Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2018 | Aug. 14, 2018 | |
HealthCor [Member] | ||
Entity Registrant Name | CareView Communications Inc | |
Entity Central Index Key | 1,377,149 | |
Document Type | 10-Q | |
Trading Symbol | CRVW | |
Document Period End Date | Jun. 30, 2018 | |
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 | 139,380,748 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2,018 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Current Assets: | ||
Cash and cash equivalents | $ 231,329 | $ 2,066,392 |
Accounts receivable | 1,169,880 | 1,210,968 |
Other current assets | 1,474,260 | 585,622 |
Total current assets | 2,875,469 | 3,862,982 |
Property and equipment, net | 3,053,613 | 3,321,541 |
Other Assets: | ||
Restricted cash | 2,500,000 | 2,500,000 |
Intangible assets, net | 709,511 | 665,918 |
Other assets, net | 1,563,910 | 1,767,909 |
Total other assets | 4,773,421 | 4,933,827 |
Total assets | 10,702,503 | 12,118,350 |
Current Liabilities: | ||
Accounts payable | 555,962 | 365,300 |
Notes payable, current portion | 11,966,667 | 8,533,334 |
Other current liabilities | 717,868 | 750,056 |
Total current liabilities | 13,240,497 | 9,648,690 |
Long-term Liabilities: | ||
Senior secured convertible notes, net of debt discount and debt costs of $16,463,985 and $18,161,723, respectively | 60,021,673 | 52,397,089 |
Loan payable | 8,333,333 | 11,666,666 |
Note payable | 313,786 | 513,786 |
Accrued interest | 60,817 | 43,583 |
Total long-term liabilities | 68,729,609 | 64,621,124 |
Total liabilities | 81,970,106 | 74,269,814 |
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 | 83,843,969 | 83,617,896 |
Accumulated deficit | (155,250,953) | (145,908,741) |
Total stockholders' deficit | (71,267,603) | (62,151,464) |
Total liabilities and stockholders' deficit | $ 10,702,503 | $ 12,118,350 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Debt discount and debt issuance costs (in dollars) | $ 16,463,985 | $ 18,161,723 |
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, authorized | 20,000,000 | 20,000,000 |
Preferred stock, issued | 0 | 0 |
Preferred stock, outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, authorized | 300,000,000 | 300,000,000 |
Common stock, issued | 139,380,748 | 139,380,748 |
Common stock, outstanding | 139,380,748 | 139,380,748 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Income Statement [Abstract] | ||||
Revenues, net | $ 1,508,611 | $ 1,602,957 | $ 3,091,125 | $ 3,100,650 |
Operating expenses: | ||||
Network operations | 866,892 | 1,124,810 | 1,852,115 | 2,278,258 |
General and administration | 807,910 | 1,043,336 | 1,699,421 | 2,126,358 |
Sales and marketing | 73,894 | 164,099 | 229,816 | 357,821 |
Research and development | 357,482 | 377,633 | 681,580 | 787,862 |
Depreciation and amortization | 311,153 | 465,358 | 715,575 | 919,040 |
Total operating expense | 2,417,331 | 3,175,236 | 5,178,507 | 6,469,339 |
Operating loss | (908,720) | (1,572,279) | (2,087,382) | (3,368,689) |
Other income and (expense) | ||||
Interest expense | (3,633,729) | (3,284,743) | (7,268,796) | (6,505,505) |
Interest income | 864 | 2,511 | 1,931 | 5,525 |
Other income | 434 | 9,643 | 12,035 | 15,755 |
Total other income (expense) | (3,632,431) | (3,272,589) | (7,254,830) | (6,484,225) |
Loss before taxes | (4,541,151) | (4,844,868) | (9,342,212) | (9,852,914) |
Net loss | $ (4,541,151) | $ (4,844,868) | $ (9,342,212) | $ (9,852,914) |
Net loss per share (in dollars per share) | $ (0.03) | $ (0.03) | $ (0.07) | $ (0.07) |
Weighted average number of common shares outstanding, basic and diluted (in shares) | 139,380,748 | 139,380,748 | 139,380,748 | 139,380,748 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITES | ||
Net loss | $ (9,342,212) | $ (9,852,914) |
Adjustments to reconcile net loss to net cash flows used in operating activities: | ||
Depreciation | 692,068 | 897,298 |
Amortization of debt discount and debt costs | 1,762,298 | 1,550,680 |
Amortization of deferred installation costs | 82,405 | 155,017 |
Amortization of deferred debt issuance and debt financing costs | 150,480 | 145,542 |
Amortization of intangible assets | 23,507 | 21,742 |
Interest incurred and paid in kind | 3,876,846 | 3,428,024 |
Stock based compensation related to options granted | 147,700 | 215,853 |
Stock based costs related to warrants issued | 13,814 | 11,512 |
Loss on disposal of assets | 6,725 | 1,717 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 41,088 | 36,129 |
Other current assets | (888,638) | (143,992) |
Other assets | 8,197 | 8,196 |
Accounts payable | 190,662 | 142,158 |
Other current liabilities | (14,954) | 265,585 |
Net cash flows used in operating activities | (3,250,014) | (3,117,453) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Purchase of property and equipment | (430,865) | (663,794) |
Payment for deferred installation costs | (37,084) | (88,095) |
Patent, trademark and other intangible asset costs | (67,100) | (38,376) |
Net cash flows used in investing activities | (535,049) | (790,265) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from senior secured convertible promissory notes | 2,050,000 | |
Repayment of notes payable | (100,000) | (300,000) |
Net cash flows provided by (used in) financing activities | 1,950,000 | (300,000) |
Decrease in cash | (1,835,063) | (4,207,718) |
Cash and cash equivalent, beginning of period | 2,066,392 | 10,088,258 |
Cash and cash equivalents, end of period | 231,329 | 5,880,540 |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||
Cash paid for interest | 1,350,000 | 1,351,000 |
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES: | ||
Beneficial conversion features for senior secured convertible notes | 64,561 | $ 92,567 |
Revaluation of warrants for modification of loan | $ 13,814 |
BASIS OF PRESENTATION AND RECEN
BASIS OF PRESENTATION AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS | 6 Months Ended |
Jun. 30, 2018 | |
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, 2017 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, 2017 as filed with the SEC on March 30, 2018. Revenue Recognition We adopted Accounting Standards Codification (“ASC”) Topic 606 (“606”) on January 1, 2018 using the full retrospective transition method for recognizing revenue. The adoption of ASC 606 represents a change in accounting principle that will more closely align revenue recognition with the delivery of our services to our customers and will provide financial statement readers with enhanced disclosures. Under ASC 606, there were no differences in the timing of our revenue recognition as compared to the requirements under ASC 605. We have employed the practical expedient discussed in ASC 606-10-55-18 related to invoicing as we have the right to consideration from our customers in the amount that corresponds directly with the value to the customer of our performance completed to date and therefore we recognize revenue upon invoicing as further discussed below. Further, for those customers for which we are required to collect sales taxes, we record such sales taxes on a net basis which has no effect on the amount of revenue or expenses recognized as the sales taxes are a flow through to the taxing authority. In accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which we expect to be entitled to receive in exchange for these goods or services. The provisions of ASC 606 include a five-step process by which we determine revenue recognition, depicting the transfer of goods or services to customers in amounts reflecting the payment to which we expect to be entitled in exchange for those goods or services. ASC 606 requires us to apply the following steps: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, we satisfy the performance obligation. We offer CareView’s services through a subscription-based contract with each healthcare facility for a standard term of three to five years and have determined we have one performance obligation for our services. We begin to bill monthly subscription fees to the healthcare facility upon official acceptance of the CareView System by the healthcare facility which is when the service is initiated. When services begin, the customer simultaneously receives the use and benefit of that service and we recognize the revenue over time based on the service completed to date as the amount invoiced each month. The contract requires the healthcare facility to pay us the subscription fee monthly. During the term of the contract, we provide continuous monitoring of the CareView System and are required to maintain and service all CareView System equipment. If the healthcare facility requires additional services, the contract is amended accordingly. The Company evaluated the