of warrants granted | vesting of the underlying shares occurs at the rate of 20,000 shares on the monthly anniversary date of the AS Agreement as long as the AS Agreement has not been terminated | |||
Consulting Expense | $ 80,000 | |||
Maximum number of shares consultant is entitled to receive under Warrants | 1,000,000 |
STOCKHOLDERS' EQUITY (DEFICIT) (Details 1) (Stock Options)
|
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2013
|
Dec. 31, 2012
|
|
Stock Options
|
||
Black-Scholes Model: | ||
Risk-free interest rate | 0.00% | 34.00% |
Volatility | 0.00% | 101.90% |
Expected life | 0 years | 3 years |
Dividend yield | 0.00% | 0.00% |
OTHER ASSETS (Details 1) (USD $)
|
Jun. 30, 2013
|
Dec. 31, 2012
|
---|---|---|
Cost | $ 4,611,539 | $ 4,465,408 |
Accumulated Amortization | 2,911,107 | 2,445,552 |
Other assets | 1,700,432 | 2,019,856 |
Deferred Debt Issuance Costs
|
||
Cost | 1,600,000 | 1,535,714 |
Accumulated Amortization | 1,030,614 | 745,920 |
Other assets | 569,386 | 789,794 |
Deferred Installation Costs
|
||
Cost | 989,904 | 799,114 |
Accumulated Amortization | 370,221 | 209,598 |
Other assets | 619,683 | 589,516 |
Prepaid Consulting
|
||
Cost | 1,131,300 | 1,131,300 |
Accumulated Amortization | 1,131,300 | 1,054,764 |
Other assets | 76,536 | |
Deferred Closing Costs
|
||
Cost | 556,712 | 516,050 |
Accumulated Amortization | 348,918 | 247,413 |
Other assets | 207,794 | 268,637 |
Prepaid License Fee
|
||
Cost | 249,999 | 233,606 |
Accumulated Amortization | 30,054 | 21,857 |
Other assets | 219,945 | 211,749 |
Security Deposit
|
||
Cost | 83,624 | 83,624 |
Accumulated Amortization | ||
Other assets | 83,624 | 83,624 |
Deferred Distribution/Service Costs
|
||
Cost | 166,000 | |
Accumulated Amortization | 166,000 | |
Other assets |
AGREEMENT WITH HEALTHCOR (Details Narrative) (USD $)
|
3 Months Ended | 6 Months Ended | 0 Months Ended | 6 Months Ended | 60 Months Ended | 6 Months Ended | 49 Months Ended | 60 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jan. 09, 2012
HealthCor Partners Fund
|
Apr. 21, 2011
HealthCor Partners Fund
|
Jan. 09, 2012
HealthCor Hybrid Offshore Master Fund
|
Apr. 21, 2011
HealthCor Hybrid Offshore Master Fund
|
Jan. 09, 2012
HealthCor
|
Apr. 21, 2011
HealthCor
|
Jun. 30, 2013
HealthCor
|
Jun. 30, 2012
HealthCor
|
Jun. 30, 2013
HealthCor
Senior Convertible Notes
|
Apr. 20, 2021
HealthCor
Senior Convertible Notes
|
Apr. 20, 2016
HealthCor
Senior Convertible Notes
|
Jun. 30, 2013
HealthCor
Senior Convertible Notes - 2012 Issuance
|
Jan. 31, 2022
HealthCor
Senior Convertible Notes - 2012 Issuance
|
Jan. 09, 2017
HealthCor
Senior Convertible Notes - 2012 Issuance
|
|
Senior convertible debt | $ 2,239,000 | $ 9,316,000 | $ 2,671,000 | $ 10,684,000 | $ 5,000,000 | |||||||||||||
Debt Maturity Date | Jan. 31, 2022 | Apr. 20, 2021 | Apr. 20, 2021 | Jan. 31, 2022 | ||||||||||||||
Warrants issued for financing costs | 64,286 | 5,488,456 | 6,294,403 | |||||||||||||||
Exercise price of warrants granted | 1.40 | 1.40 | ||||||||||||||||
Interest rate, provided no default | 10.00% | 12.50% | 10.00% | 12.50% | ||||||||||||||
Increase in interest rate (per annum) should default occur | 5.00% | 5.00% | ||||||||||||||||
Debt conversion rate | $ 1.25 | $ 1.25 | ||||||||||||||||
Number of shares the note may be converted into | 20,957,909 | 4,761,400 | ||||||||||||||||
Beneficial conversion features for senior secured convertible notes | 690,809 | 690,809 | 2,392,223 | |||||||||||||||
Interest Expense | $ 1,997,884 | $ 1,930,240 | $ 3,982,060 | $ 3,752,121 | $ 307,515 | $ 196,785 |
