|Shares Out. (in M):||132||P/E||0.0x||0.0x|
|Market Cap (in M):||159||P/FCF||0.0x||0.0x|
|Net Debt (in M):||0||EBIT||0||0|
Short Careview Communications, Inc. (CRVW)
Stock Price: $1.20
Market Cap (basic): $158.5 M
EV (f/d): $174.4 M
Avg. Volume: 100 K shares
Careview Communications, Inc. is an OTCBB-listed reverse merger with a market cap of $158 million, which is ~95x run rate revenues and 16.5x book value. EV is slightly higher at $174.4 M, this assumes full exercise although some options/warrants are slightly OTM.
Careview’s business is selling in-room internet, TV, and monitoring services to hospitals. If this doesn’t sound like a great business, that’s because it’s not. Careview had a revenue of $630K in 2011 and $829K in the first half of 2012. Their operating loss was $5.5M for an operating margin of -670%. This isn’t due to a large capex, although depreciation is high. In fact, it costs them twice as much to simply operate the network as their revenue! Their G&A is 3x revenue, while marketing costs are 1.2x revenue and D&A 1.3x revenue. In summary, this business model is absurd.
The way the promoters pitch the stock is that the monitoring services are somehow a great advance in patient care technology, but what is so special about putting a camera or motion sensors in a hospital room? Frankly, I can’t imagine that very many patients would even want such a thing.
To give one example of how promotional management is, see their product “Virtual Bed Rails”. http://www.care-view.com/pressrelease.php?pr=pr20120312
This is a motion sensor that alerts medical staff to any patient movement outside a restricted zone on the bed. Management describes the addressable market like this: “The U.S. Department of Health and Human Services reports the costs of patient falls at approximately $18 billion per year”.
This number is touted throughout their website and promotional materials. While I did find studies claiming that the cost of treating falls is roughly $19 billion annually (while already doubtful), what percentage of those falls occurred in hospitals? And what percentage involved a patient that was LYING in a HOSPITAL BED? I was not able to discover that number, but I am sure it is quite small vs. $19 billion. Most falls occur in the elderly and frail while they are walking due to balance and strength issues and environmental factors (slippery ground) often contribute. The whole idea of the Virtual Bed Rails product seems absurd on its face with a cost of $2.30 per day (not including the staff cost) compared to a physical bed rail ($100) which seems much safer if the patient is actually at risk of falling out of bed.
Another product, FacilityView, allows staff to view “exits, entrances, parking lots, and any additional hospital areas that could be considered a security breach” (actual quote from website). While I am sure many hospitals do utilize security cameras, I doubt many facilities would give this business to Careview rather than a well-known security firm.
I could keep going through the reasons why Careview’s various products are not attractive to hospitals, but the proof is in the pudding. After several years of marketing this junk, Careview has minimal revenues to show for it even at -670% op margin.
Paid Research / Promotions
Stock promoters have been paid to issue research reports on CRVW:
“CareView paid Draco Financial LLC, eight hundred fifty thousand shares of free-trading common stock and two hundred thousand warrants to purchase common stock for investor awareness services.”
Draco is a Florida-based stock promotion firm with only two clients, CRVW and TXMD (another pump’n’dump run by the same promoters as CRVW)
Here is a video of CEO Sam Greco pitching CRVW stock to seniors in Boca Raton, FL while they eat dinner: http://www.youtube.com/watch?v=aK9_ebxj2hw&feature=plcp
(at the “Undiscovered Equities Winter Conference”, cost to CRVW: $6,500) http://www.smallcapconferences.com/
“This website, www.TinyGems .com, provides readers with information regarding publicly traded companies that have retained TG to provide advertising, news and public relations. TG receives compensation from the companies in the form of cash and/or securities in the companies.”
“Pro-Active Capital Group will be receiving 80,000 shares of restricted stock from a third party for a comprehensive set of services, including equity research provided by Pro-Active Research Group.”
Careview paid “Stonegate Securities” for research coverage: http://sec.gov/Archives/edgar/data/1377149/000138713112001425/ex10-104.htm
Management and Promoters’ Backgrounds
Steve Johnson was the CEO of American Wireless Systems Inc. (AWSY). AWSY, another reverse merger, merged with Heartland Wireless in 1995 and Heartland (the surviving company) went bankrupt in 1998. The CFO of Heartland, John Bailey, was the former CFO of CRVW. The CEO of Heartland, David Webb, is a former director of CRVW.
Jeffrey D. Howes is a broker that was hired by CRVW to arrange deals: http://www.sec.gov/Archives/edgar/data/1377149/000119312510194853/dex1017.htm
Howes has 12 actions against him from various state regulators, mostly for sales of unregistered securities, and also securities fraud. These actions resulted in 12 cease and desist orders and a financial penalty of $20,000.
The CEO of CRVW, Samuel A Greco, used to run the Florida-based penny stock VGPO before it was deregistered by the SEC:
There are the usual risks of shorting a stock promotion – timing / borrow issues, although the borrow isn’t too hard right now. There is also an extremely small possibility that even though the company is worthless, the promoters could arrange for it to be bought out by their cronies at another public company (similar to what they did with Heartland/AWSY). I would just note that the market cap involved here is $158 million vs. $34 million for AWSY.
|Entry||08/14/2012 12:38 PM|
The author of this report is short CRVW, and may buy or sell the securities of CRVW without disclosure. This report was prepared for the Value Investors Club for use only by investment professionals. Securities trading involves a high degree of risk, and should only be undertaken by investment professionals.
|Entry||08/14/2012 02:17 PM|
everyone should download the draco financial "reesearch" so they can see the firm's logo
|Entry||08/14/2012 02:28 PM|
Cute dragon. My 11-month old has one just like it: http://tinyurl.com/d5cpdt8
|Entry||08/15/2012 11:10 PM|
urban - thanks for the idea. Sorry, I hit return before I pasted in my comment...
Out of curiosity, have you spoken to HMA about why they are installing the technology into all their hospitals, or how much revenue each hospital would generate for CRVW once all 66 were set up?
"On March 8, 2011, the Company entered into a Master Agreement with Hospital Management Associates, Inc., a Delaware corporation (“HMA”). Terms of the Master Agreement provide for (i) HMA to use the CareView System in each of its approximately 66 hospitals across the U.S. through the execution of a separate Hospital Agreement for each location and (ii) CareView to provide the Primary Package and preferential pricing in exchange for the volume provided by HMA. As of December 31, 2011, the Company has installations in 13 HMA hospitals resulting in revenue of approximately $179,000 for the year ended December 31, 2011."
Given their cash balance and the potential for revenue growth during the ramp period, we're trying to get a sense for how long they could keep up the shenanigans. As others have pointed out, we fear waiting a while for the cash to run out.
|Subject||Seeking Alpha and SumZero|
|Entry||08/21/2012 10:36 AM|
It has been brought to my attention that a CRVW report similar to mine has been posted to Seeking Alpha and SumZero. I just want to clarify that I am not associated with the person who posted that report.