disaggregation criteria of ASC 606 and determine that based on the nature, amount, timing and uncertainty of our service revenues, there were no material differences that merited further disaggregation as compared to the total revenue as reported in the accompanying consolidated statements of operations. We defer and capitalize all costs associated with the installation of the CareView System into a healthcare facility until the CareView System is fully operational and accepted by the healthcare facility. Installation costs are specifically identifiable based on the amounts we are charged from third party installers or directly identifiable labor hours incurred for each installation. Upon acceptance, the associated costs are expensed on a straight-line basis over the life of the contract with the healthcare facility. These costs are included in network operations on the accompanying consolidated statements of operations. The table below details the activity in these deferred installation costs during the six months ended June 30, 2018. Balance, December 31, 2017 $ 215,548 Additions 37,083 Transfer to expense (82,405 ) Balance, June 30, 2018 $ 170,226 From time to time, we enter into contracts with healthcare facilities wherein full payment of the contractual obligation is paid in advance (“PIA Contracts”). The transaction is recorded as a contract liability in our consolidated financial statements, with revenue recorded and the contract liability reduced as services are provided under the contract. The table below details this activity during the six months ended June 30, 2018. Balance, December 31, 2017 $ 17,430 Additions 87,061 Transfer to revenue (69,529 ) Balance, June 30, 2018 $ 34,962 Based on our contracts, we invoice customers once our performance obligations have been satisfied, at which point payment is unconditional. Accordingly, except in the case of PIA Contracts as detailed above, our contracts do not give rise to contract assets or liabilities under ASC 606. Accounts receivable are recorded when the right to consideration becomes unconditional and are reported accordingly on our consolidated financial statements. 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 approximately 177,000,000 and 126,000,000 at June 30, 2018 and 2017, 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 August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) Statement of Cash Flows (Topic 230) Aside from the change noted in Revenue Recognition NOTE 2 |
GOING CONCERN, LIQUIDITY AND MA
GOING CONCERN, LIQUIDITY AND MANAGEMENT'S PLAN | 6 Months Ended |
Jun. 30, 2018 | |
Going Concern Liquidity And Managements Plan | |
GOING CONCERN, LIQUIDITY AND MANAGEMENT'S PLAN | NOTE 2 – GOING CONCERN, LIQUIDITY AND MANAGEMENT’S PLAN Our cash position at June 30, 2018 was approximately $231,000. At June 30, 2018, we also had $2,500,000 included in restricted cash in other assets on the condensed consolidated balance sheet. On July 13, through the issuance of convertible secured promissory notes, we raise an aggregate of $1,000,000 (see NOTE 12 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 10 Accounting standards require management to evaluate our ability to continue as a going concern for a period of one year subsequent to the date of the filing of this Form 10-Q (“evaluation period”). As such, we have evaluated if cash and cash equivalents on hand and cash generated through operating activities would be sufficient to sustain projected operating activities through August 14, 2019. We anticipate that our current resources, along with cash generated from operations, will not be sufficient to meet our cash requirements throughout the evaluation period, including funding anticipated losses and scheduled debt maturities. We expect to seek additional funds from a combination of dilutive and/or non-dilutive financings in the future. Because such transactions have not been finalized, receipt of additional funding is not considered probable under current accounting standards. If we do not generate sufficient cash flows from operations and obtain sufficient funds when needed, we expect that we would scale back our operating plan by deferring or limiting some, or all, of our capital spending, reducing our spending on travel, and/or eliminating planned headcount additions, as well as other cost reductions to be determined. Because such contingency plans have not been finalized (the specifics would depend on the situation at the time), such actions also are not considered probable for purposes of current accounting standards. Because, under current accounting standards, neither future cash generated from operating activities, nor management’s contingency plans to mitigate the risk and extend cash resources through the evaluation period, are considered probable, substantial doubt is deemed to exist about the Company’s ability to continue as a going concern. As we continue to incur losses, our transition to profitability is dependent upon achieving a level of revenues adequate to support its cost structure. We may never achieve profitability, and unless and until doing so, we intend to fund future operations through additional dilutive or non-dilutive financings. There can be no assurances, however, that additional funding will be available on terms acceptable to us, if at all. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 6 Months Ended |
Jun. 30, 2018 | |
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 (“Black-Scholes Model”) to determine the fair value of warrants to purchase Common Stock of the Company (“Warrants”). 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 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. 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) 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 Six Months Ended June 30, 2018 On February 23, 2018, we issued an aggregate of 487,500 ten-year Warrants (with a fair value of $10,237) at an exercise price of $0.05 per share to certain directors and officers and 25,000 ten-year Warrants (with a fair value of $525) at an exercise price of $0.05 per share to an entity. On March 31, 2018, 2,500,000 Warrants issued in connection with a private placement completed in April 2013 expired and the fair value of $11,157 was written off and recorded as expense on the accompanying condensed consolidated financial statements. Warrant Activity during the Six Months Ended June 30, 2017 During the six months ended June 30, 2017, no Warrants were issued, 340,000 Warrants expired and none were exercised. Options to Purchase Common Stock of the Company On June 29, 2018, the Company’s Board of Directors amended our 2016 Stock Option Plan (the “2016 Plan”) to limit in certain circumstances the number of shares of Common Stock that would otherwise be available for issuance under the 2016 Plan, in order to ensure the availability of a sufficient number of authorized and unissued shares of Common Stock to meet all of the Company’s obligations. The number of additional shares of Common Stock that may be issued pursuant to the 2016 Plan from and after June 29, 2018 shall be the lesser of (i) such number of shares of Common Stock previously reserved for issuance under the 2016 Plan and not subject to awards outstanding (or previously exercised or vested) under the 2016 Plan as of any such date, or (ii) such number of authorized and unissued shares of Common Stock not otherwise reserved by the Company for issuance as of any such date pursuant to (a) all awards outstanding under any Company stock or option plan (including, for the avoidance of doubt, under the 2016 Plan), (b) full conversion of all outstanding notes, (c) full exercise of all outstanding warrants or (d) any other outstanding instrument or contractual commitment of the Company. During the six months ended June 30, 2018, no options to purchase our Common Stock (the ’’Option(s)’’) were granted. During the same six-month period, 567,334 Options expired and 146,664 Options were canceled. 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, 2017 22,660,459 $ 0.27 8.1 $ — Expired (567,334 ) Canceled (146,664 ) Balance at June 30, 2018 21,946,461 $ 0.27 7.6 $ — Vested and Exercisable at June 30, 2018 11,409,497 $ 0.43 6.3 $ — 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. Six Months Ended June 30, 2018 Year Ended December 31, 2017 Risk-free interest rate — % 1.17-2.15 % Volatility — % 78.40-89.93 % Expected life in years — 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 six months ended June 30, 2018 and 2017 ($147,697 and $215,853, 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 June 30, 2018, total unrecognized estimated compensation expense related to non-vested Options granted prior to that date was approximately $388,000, which is expected to be recognized over a weighted-average period of 1.9 years. No tax benefit was realized due to a continued pattern of operating losses. |