STOCKHOLDERS' EQUITY (DEFICIT) (Details Narrative 1) (USD $)
|
0 Months Ended | 1 Months Ended | 6 Months Ended | 0 Months Ended | 6 Months Ended | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Apr. 02, 2013
|
Aug. 31, 2011
Comerica Bank and Bridge Bank
|
May 31, 2012
Warrants
|
Apr. 02, 2012
Warrants
|
Feb. 28, 2012
Warrants
|
Jan. 19, 2012
Warrants
|
Feb. 06, 2012
Warrants
|
Jun. 30, 2013
Warrants
|
Jun. 30, 2012
Warrants
|
Jan. 16, 2013
Warrants
Comerica Bank and Bridge Bank
|
Jun. 30, 2013
Warrants
Lower Range
|
Jun. 30, 2013
Warrants
Upper Range
|
Apr. 30, 2013
Warrants Revalued
Comerica Bank and Bridge Bank
|
Jan. 16, 2013
Warrants Revalued
Comerica Bank and Bridge Bank
|
May 07, 2012
Warrants Under AS Agreement
|
Jun. 30, 2013
Warrants Under AS Agreement
|
|
Warrants | ||||||||||||||||
Warrants outstanding | 2,500,000 | 24,793,851 | ||||||||||||||
Warrants exercise price | 0.60 | 0.73 | 1.40 | 0.52 | 1.65 | 1.10 | ||||||||||
Term of warrants | 2 years 7 months 6 days | |||||||||||||||
Unamortized warrant costs, excluding HealthCor warrants | $ 569,000 | |||||||||||||||
Fair value of warrants at re-value | 668,859 | |||||||||||||||
Fair value adjustment recorded as non-cash costs | 4,050 | |||||||||||||||
Expensed as non-cash costs in general and administration | 47,942 | 76,535 | 249,353 | |||||||||||||
Expensed as Interest Expense | 284,694 | 263,265 | ||||||||||||||
Change in fair value of warrants, amortized to interest expense | 52,857 | 11,429 | ||||||||||||||
Noncash service costs related to warrants | 23,764 | |||||||||||||||
Warrants issued for services, shares | 50,000 | 50,000 | 240,000 | |||||||||||||
Warrants issued for services | 52,300 | 48,200 | 265,200 | |||||||||||||
Exercise price of warrants granted | 1.40 | 1.55 | 1.52 | 1.65 | ||||||||||||
Term of warrants granted | 5 years | |||||||||||||||
Vesting terms of warrants granted | vesting of the underlying shares occurs at the rate of 20,000 shares on the monthly anniversary date of the AS Agreement as long as the AS Agreement has not been terminated | |||||||||||||||
Fair value of warrants | 124,720 | |||||||||||||||
Expensed as non-cash compensation | 4,358 | |||||||||||||||
Expensed as distribution/service costs in network operations | 27,666 | |||||||||||||||
Warrants exercised | 450,000 | 39,683 | 400,000 | |||||||||||||
Shares issued for exercise of warrants | $ 20,635 | |||||||||||||||
Shares issued for exercise of warrants, shares | 311,857 | 39,683 | 277,809 | |||||||||||||
Noncash exercise of warrants, shares forfeited for exercise | 138,143 | 122,191 |
VARIABLE INTEREST ENTITIES (Details Narrative) (USD $)
|
Jun. 30, 2013
|
Dec. 31, 2012
|
---|---|---|
Debt discount of notes payable, current | $ 0 | $ 32,988 |
Debt discount of mandatorily redeemable equity in joint venture, current | 0 | 32,988 |
Variable Interest Entity
|
||
Debt discount of notes payable, current | 0 | 32,988 |
Debt discount of mandatorily redeemable equity in joint venture, current | $ 0 | $ 32,988 |
PROPERTY AND EQUIPMENT (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
|
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Property And Equipment Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of fixed assets | Property and equipment consists of the following:
|
LIQUIDITY AND MANAGEMENTS PLAN
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Liquidity And Managements Plan | |
LIQUIDITY AND MANAGEMENTS PLAN | NOTE 2 – LIQUIDITY AND MANAGEMENT’S PLAN
Our
