UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended:
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from________ to ___________
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(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
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Securities registered pursuant to Section 12(b) of the Exchange Act: None
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Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller reporting company | |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 31(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ☐
The aggregate market value of the common stock held
by non-affiliates of the registrant at June 30, 2023 (the last business day of the registrant's
most recently completed second fiscal quarter) was approximately $
As of March 29, 2024, the registrant had outstanding shares of common stock, $0.001 par value, which is its only class of common stock.
TABLE OF CONTENTS
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PART I
| ITEM 1. | BUSINESS. |
Cautionary Note Regarding Forward Looking Statements
This Annual Report on Form 10-K contains certain statements that are “forward-looking” within the meaning of the federal securities laws. These forward- looking statements and other information are based on our beliefs as well as assumptions made by us using information currently available.
The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “should” and similar expressions, as they relate to us, are intended to identify forward- looking statements. Such statements reflect our current views with respect to future events and are subject to certain risks, uncertainties, and assumptions, and are not guarantees of future performance. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected, intended, or using other similar expressions.
We are making investors aware that such forward-looking statements, because they relate to future events, are by their very nature subject to many important factors that could cause actual results to differ materially from those contemplated by the forward-looking statements contained in this Annual Report on Form 10-K. Important factors that could cause actual results to differ from our predictions include those discussed under “Risk Factors,” “Management’s Discussion and Analysis” and “Business.” Although we have sought to identify the most significant risks to our business, we cannot predict whether, or to what extent, any of such risks may be realized, nor can there be any assurance that we have identified all possible issues which we might face. In addition, assumptions relating to budgeting, marketing, product development and other management decisions are subjective in many respects and thus susceptible to interpretations and periodic revisions based on actual experience and business developments, the impact of which may cause us to alter our marketing, capital expenditure or other budgets, which may in turn affect our financial position and results of operations. For all these reasons, the reader is cautioned not to place undue reliance on forward-looking statements contained herein, which speak only as of the date hereof. We assume no responsibility to update any forward-looking statements because of new information, future events, or otherwise except as required by law. We urge readers to carefully review the risk factors described in this Annual Report and in the other documents that we file with the Securities and Exchange Commission. You can read these documents at www.sec.gov.
Where we say “we,” “us,” “our,” “Care View,” or the “Company” refers to CareView Communications, Inc., a Nevada corporation, originally formed in California on July 8, 1997 under the name Purpose, Inc., changing our name to Ecogate, Inc. in April 1999, and CareView Communications, Inc. in October 2007. Unless otherwise specified, these terms also include our wholly owned subsidiaries, CareView Communications, Inc., a Texas corporation (“CareView-TX”).
We maintain a website at www.care-view.com and our Common Stock trades on the OTCQB under the symbol “CRVW.’’
General
Company Overview and Recent Developments
As a leader in turnkey patient video monitoring solutions, CareView is redefining the standard of patient safety in hospitals and healthcare facilities across the country. For over a decade, CareView has relentlessly pursued innovative ways to increase patient protection, providing next generation solutions that lower operational costs and foster a culture of safety among patients, staff, and hospital leadership. With installations in more than 150 hospitals, CareView has proven that its innovative technology is creating a culture of patient safety where patient falls have decreased by 80% with sitter costs reduced by more than 65%. Anchored by the CareView Patient Safety System, this modular, scalable solution delivers flexible configurations to fit any facility while significantly increasing patient safety and operational savings. All configurations feature HD cameras, high-fidelity 2-way audio/video, LCD displays for the ultimate in capability, flexibility, and affordability.
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SitterView® and TeleMedView allow hospital staff to use CareView’s high-quality video cameras with pan-tilt-zoom and 2-way video functionality to observe and communicate with patients remotely. With CareView, hospitals are safely monitoring more patients while providing a higher level of care by leveraging CareView’s patented technology, a portfolio that includes 40 patents. TeleMedView leverages the CareView Mobile Controller’s built-in monitor and can work with the CareView Portable Controller as well. Usage of SitterView® and TeleMedView has increased in response to a growing demand for remote patient monitoring driven by increasing demands for care and staffing shortages in the healthcare industry.
The CareView Patient Safety System enabled virtual nursing workflows for patient observation, companionship, care concierge, and administrative task can ease workloads and improve care delivery. Hybrid patient care, the combination of bedside and virtual care, allows hospitals to keep nurses working at the top of their licenses and creates flexible and scalable workforce options. CareView’s integrations with existing clinical workflow and patient engagement tools allow providers to access patient rooms virtually from within the EHR workflow. CareView then becomes the centralized hub for a patient-centric, interconnected virtual care system.