OTHER CURRENT ASSETS
OTHER CURRENT ASSETS | 6 Months Ended |
Jun. 30, 2018 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
OTHER CURRENT ASSETS | NOTE 4 – OTHER CURRENT ASSETS Other current assets consist of the following: June 30, 2018 December 31, 2017 Prepaid equipment $ 1,227,466 $ 465,847 Prepaid expenses 232,323 98,656 Other current assets 14,471 21,119 TOTAL OTHER CURRENT ASSETS $ 1,474,260 $ 585,622 |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 6 Months Ended |
Jun. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE 5 – PROPERTY AND EQUIPMENT Property and equipment consist of the following: June 30, 2018 December 31, 2017 Network equipment $ 13,977,074 $ 13,610,280 Office equipment 292,897 291,003 Vehicles 217,004 217,004 Test equipment 175,603 177,386 Furniture 90,827 90,827 Warehouse equipment 9,524 9,524 Leasehold improvements 5,121 5,121 14,768,050 14,401,145 Less: accumulated depreciation (11,714,437 ) (11,079,604 ) TOTAL PROPERTY AND EQUIPMENT $ 3,053,613 $ 3,321,541 Depreciation expense for the six months ended June 30, 2018 and 2017 was $634,833 and $897,298, respectively. |
OTHER ASSETS
OTHER ASSETS | 6 Months Ended |
Jun. 30, 2018 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
OTHER ASSETS | NOTE 6 – OTHER ASSETS Intangible assets consist of the following: June 30, 2018 Cost Accumulated Amortization Net Patents and trademarks $ 868,992 $ 168,263 $ 700,729 Other intangible assets 63,509 54,727 8,782 TOTAL INTANGIBLE ASSETS $ 932,501 $ 222,990 $ 709,511 December 31, 2017 Cost Accumulated Amortization Net Patents and trademarks $ 806,279 $ 146,246 $ 660,033 Other intangible assets 59,122 53,237 5,885 TOTAL INTANGIBLE ASSETS $ 865,401 $ 199,483 $ 665,918 Other assets consist of the following: June 30, 2018 Cost Accumulated Amortization Net Deferred debt issuance costs $ 1,302,223 $ 545,998 $ 756,225 Prepaid financing costs 805,918 352,561 453,357 Deferred installation costs 1,785,901 1,615,675 170,226 Prepaid license fee 249,999 112,021 137,978 Security deposit 46,124 — 46,124 TOTAL OTHER ASSETS $ 4,190,165 $ 2,626,255 $ 1,563,910 December 31, 2017 Cost Accumulated Amortization Net Deferred debt issuance costs $ 1,257,778 $ 451,216 $ 806,562 Deferred financing costs 850,363 296,863 553,500 Deferred installation costs 1,748,818 1,533,270 215,548 Prepaid license fee 249,999 103,824 146,175 Security deposit 46,124 — 46,124 TOTAL OTHER ASSETS $ 4,153,082 $ 2,385,173 $ 1,767,909 |
OTHER CURRENT LIABILITIES
OTHER CURRENT LIABILITIES | 6 Months Ended |
Jun. 30, 2018 | |
Payables and Accruals [Abstract] | |
OTHER CURRENT LIABILITIES | NOTE 7 – OTHER CURRENT LIABILITIES Other current liabilities consist of the following: June 30, 2018 December 31, 2017 Allowance for system removal $ 223,600 $ 176,750 Accrued rent expense 104,308 120,433 Accrued insurance 95,668 — Accrued paid time off 82,568 112,577 Accrued taxes 63,124 127,225 Deferred revenue 34,962 17,430 Other accrued liabilities 113,638 195,641 TOTAL OTHER CURRENT LIABILITIES $ 717,868 $ 750,056 |
INCOME TAXES
INCOME TAXES | 6 Months Ended |
Jun. 30, 2018 | |
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 2018 as a result of the losses recorded during the six months ended June 30, 2018 and the additional losses expected for the remainder of 2018 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 June 30, 2018, 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. The Tax Cuts and Jobs Act (the “Act”) was signed into law on December 22, 2017. Among its numerous changes to the Internal Revenue Code, the Act reduces U.S. corporate rates from 35% to 21%. Additionally, the Act limits the use of net operating loss carry backs, however any future net operating losses will instead be carried forward indefinitely. Net operating losses generated from January 1, 2018 are limited to offset 80% of current income, with the remainder of the net operating loss continuing to carry forward indefinitely. Net operating losses incurred before January 1, 2018 are not subject to the 80% limitations and will begin to expire in 2029. Based on an initial assessment of the Act, the Company believes that the most significant impact on the Company’s consolidated financial statements will be limitations in tax deductions on interest expense. Under the Act, interest deductions disallowed from current income will carryforward indefinitely. The Act did not impact management’s valuation allowance position. |
AGREEMENT WITH PDL BIOPHARMA, I
AGREEMENT WITH PDL BIOPHARMA, INC. | 6 Months Ended |
Jun. 30, 2018 | |
Agreement With Pdl Biopharma Inc. | |
AGREEMENT WITH PDL BIOPHARMA, INC. | NOTE 9 – AGREEMENT WITH PDL BIOPHARMA, INC. On June 26, 2015, we entered into a Credit Agreement, as subsequently amended, with PDL BioPharma, Inc. (“PDL”), as administrative agent and lender (“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. Tranche One was funded on October 8, 2015 (the “Tranche One Loan’). Pursuant to the terms of the PDL Credit Agreement and having not met the Tranche Two Milestones by July 26, 2017, the Tranche Two funding was terminated in full. Outstanding borrowings under the Tranche One Loan bears interest at the rate of 13.5% per annum, payable quarterly in arrears. The PDL Credit Agreement, as modified, includes a minimum cash balance requirement of $2,500,000, which has been recorded as restricted cash on the condensed consolidated balance sheet at March 31, 2018, and should we drop below $2,500,000, it will trigger a default. On June 26, 2015, we issued Warrants to PDL for the purchase of an aggregate of 4,444,445 shares of our Common Stock at an exercise price of $0.45 per share (the “PDL Warrant”) On October 7, 2015, we entered into an amendment to the PDL Credit Agreement (the “First Amendment”). 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 PDL Credit Agreement, as amended. On October 7, 2015, we also amended and restated the PDL Warrant changing the exercise price from $0.45 to $0.40 per share (the “Amended 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. On December 28, 2017, the Company and PDL Investment Holdings, LLC (as assignee of PDL) (“PDL Investment”) entered into a Binding Forbearance Term Sheet (the “Forbearance Term Sheet”) in order to modify certain provisions of the PDL Credit Agreement to prevent any Events of Default from occurring on December 31, 2017. This Forbearance Term Sheet was the governing document until February 2, 2018, at which time, the Company and PDL Investment entered into a modification agreement (the “PDL Modification Agreement”), effective December 28, 2017, with respect to the PDL Credit Agreement, as amended, which reiterated the terms included in the Forbearance Term Sheet and effective February 2, 2018, entered into certain consents and amendments with respect to other existing agreements. In accordance with GAAP, we accounted for this transaction as a debt modification, wherein consideration given to the Lender was recorded as deferred closing costs and all third-party payments were considered an expense and recorded as such on the accompanying condensed consolidated financial statements. Details of the PDL Modification Agreement are included in our Form 10-K filed with the SEC on March 30, 2018. On May 31, 2018, the Company and PDL Investment entered into an amendment to the PDL Modification Agreement (the “PDL Modification Agreement Amendment”), pursuant to which the parties agreed to amend the PDL Modification Agreement to provide that the dates on which the Lender may elect, in the Lender’s sole discretion, to terminate the Modification Period would be July 31, 2018 and September 30, 2018 (with each such date permitted to be extended by the Lender in its sole discretion); and that the Company could satisfy its obligations under the PDL Modification Agreement, as amended, to obtain financing by obtaining (i) at least $2,050,000 in net cash proceeds from the issuance of Capital Stock (other than Disqualified Capital Stock) or Debt on or prior to February 23, 2018 and (ii) an additional (A) $750,000 in net cash proceeds from the issuance of Capital Stock (other than Disqualified Capital Stock) or Debt on or prior to June 15, 2018 and (B) $750,000 in net cash proceeds from the issuance of Capital Stock (other than Disqualified Capital Stock) or Debt on or prior to August 31, 2018 (resulting in aggregate net cash proceeds of at least $3,550,000). On June 14, 2018, the Company and PDL Investment entered into a second amendment to the PDL Modification Agreement (the “Second PDL Modification Agreement