cash position at June 30, 2013 was approximately $6.0 million. We are required to maintain a minimum cash balance $5
million pursuant to existing loan documents (see NOTE
14 – AGREEMENT
WITH HEALTHCOR and NOTE 15 – LOAN
AND SECURITY AGREEMENT WITH COMERICA BANK AND BRIDGE BANK for more details). Falling below that balance triggers
an immediate default with Comerica Bank and Bridge Bank. In view of these facts, our continued successful operation is
dependent upon us achieving positive cash flow through operations while maintaining adequate liquidity; however, we may be
required to obtain additional financing. In order to support current and future operations, we closed a private offering on
April 1, 2013 through which we sold an (i) an aggregate of 6,220,000 shares of Common Stock for $0.495 per share and (ii)
Common Stock Purchase Warrants for the purchase of an aggregate of 2,500,000 shares for $0.01 per share for an aggregate
purchase price, net of expenses of $2,728,129. We expect that the proceeds from this private offering, 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 during 2013 and will help us achieve future
operating profitability.
As more fully described in NOTE 15 – LOAN AND SECURITY AGREEMENT WITH COMERICA BANK AND BRIDGE BANK, we have an additional financial resource with the Comerica/Bridge Bank revolving credit line. 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 needs through the revolving credit line under which we can borrow up to $19.3 million by using eligible signed customer contracts as collateral. At June 30, 2013, approximately $36,000 of eligible contracts was available for additional borrowings on the revolving credit line. This revolving credit line expires in June 2014 unless mutually extended.
We
believe that we will achieve operating profitability; however, due to conditions and influences out of our control including
the current state of the national economy, we cannot guarantee that profitability will be achieved or that it will be
achieved in the stated time frame, nor is there any assurance that such an operating level can ever be achieved. |
PROPERTY AND EQUIPMENT
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
|
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Property And Equipment | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PROPERTY AND EQUIPMENT | NOTE 5 – PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
Depreciation expense for the six month periods ended June 30, 2013 and 2012 was $761,561 and $807,887, respectively. |
STOCKHOLDERS' EQUITY (DEFICIT)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
|
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Stockholders Equity Deficit | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCKHOLDERS' EQUITY (DEFICIT) | NOTE 3 – STOCKHOLDERS’ EQUITY (DEFICIT)
Private Placement
On March 27, 2013, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with multiple investors relating to the issuance and sale of our Common Stock in a private offering. On April 1, 2013, the closing date of the Purchase Agreement, we sold (i) an aggregate of 6,220,000 shares of our Common Stock for $0.495 per share and (ii) Common Stock Purchase Warrants for the purchase of an aggregate of 2,500,000 shares for $0.01 per share (the “Private Placement Warrants”) for an aggregate gross purchase price of approximately $3.1 million. The five-year Private Placement Warrants vest immediately upon issuance, have an exercise price of $0.60 per share and contain provisions for a cashless exercise.