Amendment”), pursuant to which the parties agreed to further amend the PDL Modification Agreement, as amended, to provide that the Company could satisfy its obligations under the PDL Modification Agreement to obtain financing by obtaining (i) at least $2,050,000 in net cash proceeds from the issuance of Capital Stock (other than Disqualified Capital Stock) or Debt on or prior to February 23, 2018 and (ii) an additional (A) $750,000 in net cash proceeds from the issuance of Capital Stock (other than Disqualified Capital Stock) or Debt on or prior to July 3, 2018 (rather than June 15, 2018) and (B) $750,000 in net cash proceeds from the issuance of Capital Stock (other than Disqualified Capital Stock) or Debt on or prior to August 31, 2018 (resulting in aggregate net cash proceeds of at least $3,550,000). On June 28, 2018, the Company, and PDL Investment entered into a third amendment to the PDL Modification Agreement (the “Third PDL Modification Agreement Amendment”), pursuant to which the parties agreed to further amend the PDL Modification Agreement to provide that the Company could satisfy its obligations under the PDL Modification Agreement, as amended, to obtain financing by obtaining (i) at least $2,050,000 in net cash proceeds from the issuance of Capital Stock (other than Disqualified Capital Stock) or Debt on or prior to February 23, 2018 and (ii) an additional (A) $750,000 in net cash proceeds from the issuance of Capital Stock (other than Disqualified Capital Stock) or Debt on or prior to July 13, 2018 (rather than July 3, 2018) and (B) $750,000 in net cash proceeds from the issuance of Capital Stock (other than Disqualified Capital Stock) or Debt on or prior to August 31, 2018 (resulting in aggregate net cash proceeds of at least $3,550,000). In accordance with the PDL Credit Agreement, as amended, interest only payments of $675,000 for each of the first nine interest payment dates (December 31, 2015, March 31, June 30, September 30, and December 31, 2016, March 31, June 30, September 30, 2017 and December 31, 2017) were made timely. Pursuant to the terms of the PDL Modification Agreement, as amended, the first principal payment on the Tranche One Loan due on December 31, 2017 in the amount of $1,666,667, and similar principal payments due on March 31, 2018, June 30, 2018 and September 30, 2018 have been delayed and are included in the payment due on December 31, 2018. Quarterly payments under the PDL Credit Agreement, as amended, subsequent to the PDL Modification Agreement, as amended, will be due as detailed in the PDL Credit Agreement, as amended. 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, as amended, 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 2015 and 2018 Investors (as defined in NOTE 10 The PDL Credit Agreement, as amended, 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, as amended, 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, as amended, calls for a reduction of our operating expenses compared to such expense incurred in October 2017 by at least (i) $113,000 for January 2018, (ii) $148,000 for February 2018 and (iii) $167,000 for each other month for the duration of the Modification Period. We are in compliance with this covenant as of the date of this filing. The PDL Credit Agreement, as amended, also provides for a number of customary events of default, including payment, bankruptcy, covenant, representation and warranty and judgment defaults. In addition, contemporaneously with the execution of the PDL Credit Agreement, the Company and the Lender executed (i) a Registration Rights Agreement (as amended in the PDL Modification Agreement as discussed above) pursuant to which we agreed to provide the Lender with certain registration rights with respect to the shares of Common Stock issuable upon exercise of the PDL Warrant, (ii) a Guarantee and Collateral Agreement pursuant to which certain of our subsidiaries guaranteed the performance of our obligations under the PDL Credit Agreement, as amended, 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, as amended. Accounting Treatment In connection with the PDL Credit Agreement, as amended, 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, as amended, are recorded as assets in accordance with the accounting standards as the PDL Credit Agreement, as amended, 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 PDL Credit Agreement, as amended. In December 2017, in connection with the PDL Modification Agreement, the Amended PDL Warrant was again amended (the “Second Amendment to the PDL Warrant’) resulting in an increase in fair value of $44,445, which was recorded as additional deferred financing costs in the accompanying condensed consolidated financial statements. For the six-month periods ended June 30, 2018 and 2017, $94,782 and $89,844, respectively, was amortized to interest expense. As of June 30, 2018, the Amended PDL Warrant has not been exercised. We also incurred certain closing costs related to the PDL Credit Agreement, as amended, totaling $805,917 in the accompanying condensed consolidated financial statements. These costs have been recorded as deferred closing costs and are being amortized to interest expense over the term of the PDL Credit Agreement, as amended. For both six month-periods ended June 30, 2018 and 2017, $55,698 was amortized to interest expense. |
AGREEMENT WITH HEALTHCOR
AGREEMENT WITH HEALTHCOR | 6 Months Ended |
Jun. 30, 2018 | |
Agreement With Healthcor | |
AGREEMENT WITH HEALTHCOR | NOTE 10 – 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 Partners Fund, LP and HealthCor Hybrid Offshore Master Fund, LP (“HealthCor”). Pursuant to the terms of the 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. For the period from April 21, 2016 through March 31, 2018 interest has been added to the outstanding principal balance. 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 June 30, 2018, the underlying shares of our Common Stock related to the 2011 HealthCor Notes totaled approximately 37,000,000. 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. For the period from January 31, 2017 through June 30, 2018 interest has been added to the outstanding principal balance. As of June 30, 2018, the underlying shares of our Common Stock related to the 2012 HealthCor Notes totaled approximately 8,000,000. On August 20, 2013, we entered into the 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 the 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 June 30, 2018, the underlying shares of our Common Stock related to the 2014 HealthCor Notes totaled approximately 22,000,000. On December 4, 2014, we entered into the Fifth Amendment to the HealthCor Purchase Agreement (the “Fifth Amendment”) with HealthCor and certain additional investors (such additional investors, the “2015 Additional Investors” and, collectively with HealthCor Partners Fund, LP, the “2015 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 2015 Investors are composed of all but one of our current directors and one of our officers. On February 17, 2015, the Company and the 2015 Investors closed on the transactions contemplated by the Fifth Amendment. In connection with this closing, the Company and the 2015 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 June 30, 2018, the underlying shares of our Common Stock related to the Fifth Amendment Notes totaled approximately 3,000,000 to HealthCor Partners Fund, LP and 14,000,000 to the 2015 Additional 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 the 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 PDL Credit Agreement, as amended (as detailed in NOTE 9 On February 23, 2018, we entered into the Eighth Amendment to the HealthCor Purchase Agreement (the “Eighth Amendment”) with HealthCor and certain investors ( the “February 2018 Investors”) and agreed to sell and issue (i) additional notes in the initial aggregate principal amount of $2,050,000,with a conversion price per share of $0.05 (subject to adjustment as described therein) (the “Eighth Amendment Notes”) and (ii) additional Warrants for an aggregate of up to 512,500 shares of our Common Stock at an exercise price per share of $0.05 (subject to adjustment as described therein) (the “Eighth Amendment Warrants”). As provided by the Eighth Amendment, the Eighth 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 Eighth Amendment Notes have a maturity date of February 22, 2028. 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 February 2018 Investors are composed of all but one of our current directors, one of our officers and an entity. As of June 30, 2018, the underlying shares of our Common Stock related to the Eighth Amendment Notes totaled approximately 43,000,000 to the February 2018 Investors. 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. We recorded an aggregate of $1,719,400 and $1,509,975 in interest for the six months ended June 30, 2018 and 2017, respectively, related to these transactions. The face amount of the 2012 HealthCor Notes, 2014 HealthCor Notes, the Fifth Amendment Notes and the Eighth Amendment Notes and all accrued PIK interest also qualify for BCF treatment as discussed above. During the six months ended June 30, 2018 and 2017, we recorded a BCF of $64,561 and $92,567, 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 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 $13,997, and $11,804 in interest for the six months ended June 30, 2018 and 2017, respectively, related to the Fifth Amendment Notes and Fifth Amendment Warrants. The carrying value of the Fifth Amendment Notes at June 30, 2018 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 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 Sixth Amendment Warrant was $378,000, which was recorded as debt costs with the credit to additional paid in capital. We recorded an aggregate of $28,901 in interest for both six month-periods ended June 30, 2018 and 2017. As Warrants were issued with the Eighth 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 value allocated to the Eighth Amendment Warrants was $10,707 and was recorded as interest expense with the credit to additional paid in capital. The carrying value of the Eighth Amendment Notes at June 30, 2018 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. |
JOINT VENTURE AGREEMENT
JOINT VENTURE AGREEMENT | 6 Months Ended |
Jun. 30, 2018 | |
Equity Method Investments and Joint Ventures [Abstract] | |
JOINT VENTURE AGREEMENT | NOTE 11 – 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)”). On January 31, 2017, under the terms of the Rockwell Agreement, wherein we had the option to purchase Rockwell’s interest in the Project LLCs, we exercised that right by entering into a Settlement and LLC Interest Purchase Agreement with Rockwell (the “Settlement Agreement). Pursuant to the terms of the Settlement Agreement, we paid Rockwell the aggregate amount of $1,213,786 by the issuance of a promissory note to Rockwell for $1,113,786 (the “Rockwell Note”) and a cash payment of $100,000. Pursuant to the terms of the Rockwell Note, we were to make quarterly principal payments of $100,000, with each payment being made on the last day of each calendar quarter beginning with the first payment date of March 31, 2017 and continuing on the last business day of each subsequent quarter through September 30, 2019 with the final payment of $13,786, representing the remaining principal balance plus all accrued and unpaid interest, due on December 31, 2019. On February 2, 2018, pursuant to the terms of PDL Modification Agreement, we entered into an amendment to the Rockwell Note wherein the quarterly payments under the Rockwell Note were reduced to $50,000 per quarter during the term of the PDL Modification Agreement, which ends December 31, 2018, at which time the payments will revert back to $100,000 per quarter starting March 31, 2019 through September 30, 2019 with the final payment of $307,538, representing the remaining principal balance plus all accrued and unpaid interest, due on December 31, 2019. Our evaluation of the February 2, 2018 modification of the Rockwell Note concluded that the modification resulted in a troubled debt restructuring under the accounting guidance as we are experiencing financial difficulties and it was deemed a concession was granted by Rockwell. However, as the future payments to be received subsequent to the modification were greater than the carrying value at the time of the modification, no gain was required to be recognized on the restructuring. We will amortize the restructured note using the effective interest method which is not expected to be materially different as the effective rate on the restructured debt was not materially lower than before the modification. We were not in default of any conditions under the Settlement Agreement as of June 30, 2018. As additional consideration to Rockwell for entering into the Rockwell Agreement, we granted Rockwell Warrants to purchase 1,151,206 shares of our Common Stock on the date of the Rockwell Agreement, and, using the Black-Scholes Model, valued the Warrants at $1,124,728 (the “Project Warrant”), which amount was fully amortized at December 31, 2015. Pursuant to the terms of the Settlement Agreement, the expiration date of the Project Warrant was extended from November 16, 2017 to November 16, 2022. All other provisions of the Project Warrant remained unchanged. At the time of the extension, the Project Warrant were revalued resulting in a $11,512 increase in fair value, which has been recorded as non-cash costs included in general and administration expense in the accompanying consolidated financial statements. Effective February 2, 2018, pursuant to the terms of the PDL Modification Agreement, we entered into an amendment to the Project Warrant wherein the Project Warrant’s exercise price was changed from $0.52 to $0.05, resulting in a $13,814 increase in fair value, which was recorded as non-cash costs included in general and administration expense in the consolidated financial statements for the six months ended June 30, 2018. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 6 Months Ended |
Jun. 30, 2018 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 11 – 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)”). On January 31, 2017, under the terms of the Rockwell Agreement, wherein we had the option to purchase Rockwell’s interest in the Project LLCs, we exercised that right by entering into a Settlement and LLC Interest Purchase Agreement with Rockwell (the “Settlement Agreement). Pursuant to the terms of the Settlement Agreement, we paid Rockwell the aggregate amount of $1,213,786 by the issuance of a promissory note to Rockwell for $1,113,786 (the “Rockwell Note”) and a cash payment of $100,000. Pursuant to the terms of the Rockwell Note, we were to make quarterly principal payments of $100,000, with each payment being made on the last day of each calendar quarter beginning with the first payment date of March 31, 2017 and continuing on the last business day of each subsequent quarter through September 30, 2019 with the final payment of $13,786, representing the remaining principal balance plus all accrued and unpaid interest, due on December 31, 2019. On February 2, 2018, pursuant to the terms of PDL Modification Agreement, we entered into an amendment to the Rockwell Note wherein the quarterly payments under the Rockwell Note were reduced to $50,000 per quarter during the term of the PDL Modification Agreement, which ends December 31, 2018, at which time the payments will revert back to $100,000 per quarter starting March 31, 2019 through September 30, 2019 with the final payment of $307,538, representing the remaining principal balance plus all accrued and unpaid interest, due on December 31, 2019. Our evaluation of the February 2, 2018 modification of the Rockwell Note concluded that the modification resulted in a troubled debt restructuring under the accounting guidance as we are experiencing financial difficulties and it was deemed a concession was granted by Rockwell. However, as the future payments to be received subsequent to the modification were greater than the carrying value at the time of the modification, no gain was required to be recognized on the restructuring. We will amortize the restructured note using the effective interest method which is not expected to be materially different as the effective rate on the restructured debt was not materially lower than before the modification. We were not in default of any conditions under the Settlement Agreement as of June 30, 2018. As additional consideration to Rockwell for entering into the Rockwell Agreement, we granted Rockwell Warrants to purchase 1,151,206 shares of our Common Stock on the date of the Rockwell Agreement, and, using the Black-Scholes Model, valued the Warrants at $1,124,728 (the “Project Warrant”), which amount was fully amortized at December 31, 2015. Pursuant to the terms of the Settlement Agreement, the expiration date of the Project Warrant was extended from November 16, 2017 to November 16, 2022. All other provisions of the Project Warrant remained unchanged. At the time of the extension, the Project Warrant were revalued resulting in a $11,512 increase in fair value, which has been recorded as non-cash costs included in general and administration expense in the accompanying consolidated financial statements. Effective February 2, 2018, pursuant to the terms of the PDL Modification Agreement, we entered into an amendment to the Project Warrant wherein the Project Warrant’s exercise price was changed from $0.52 to $0.05, resulting in a $13,814 increase in fair value, which was recorded as non-cash costs included in general and administration expense in the consolidated financial statements for the six months ended June 30, 2018. |