Pursuant to terms in the Purchase Agreement, the 6,220,000 shares of Common Stock and the 2,500,000 shares available for purchase under Warrants, were registered in a Form S-1 Registration Statement under the Securities Act of 1933 on May 4, 2013 (“Form S-1”). On May 9, 2013, the Form S-1 was deemed effective by the SEC.
As discussed below, the Private Placement Warrants are classified as liabilities and recorded at fair value at the date of issuance. The total proceeds received from the Private Placement were allocated between the Common Stock issued and the Private Placement Warrants based on the residual method. Accordingly, $672,909 was allocated to the Private Placement Warrants and $2,475,991 was allocated to stockholders’ equity upon issuance.
Warrants to Purchase Common Stock of the Company
The
Company uses the Black-Scholes-Merton option pricing model (“Black-Scholes Model”) to determine the fair value of
warrants to purchase shares of our Common Stock (“Warrant(s)”) (except warrants issued to HealthCor Partners Fund,
LP and HealthCor Hybrid Offshore Master Fund, LP (the “HealthCor Warrants”) and the Private Placement Warrants discussed
more fully later in this paragraph). The Black-Scholes Model is an acceptable model in accordance with the Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 718-10 Stock Compensation (“ASC
718-10”). 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 HealthCor Warrants
and the Private Placement Warrants were 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 round down provisions associated with the exercise price of the HealthCor Warrants and Private
Placement Warrants, we determined that the Binomial Lattice model was the most appropriate model for valuing these instruments.
As of June 30, 2013, Warrants outstanding (excluding the HealthCor Warrants) covered an aggregate of 24,793,851 shares of our Common Stock with exercise prices ranging from $0.52 to $1.65 per share resulting in a weighted average exercise price of $0.73 per share and a weighted average contractual life of 2.6 years. As of June 30, 2013, unamortized costs associated with capitalized Warrants, excluding the HealthCor Warrants, totaled approximately $569,000.
Warrant Activity during the Six Months Ended June 30, 2013
During the six months ended June 30, 2013, the Company issued 2,500,000 Private Placement Warrants as discussed above. The Private Placement Warrants contain provisions that protect the holders from a decline in the issue price of our Common Stock or “downround” provisions. We have evaluated the following guidance ASC 480-10 Distinguishing Liabilities from Equity and ASC 815-40 Contracts in an Entity’s Own Equity. Based on this guidance, our management concluded these instruments are to be accounted for as liabilities instead of equity due to the down round protection feature available on the exercise price of the Warrants. We recognized these Warrants as liabilities at their fair value and will re-measure them at fair value on each reporting date. ASC 820 Fair Value Measurement provides requirements for disclosure of liabilities that are measured at fair value on a recurring basis in periods subsequent to the initial recognition. Fair values for warrants are determined using the Binomial Lattice Model valuation technique. The Binomial Lattice Model valuation model provides for dynamic assumptions regarding volatility and risk-free interest rates within the total period to maturity. Accordingly, within the contractual term, we provided multiple date intervals over which multiple volatilities and risk free interest rates were used. These intervals allow the Binomial Lattice Model valuation to project outcomes along specific paths which consider volatilities and risk free rates that would be more likely in an early exercise scenario. As of April 1, 2013, the date of issuance, we recorded the Warrant liability at $672,909 in the accompanying condensed consolidated financial statements. At June 30, 2013, the Warrants were re-valued with a fair value of $668,859 with the difference of $4,050 recorded as a reduction to non-cash costs in general and administration in the accompanying condensed consolidated financial statements. We also amortized certain previously capitalized Warrant costs in the accompanying condensed consolidated financial statements as follows: (i) $76,535 as non-cash costs in general and administration and (ii) $284,694 as interest expense.