BASIS OF PRESENTATION AND REC18
BASIS OF PRESENTATION AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (Policies) | 6 Months Ended |
Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
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, 2017 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, 2017 as filed with the SEC on March 30, 2018. |
Revenue Recognition | Revenue Recognition We adopted Accounting Standards Codification (“ASC”) Topic 606 (“606”) on January 1, 2018 using the full retrospective transition method for recognizing revenue. The adoption of ASC 606 represents a change in accounting principle that will more closely align revenue recognition with the delivery of our services to our customers and will provide financial statement readers with enhanced disclosures. Under ASC 606, there were no differences in the timing of our revenue recognition as compared to the requirements under ASC 605. We have employed the practical expedient discussed in ASC 606-10-55-18 related to invoicing as we have the right to consideration from our customers in the amount that corresponds directly with the value to the customer of our performance completed to date and therefore we recognize revenue upon invoicing as further discussed below. Further, for those customers for which we are required to collect sales taxes, we record such sales taxes on a net basis which has no effect on the amount of revenue or expenses recognized as the sales taxes are a flow through to the taxing authority. In accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which we expect to be entitled to receive in exchange for these goods or services. The provisions of ASC 606 include a five-step process by which we determine revenue recognition, depicting the transfer of goods or services to customers in amounts reflecting the payment to which we expect to be entitled in exchange for those goods or services. ASC 606 requires us to apply the following steps: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, we satisfy the performance obligation. We offer CareView’s services through a subscription-based contract with each healthcare facility for a standard term of three to five years and have determined we have one performance obligation for our services. We begin to bill monthly subscription fees to the healthcare facility upon official acceptance of the CareView System by the healthcare facility which is when the service is initiated. When services begin, the customer simultaneously receives the use and benefit of that service and we recognize the revenue over time based on the service completed to date as the amount invoiced each month. The contract requires the healthcare facility to pay us the subscription fee monthly. During the term of the contract, we provide continuous monitoring of the CareView System and are required to maintain and service all CareView System equipment. If the healthcare facility requires additional services, the contract is amended accordingly. The Company evaluated the disaggregation criteria of ASC 606 and determine that based on the nature, amount, timing and uncertainty of our service revenues, there were no material differences that merited further disaggregation as compared to the total revenue as reported in the accompanying consolidated statements of operations. We defer and capitalize all costs associated with the installation of the CareView System into a healthcare facility until the CareView System is fully operational and accepted by the healthcare facility. Installation costs are specifically identifiable based on the amounts we are charged from third party installers or directly identifiable labor hours incurred for each installation. Upon acceptance, the associated costs are expensed on a straight-line basis over the life of the contract with the healthcare facility. These costs are included in network operations on the accompanying consolidated statements of operations. The table below details the activity in these deferred installation costs during the six months ended June 30, 2018. Balance, December 31, 2017 $ 215,548 Additions 37,083 Transfer to expense (82,405 ) Balance, June 30, 2018 $ 170,226 From time to time, we enter into contracts with healthcare facilities wherein full payment of the contractual obligation is paid in advance (“PIA Contracts”). The transaction is recorded as a contract liability in our consolidated financial statements, with revenue recorded and the contract liability reduced as services are provided under the contract. The table below details this activity during the six months ended June 30, 2018. Balance, December 31, 2017 $ 17,430 Additions 87,061 Transfer to revenue (69,529 ) Balance, June 30, 2018 $ 34,962 Based on our contracts, we invoice customers once our performance obligations have been satisfied, at which point payment is unconditional. Accordingly, except in the case of PIA Contracts as detailed above, our contracts do not give rise to contract assets or liabilities under ASC 606. Accounts receivable are recorded when the right to consideration becomes unconditional and are reported accordingly on our consolidated financial statements. |
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 approximately 177,000,000 and 126,000,000 at June 30, 2018 and 2017, 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 August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) Statement of Cash Flows (Topic 230) Aside from the change noted in Revenue Recognition NOTE 2 |
BASIS OF PRESENTATION AND REC19
BASIS OF PRESENTATION AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Basis Of Presentation And Recently Issued Accounting Pronouncements | |
Schedule of revenue income and expense | The table below details the activity in these deferred installation costs during the six months ended June 30, 2018. Balance, December 31, 2017 $ 215,548 Additions 37,083 Transfer to expense (82,405 ) Balance, June 30, 2018 $ 170,226 The table below details this activity during the six months ended June 30, 2018. Balance, December 31, 2017 $ 17,430 Additions 87,061 Transfer to revenue (69,529 ) Balance, June 30, 2018 $ 34,962 |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
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, 2017 22,660,459 $ 0.27 8.1 $ — Expired (567,334 ) Canceled (146,664 ) Balance at June 30, 2018 21,946,461 $ 0.27 7.6 $ — Vested and Exercisable at June 30, 2018 11,409,497 $ 0.43 6.3 $ — |
Schedule of assumptions used in the Black-Scholes Model - stock options | The assumptions used in the Black-Scholes Model are set forth in the table below. Six Months Ended June 30, 2018 Year Ended December 31, 2017 Risk-free interest rate — % 1.17-2.15 % Volatility — % 78.40-89.93 % Expected life in years — 6 Dividend yield 0.00 % 0.00 % |
OTHER CURRENT ASSETS (Tables)
OTHER CURRENT ASSETS (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Schedule of other current assets | Other current assets consist of the following: June 30, 2018 December 31, 2017 Prepaid equipment $ 1,227,466 $ 465,847 Prepaid expenses 232,323 98,656 Other current assets 14,471 21,119 TOTAL OTHER CURRENT ASSETS $ 1,474,260 $ 585,622 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | Property and equipment consist of the following: June 30, 2018 December 31, 2017 Network equipment $ 13,977,074 $ 13,610,280 Office equipment 292,897 291,003 Vehicles 217,004 217,004 Test equipment 175,603 177,386 Furniture 90,827 90,827 Warehouse equipment 9,524 9,524 Leasehold improvements 5,121 5,121 14,768,050 14,401,145 Less: accumulated depreciation (11,714,437 ) (11,079,604 ) TOTAL PROPERTY AND EQUIPMENT $ 3,053,613 $ 3,321,541 |
OTHER ASSETS (Tables)
OTHER ASSETS (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Schedule of intangible assets | Intangible assets consist of the following: June 30, 2018 Cost Accumulated Amortization Net Patents and trademarks $ 868,992 $ 168,263 $ 700,729 Other intangible assets 63,509 54,727 8,782 TOTAL INTANGIBLE ASSETS $ 932,501 $ 222,990 $ 709,511 December 31, 2017 Cost Accumulated Amortization Net Patents and trademarks $ 806,279 $ 146,246 $ 660,033 Other intangible assets 59,122 53,237 5,885 TOTAL INTANGIBLE ASSETS $ 865,401 $ 199,483 $ 665,918 |
Schedule of other assets | Other assets consist of the following: June 30, 2018 Cost Accumulated Amortization Net Deferred debt issuance costs $ 1,302,223 $ 545,998 $ 756,225 Prepaid financing costs 805,918 352,561 453,357 Deferred installation costs 1,785,901 1,615,675 170,226 Prepaid license fee 249,999 112,021 137,978 Security deposit 46,124 — 46,124 TOTAL OTHER ASSETS $ 4,190,165 $ 2,626,255 $ 1,563,910 December 31, 2017 Cost Accumulated Amortization Net Deferred debt issuance costs $ 1,257,778 $ 451,216 $ 806,562 Deferred financing costs 850,363 296,863 553,500 Deferred installation costs 1,748,818 1,533,270 215,548 Prepaid license fee 249,999 103,824 146,175 Security deposit 46,124 — 46,124 TOTAL OTHER ASSETS $ 4,153,082 $ 2,385,173 $ 1,767,909 |
OTHER CURRENT LIABILITIES (Tabl
OTHER CURRENT LIABILITIES (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Payables and Accruals [Abstract] | |
Schedule of other current liabilities | Other current liabilities consist of the following: June 30, 2018 December 31, 2017 Allowance for system removal $ 223,600 $ 176,750 Accrued rent expense 104,308 120,433 Accrued insurance 95,668 — Accrued paid time off 82,568 112,577 Accrued taxes 63,124 127,225 Deferred revenue 34,962 17,430 Other accrued liabilities 113,638 195,641 TOTAL OTHER CURRENT LIABILITIES $ 717,868 $ 750,056 |
BASIS OF PRESENTATION AND REC25
BASIS OF PRESENTATION AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (Details Narrative) - shares | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Anti-dilutive common share equivalents excluded from EPS calculation | 177,000,000 | 126,000,000 |
GOING CONCERN, LIQUIDITY AND 26
GOING CONCERN, LIQUIDITY AND MANAGEMENT'S PLAN (Details Narrative) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 | Jun. 30, 2017 | Dec. 31, 2016 | Apr. 21, 2011 |
Cash and cash equivalents | $ 231,329 | $ 2,066,392 | $ 5,880,540 | $ 10,088,258 | |
Restricted cash | $ 2,500,000 | $ 2,500,000 | |||
HealthCor Purchase Agreement [Member] | |||||
Minimum cash balance required under existing loan documents | $ 2,000,000 |
STOCKHOLDERS' EQUITY (Details)
STOCKHOLDERS' EQUITY (Details) | 6 Months Ended |
Jun. 30, 2018$ / sharesshares | |
Number Options | |
Stock Options Outstanding, Beginning | 22,660,459 |
Expired | (567,334) |
Canceled | (146,664) |
Stock Options Outstanding, Ending | 21,946,461 |
Stock Options, vested and exercisable | 11,409,497 |
Weighted Average Exercise Price | |
Stock Options Outstanding, Beginning | $ / shares | $ .27 |
Stock Options Outstanding, Ending | $ / shares | 0.27 |
Stock Options, vested and exercisable | $ / shares | $ 0.43 |
Weighted Average Remaining Contractual Life | |
Stock Options Outstanding, Beginning | 8 years 1 month 6 days |
Stock Options Outstanding, Ending | 7 years 7 months 6 days |
Stock Options, vested and exercisable | 6 years 3 months 18 days |
STOCKHOLDERS' EQUITY (Details 1
STOCKHOLDERS' EQUITY (Details 1) - Stock Options [Member] | 6 Months Ended | 12 Months Ended |
Jun. 30, 2018 | Dec. 31, 2017 | |
Black-Scholes Model: | ||
Expected life | 6 years | |
Dividend yield | 0.00% | 0.00% |
Lower Range [Member] | ||
Black-Scholes Model: | ||
Risk-free interest rate | 0.00% | 1.70% |
Volatility | 0.00% | 78.40% |
Lower Range [Member] | ||
Black-Scholes Model: | ||
Risk-free interest rate | 0.00% | 2.15% |
Volatility | 0.00% | 89.93% |
STOCKHOLDERS' EQUITY (Details N
STOCKHOLDERS' EQUITY (Details Narrative) - USD ($) | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Feb. 23, 2018 | |
Warrant activity | |||
Number of warrants expired | 340,000 | ||
Number of warrant issued | 2,500,000 | 487,500 | |
Written off warrant | $ 11,157 | ||
Warrant exercise price (in dollars per share) | $ 0.05 | ||
Fair value of the warrants | $ 10,237 | ||
Option activity | |||
Options canceled | 146,664 | ||
Share-based compensation expense | $ 147,697 | $ 215,853 | |
Unrecognized estimated compensation expense | $ 388,000 | ||
Period for recognition of unrecognized compensation expense | 1 year 10 months 24 days | ||
Directors And Officers [Member] | |||
Warrant activity | |||
Number of warrant issued | 25,000 | ||
Warrant exercise price (in dollars per share) | $ 0.05 | ||
Fair value of the warrants | $ 525 |
OTHER CURRENT ASSETS (Details)
OTHER CURRENT ASSETS (Details) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Prepaid equipment | $ 1,227,466 | $ 465,847 |
Prepaid expenses | 232,323 | 98,656 |
Other current assets | 14,471 | 21,119 |
TOTAL OTHER CURRENT ASSETS | $ 1,474,260 | $ 585,622 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 14,768,050 | $ 14,401,145 |
Less: accumulated depreciation | (11,714,437) | (11,079,604) |
Property and equipment, net | 3,053,613 | 3,321,541 |
Network Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 13,977,074 | 13,610,280 |
Office Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 292,897 | 291,003 |
Vehicles [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 217,004 | 217,004 |
Test Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 175,603 | 177,386 |
Furniture [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 90,827 | 90,827 |
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 |
PROPERTY AND EQUIPMENT (Detai32
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 692,068 | $ 897,298 |
OTHER ASSETS (Details)
OTHER ASSETS (Details) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Finite-Lived Intangible Assets [Line Items] | ||
Cost | $ 932,501 | $ 865,401 |
Accumulated Amortization | 222,990 | 199,483 |
Intangible assets, Net | 709,511 | 665,918 |
Patents and Trademarks [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Cost | 868,992 | 806,279 |
Accumulated Amortization | 168,263 | 146,246 |
Intangible assets, Net | 700,729 | 660,033 |
Other Intangible Assets [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Cost | 63,509 | 59,122 |
Accumulated Amortization | 54,727 | 53,237 |
Intangible assets, Net | $ 8,782 | $ 5,885 |
OTHER ASSETS (Details 1)
OTHER ASSETS (Details 1) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Cost | $ 4,190,165 | $ 4,153,082 |
Accumulated Amortization | 2,626,255 | 2,385,173 |
Other assets | 1,563,910 | 1,767,909 |
Deferred Debt Issuance Costs [Member] | ||
Cost | 1,302,223 | 1,257,778 |
Accumulated Amortization | 545,998 | 451,216 |
Other assets | 756,225 | 806,562 |
Deferred Financing Costs [Member] | ||
Cost | 805,918 | 850,363 |
Accumulated Amortization | 352,561 | 296,863 |
Other assets | 453,357 | 553,500 |
Deferred Installation Costs [Member] | ||
Cost | 1,785,901 | 1,748,818 |
Accumulated Amortization | 1,615,675 | 1,533,270 |
Other assets | 170,226 | 215,548 |
Prepaid License Fee [Member] | ||
Cost | 249,999 | 249,999 |
Accumulated Amortization | 112,021 | 103,824 |
Other assets | 137,978 | 146,175 |
Security Deposit [Member] | ||
Cost | 46,124 | 46,124 |
Other assets | $ 46,124 | $ 46,124 |
OTHER CURRENT LIABILITIES (Deta
OTHER CURRENT LIABILITIES (Details) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
OTHER CURRENT LIABILITIES: | ||
Allowance for system removal | $ 223,600 | $ 176,750 |
Accrued rent expense | 104,308 | 120,433 |
Accrued insurance | 95,668 | |
Accrued paid time off | 82,568 | 112,577 |
Accrued taxes | 63,124 | 127,225 |
Deferred revenue | 34,962 | 17,430 |
Other accrued liabilities | 113,638 | 195,641 |
TOTAL OTHER CURRENT LIABILITIES | $ 717,868 | $ 750,056 |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) | 6 Months Ended |
Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Statutory federal tax rate (in percent) | 21.00% |
Previously Statutory federal tax rate (in percent) | 35.00% |
AGREEMENT WITH PDL BIOPHARMA,37
AGREEMENT WITH PDL BIOPHARMA, INC. (Details Narrative) - USD ($) | Dec. 28, 2018 | Jun. 28, 2018 | Jun. 14, 2018 | May 31, 2018 | Jun. 26, 2015 | Feb. 28, 2018 | Jan. 31, 2018 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2018 | Oct. 08, 2018 | Feb. 23, 2018 | Dec. 31, 2017 | Dec. 28, 2017 | Oct. 09, 2015 |
Warrant exercise price (in dollars per share) | $ 0.05 | ||||||||||||||
Restricted cash | $ 2,500,000 | $ 2,500,000 | |||||||||||||
Amortization of issuance costs | 55,698 | $ 55,698 | |||||||||||||
Amortization of financing costs | 89,844 | $ 94,782 | |||||||||||||
PDL Modification Agreement [Member] | |||||||||||||||
Reduction in monthly operating expenses | $ 148,000 | $ 113,000 | $ 167,000 | ||||||||||||
PDL Credit Agreement [Member] | |||||||||||||||
Amount available under credit agreement | $ 40,000,000 | ||||||||||||||
Minimum cash balance required under existing loan documents | 2,500,000 | ||||||||||||||
Interest only quarterly payments | $ 675,000 | ||||||||||||||
Deferred financing costs | $ 805,917 | ||||||||||||||
PDL Credit Agreement [Member] | Purchase Agreement Warrants [Member] | |||||||||||||||
Warrants granted (shares) | 4,444,445 | ||||||||||||||
Warrant exercise price (in dollars per share) | $ 0.45 | $ .40 | |||||||||||||