On January 15, 2013, we entered into a Second Amendment of the Agreement (“Second Amendment”) in which Comerica Bank and Bridge Bank (the “Banks”) agreed to amend the defining term for “Eligible Accounts” and add the defining term for “Verification of Accounts.” In conjunction with this Second Amendment, the Warrants issued to the Banks were amended to reduce the exercise price from $1.40 to $1.10 per share (subject to adjustment for capital events) and to extend the expiration date from August 8, 2018 to January 15, 2020. All other provisions of the Agreement and the Warrants remained unchanged. The Warrants were revalued in January and April 2013 resulting in $11,429 and $52,857 increases in fair value, respectively, both of which are amortized to interest expense using the effective interest method.
During the six months ended June 30, 2013, we recorded a $23,764 charge to non-cash costs in the accompanying condensed consolidated financial statements as a result of the following agreement effective May 7, 2012. We entered into a 12 month advisory services agreement (the “AS Agreement”) with an unrelated entity, wherein compensation was paid through the issuance of a five-year Warrant to purchase 240,000 shares of our Common Stock (see NOTE 11 – SERVICE AGREEMENTS for further details). Vesting of the underlying shares occurs at the rate of 20,000 shares on the monthly anniversary date of the AS Agreement as long as the AS Agreement has not been terminated. At grant date the Warrant had a fair value of $265,200 at an exercise price of $1.65 per share. Since the Warrant was issued to a non-employee and contained specific vesting requirements, we followed ASC 505-50 Equity Based Payments to Non-Employees (“ASC-505-50”) which requires that the fair value of the Warrant be re-valued at each reporting period and any change in the fair value of the unvested portion of the Warrant recorded as a charge or credit to income. Upon full vesting, and after applying ASC 505-50, the fair value of these Warrants totaled $124,720.
Warrant Activity during the Six Months Ended June 30, 2012
During the six months ended June 30, 2012, we issued warrants to certain unaffiliated parties for services, recording them in the accompanying condensed consolidated financial statements as follows: (i) on April 2, 2012, we issued a five-year Warrant to an entity to purchase 50,000 shares of our Common Stock (with a fair value of $48,200) at an exercise price of $1.52 per share, all of which was recorded as non-cash compensation and (ii) on May 31, 2012, we entered into an addendum to a two year sales consulting agreement with an entity, wherein a portion of the compensation was paid through the issuance of a five-year Warrant to purchase 50,000 shares of our Common Stock (with a fair value of $52,300) at an exercise price of $1.55 per share; $4,358 was charged to expense and recorded as non-cash compensation and $47,942 as prepaid costs in other assets. We also amortized certain previously capitalized Warrant costs in the accompanying condensed consolidated financial statements as follows: (i) $27,666 as distribution/service costs in network operations, (ii) $249,353 as non-cash compensation in general and administration, and (iii) $263,265 as interest expense.
On January 16, 2012 and February 6, 2012, an unaffiliated entity exercised a Warrant to purchase an aggregate of 400,000 shares of our Common Stock. In order to exercise the Warrant pursuant to the cashless provisions thereof, the unaffiliated entity surrendered its right to receive 122,191 shares, resulting in an issuance to the entity of 277,809 shares of Common Stock. On January 19, 2012, two unaffiliated entities exercised Warrants to purchase an aggregate of 39,683 shares of our Common Stock at an aggregate exercise price of $20,635. On February 28, 2012, an unaffiliated entity exercised a Warrant to purchase an aggregate of 450,000 shares of our Common Stock. In order to exercise the Warrant pursuant to the cashless provisions thereof, the unaffiliated entity surrendered its right to receive 138,143 shares, resulting in an issuance of 311,857 shares of Common Stock.
Options to Purchase Common Stock of the Company
During
the six months ended June 30, 2013 and 2012, we did not grant any options to purchase shares of ours Common Stock (“Option(s)”).
During the same six month periods, resulting from the resignation or termination of employees, Options for the purchase of 129,168
and 310,305 shares, respectively, were cancelled. During the six months ended June 30, 2013, Options for the purchase of 5,000
shares expired. No Options expired during the same period in 2012. As of June 30, 2013, 8,959,809 Options remained outstanding.
A summary of our stock option activity and related information follows:
The valuation methodology used to determine the fair value of the Options issued during the year was the Black-Scholes Model, an acceptable model in accordance with ASC 718-10. 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 expected term of the Options.
The assumptions used in the Black-Scholes Model are set forth in the table below.
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 a blended average of the historical volatility of peer entities whose stock prices were publicly available and our historical volatility during the available trading period, and is calculated using this blended average over a period equal to the expected life of the awards. We use the historical volatility of peer entities due to the lack of sufficient historical data of our stock price.
Share-based compensation expense for Options recognized in our results for the three and six months ended June 30, 2013 ($41,416 and $139,567, respectively) and for the three and six months ended June 30, 2012 ($172,650 and $407,699, respectively) is based on awards granted, with expected forfeitures at 0%. ASC 718-10 requires forfeitures to be estimated at the time of grant and revised in subsequent periods if actual forfeitures differ from the estimates.
At June 30, 2013, total unrecognized estimated compensation expense related to non-vested Options granted prior to that date was approximately $539,600, which is expected to be recognized over a weighted-average period of 2.0 years. No tax benefit was realized due to a continued pattern of operating losses. |
OTHER CURRENT LIABILITIES (Details) (USD $)
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Jun. 30, 2013
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Dec. 31, 2012
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OTHER CURRENT LIABILITIES: | ||
Accrued taxes | $ 391,042 | $ 360,587 |
Other accrued liabilities | 482,794 | 441,941 |
Other current liabilities | $ 873,836 | $ 802,528 |
VARIABLE INTEREST ENTITIES (Tables)
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Jun. 30, 2013
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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 June 30, 2013 and December 31, 2012 are as follows:
The financial performance of the consolidated VIEs reflected on our condensed consolidated statements of operations for the six months ended June 30, 2013 and 2012 is as follows:
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STOCKHOLDERS' EQUITY (DEFICIT) (Details Narrative 2) (USD $)
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3 Months Ended | 6 Months Ended | |||||
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Jun. 30, 2013
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Jun. 30, 2012
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Jun. 30, 2013
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Jun. 30, 2012
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Jun. 30, 2013
Stock Options
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Jun. 30, 2012
Stock Options
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Dec. 31, 2012
Stock Options
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Stock Options | |||||||
Options cancelled | 129,168 | 310,305 | |||||
Stock Options Outstanding | 8,959,809 | 9,093,977 | |||||
Share-based compensation expense | $ 41,416 | $ 172,560 | $ 139,567 | $ 407,699 | |||
Expected percentage of forfeited options | 0.00% | 0.00% | 0.00% | 0.00% | |||
Unrecognized estimated compensation expense | $ 539,600 | $ 539,600 | |||||
Period for recognization of unrecognized compensation expense | 2 years |
PROPERTY AND EQUIPMENT (Details) (USD $)
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Jun. 30, 2013
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Dec. 31, 2012
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Property and equipment, gross | $ 10,701,407 | $ 10,587,771 |
Less: accumulated depreciation | (3,485,598) | (2,726,234) |
Property and equipment, net | 7,215,809 | 7,861,537 |
Network Equipment
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Property and equipment, gross | 10,286,301 | 10,170,480 |
Vehicles
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Property and equipment, gross | 132,382 | 136,082 |
Office Equipment
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Property and equipment, gross | 121,345 | 119,830 |
Furniture
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Property and equipment, gross | 75,673 | 75,673 |
Test Equipment
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Property and equipment, gross | 73,719 | 73,719 |
Warehouse Equipment
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Property and equipment, gross | 6,866 | 6,866 |
Leasehold Improvements
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Property and equipment, gross | $ 5,821 | $ 5,121 |