Deferred issuance costs | $ 1,257,778 | ||||||||||||||
Deferred financing costs | $ 44,445 | ||||||||||||||
PDL Modification Agreement [Member] | |||||||||||||||
Net cash proceeds for issuance capital stock or debt | $ 3,550,000 | ||||||||||||||
PDL Modification Agreement [Member] | February 23, 2018 [Member] | |||||||||||||||
Net cash proceeds for issuance capital stock or debt | 2,050,000 | ||||||||||||||
PDL Modification Agreement [Member] | June 15, 2018 [Member] | |||||||||||||||
Net cash proceeds for issuance capital stock or debt | 750,000 | ||||||||||||||
PDL Modification Agreement [Member] | August 31, 2018 [Member] | |||||||||||||||
Net cash proceeds for issuance capital stock or debt | $ 750,000 | ||||||||||||||
Second Amendment PDL Modification Agreement [Member] | |||||||||||||||
Net cash proceeds for issuance capital stock or debt | $ 3,550,000 | ||||||||||||||
Second Amendment PDL Modification Agreement [Member] | February 23, 2018 [Member] | |||||||||||||||
Net cash proceeds for issuance capital stock or debt | 2,050,000 | ||||||||||||||
Second Amendment PDL Modification Agreement [Member] | June 15, 2018 [Member] | |||||||||||||||
Net cash proceeds for issuance capital stock or debt | 750,000 | ||||||||||||||
Second Amendment PDL Modification Agreement [Member] | August 31, 2018 [Member] | |||||||||||||||
Net cash proceeds for issuance capital stock or debt | 750,000 | ||||||||||||||
Third Amendment PDL Modification Agreement [Member] | |||||||||||||||
Net cash proceeds for issuance capital stock or debt | $ 3,550,000 | ||||||||||||||
Third Amendment PDL Modification Agreement [Member] | February 23, 2018 [Member] | |||||||||||||||
Net cash proceeds for issuance capital stock or debt | 2,050,000 | ||||||||||||||
Third Amendment PDL Modification Agreement [Member] | June 15, 2018 [Member] | |||||||||||||||
Net cash proceeds for issuance capital stock or debt | $ 750,000 | ||||||||||||||
Third Amendment PDL Modification Agreement [Member] | August 31, 2018 [Member] | |||||||||||||||
Net cash proceeds for issuance capital stock or debt | $ 750,000 | ||||||||||||||
Tranche One Term Note [Member] | |||||||||||||||
Proceeds for debt | $ 20,000,000 | ||||||||||||||
Principal payments | $ 1,666,667 | ||||||||||||||
PDL Credit Agreement - Tranche One Debt [Member] | |||||||||||||||
Amount available under credit agreement | $ 20,000,000 | ||||||||||||||
Interest rate | 13.50% | ||||||||||||||
PDL Credit Agreement - Tranche Two Debt [Member] | |||||||||||||||
Amount available under credit agreement | $ 20,000,000 |
AGREEMENT WITH HEALTHCOR (Detai
AGREEMENT WITH HEALTHCOR (Details Narrative) | Jan. 31, 2012USD ($)$ / shares | Apr. 21, 2011USD ($)$ / sharesshares | Jun. 30, 2018Number | Feb. 23, 2018$ / shares |
Exercise price of warrants | $ 0.05 | |||
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 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 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 | 37,000,000 | |||
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 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 | |||
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 | 8,000,000 |
AGREEMENT WITH HEALTHCOR (Det39
AGREEMENT WITH HEALTHCOR (Details Narrative 1) | Feb. 23, 2018USD ($)$ / sharesshares | Jun. 30, 2015USD ($)$ / sharesshares | Dec. 04, 2014USD ($)$ / sharesshares | Jan. 16, 2014USD ($)$ / sharesshares | Jun. 30, 2018USD ($) | Jun. 30, 2017USD ($) | Jun. 30, 2018USD ($)Number | Jun. 30, 2017USD ($) | Dec. 31, 2017USD ($) | Aug. 20, 2013USD ($) | Apr. 21, 2011USD ($) |
Exercise price of warrants | $ / shares | $ 0.05 | ||||||||||
Beneficial conversion features for senior secured convertible notes | $ 64,561 | $ 92,567 | |||||||||
Debt discount | $ 16,463,985 | 16,463,985 | $ 18,161,723 | ||||||||
Interest Expense | $ 3,633,729 | $ 3,284,743 | $ 7,268,796 | 6,505,505 | |||||||
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 | ||||||||||
HealthCor Fourth Amendment Purchase Agreement [Member] | 2014 Senior Secured Convertible Note#1 [Member] | |||||||||||
Note amount | $ 2,329,000 | ||||||||||
Debt Maturity Date | Jan. 15, 2024 | ||||||||||
Minimum cash balance required under existing loan documents | $ 5,000,000 | ||||||||||
HealthCor Fourth Amendment Purchase Agreement [Member] | 2014 Senior Secured Convertible Note#2 [Member] | |||||||||||
Note amount | $ 2,671,000 | ||||||||||
Debt Maturity Date | Jan. 15, 2024 | ||||||||||
HealthCor Fourth Amendment Purchase Agreement [Member] | 2014 Senior Secured Convertible Notes [Member] | |||||||||||
Issuance of warrants | shares | 4,000,000 | ||||||||||
Exercise price of warrants | $ / shares | $ 0.40 | ||||||||||
Debt conversion price | $ / shares | $ 0.40 | ||||||||||
Number of shares the note may be converted into | Number | 22,000,000 | ||||||||||
HealthCor Fifth Amendment Purchase Agreement [Member] | |||||||||||
Note amount | $ 6,000,000 | ||||||||||
Debt Maturity Date | Feb. 16, 2025 | ||||||||||
Issuance of warrants | shares | 3,692,308 | ||||||||||
Exercise price of warrants | $ / shares | $ 0.52 | ||||||||||
Debt conversion price | $ / shares | $ 0.52 | ||||||||||
Debt discount | $ 1,093,105 | ||||||||||
Interest Expense | $ 13,997 | 11,804 | |||||||||
HealthCor Fifth Amendment Purchase Agreement [Member] | HealthCor Partners Fund [Member] | |||||||||||
Number of shares the note may be converted into | Number | 3,000,000 | ||||||||||
HealthCor Fifth Amendment Purchase Agreement [Member] | New Investors [Member] | |||||||||||
Number of shares the note may be converted into | Number | 14,000,000 | ||||||||||
HealthCor Eighth Amendment Purchase Agreement [Member] | |||||||||||
Note amount | $ 2,050,000 | ||||||||||
Debt Maturity Date | Feb. 22, 2028 | ||||||||||
Issuance of warrants | shares | 512,500 | ||||||||||
Exercise price of warrants | $ / shares | $ 0.05 | ||||||||||
Debt conversion price | $ / shares | $ 0.05 | ||||||||||
Debt discount | $ 10,707 | ||||||||||
Interest Expense | 92,567 | ||||||||||
HealthCor Eighth Amendment Purchase Agreement [Member] | New Investors [Member] | |||||||||||
Number of shares the note may be converted into | Number | 43,000,000 | ||||||||||
HealthCor Sixth Amendment Purchase Agreement [Member] | |||||||||||
Debt Maturity Date | Mar. 31, 2025 | ||||||||||
Issuance of warrants | shares | 1,000,000 | ||||||||||
Exercise price of warrants | $ / shares | $ 0.53 | ||||||||||
Minimum cash balance required under existing loan documents | $ 5,000,000 | ||||||||||
Debt discount | 378,000 | ||||||||||
HealthCor Sixth Amendment Purchase Agreement [Member] | Lower Range [Member] | |||||||||||
Minimum cash balance required under existing loan documents | $ 2,000,000 | ||||||||||
HealthCor Sixth Amendment Purchase Agreement [Member] | |||||||||||
Interest Expense | $ 28,901 | ||||||||||
HealthCor Purchase Agreement [Member] | |||||||||||
Minimum cash balance required under existing loan documents | $ 2,000,000 | ||||||||||
Beneficial conversion features for senior secured convertible notes | 64,561 | 28,901 | |||||||||
Interest Expense | $ 1,719,400 | $ 1,509,975 |
JOINT VENTURE AGREEMENT (Detail
JOINT VENTURE AGREEMENT (Details Narrative) - USD ($) | Jan. 31, 2019 | Feb. 02, 2018 | Jan. 31, 2017 | Dec. 31, 2015 | Jun. 30, 2018 | Feb. 23, 2018 |
Exercise price of warrants | $ 0.05 | |||||
Joint Venture - Rockwell [Member] | ||||||
Total cost to acquire remaining interest in joint venture | $ 1,213,786 | |||||
Promissory note issued to acquire interest in joint venture | 1,113,786 | |||||
Cash payment to acquire remaining interest in joint venture | $ 307,538 | 100,000 | ||||
Balloon payment to be paid | 13,786 | |||||
Joint Venture - Rockwell [Member] | PDL Modification Agreement [Member] | ||||||
Cash payment to acquire remaining interest in joint venture | $ 50,000 | |||||
Balloon payment to be paid | $ 13,786 | |||||
Increase fair value of warrant | $ 13,814 | |||||
Exercise price of warrants | $ 0.05 | $ 0.52 | ||||
Joint Venture - Rockwell [Member] | Warrants [Member] | ||||||
Warrants issued for financing costs, warrants | 1,151,206 | |||||
Fair value of warrants issued to Rockwell for providing funding | $ 1,124,728 | |||||
Fair value adjustment of warrants | $ 11,512 |
SUBSEQUENT EVENTS (Details Narr
SUBSEQUENT EVENTS (Details Narrative) - Subsequent Event [Member] - USD ($) | Jul. 13, 2018 | Jul. 10, 2018 |
HealthCor Ninth Amendment to Purchase Agreement [Member] | ||
Subsequent Event [Line Items] | ||
Net proceeds to be retained from sale of hospital assets | $ 5,000,000 | |
HealthCor Tenth Amendment to Purchase Agreement [Member] | ||
Subsequent Event [Line Items] | ||
Note amount | $ 1,000,000 | |
Debt Maturity Date | Jul. 12, 2028 | |
Debt conversion price (per share) | $ .05 |