Current Products and Services
CareView Patient Safety System
Our CareView Patient Safety System provides innovative ways to increase patient protection, provides advanced solutions that lower operational costs, and helps hospitals foster a culture of safety among patients, staff, and hospital leadership. We understand the importance of providing high quality patient care in a safe environment and believe in partnering with hospitals to improve the quality of patient care and safety by providing a system that monitors continuously. We are committed to providing an affordable video monitoring tool to improve the practice of nursing, create a better work environment and make the patient’s hospital stay more satisfying. Our suite of products and services can simplify and streamline the task of preventing and managing patients’ falls, enhance patient safety, improve quality of care, and reduce costs. Our products and services can be used in all types of hospitals, nursing homes, adult living centers, and selected outpatient care facilities domestically and internationally.
The CareView Patient Safety System includes CareView’s SitterView®, providing a clear picture of up to 40 patients at once, allowing staff to intervene and document patient risks more quickly. SitterView features intuitive decision support pathway, guiding staff alarm response and pan- tilt-zoom functionality, allowing staff to hone in on areas of interest. CareView’s new Analytics Dashboard provides real-time metrics on utilization, compliance, and outcome data by day, week, month, and quarter. Outcomes are automatically compared to organizational goals to evaluate real-time ROI.
CareView’s next generation of in-room camera; the CareView Controller features an HD camera, high- fidelity 2-way audio, and an LCD display, harnessing increased performance to deliver the ultimate in capability, flexibility, and affordability for all types of hospitals. Building on top of CareView’s patented Virtual Bed Rails and Virtual Chair Rails predictive technology, the CareView Controller uses machine learning to differentiate between normal patient movements and behaviors of a patient at risk. This technology results in less false alarms, faster staff intervention, and a significant reduction in patient falls.
The CareView Controller is available in multiple configurations for permanent or temporary situations, the CareView Mobile, Portable, and Fixed Controller. For situations that demand that the camera come to the patient, the CareView Mobile Controller on wheels comes with an uninterrupted external power supply for situations where power may not be readily available and can operate on the facility’s wireless network. For monitoring patients within a general care unit, the CareView Portable Controller can be easily removed from mounts and moved where the workflow dictates, making this application perfect for general use. For high-risk patient rooms where behavior and self-harm may be a factor, or where a patient must be continuously monitored, the CareView fixed Controller can be installed seamlessly in the ceiling tiles leaving no exposed wiring making it ligature resistant.
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The CareView Patient Safety System can be easily configured to meet the individual privacy and security requirements of any hospital or nursing facility. CareView is (“HIPAA”) compliant and HITRUST certified. Additional HIPAA-compliant features allow privacy options to be enabled at any time by the patient, nurse, or physician.
CareView Patient Safety System Products and Services Agreement with Healthcare Facilities
CareView’s subscription-based model is offered to healthcare facilities through a Products and Services Agreement (the “P&S Agreement(s)”). During the term of the P&S Agreement, we provide continuous monitoring of the CareView Patient Safety System products and services deployed to a healthcare facility and maintain and service all equipment installed by us. Under the subscription-based model, terms of each P&S Agreement require the healthcare facility to pay us a monthly fee based on the number of selected, installed, and activated services. None of the services provided through the Primary Package are paid or reimbursed by any third-party provider including insurance companies, Medicare, or Medicaid. We also enter into corporate-wide agreements with healthcare companies (the “Master Agreement(s)”), wherein the healthcare companies enter into individual facility level agreements that are substantially like our P&S Agreements.
Master Agreements and P&S Agreements are currently negotiated for a period of five years with a minimum of two or three years; however, older P&S Agreements were negotiated for a five-year period with a provision for automatic renewal. P&S Agreements specific to pilot programs (“P&S Pilot Agreements”) contain pricing terms substantially like P&S Agreements, are generally three or six-months in length and can be extended on a month-to-month basis as required. Regarding the subscription-based model, we own all rights, title, and interest in and to the equipment we install at each location and agree to maintain and repair it; although, we may charge for repairs or replacements due to damage or misuse. We are not responsible for maintaining data arising from use of the CareView Patient Safety System or for transmission errors, corruption or compromise of data carried over local or interchange telecommunication carriers. We grant each healthcare facility a limited, revocable, non-transferable, and nonexclusive license to use the software, network facilities, content, and documentation on and in the CareView Patient Safety System to the extent, and only to the extent, necessary to access, explore and otherwise use the CareView Patient Safety System in real time. Such non-exclusive license expires upon termination of the P&S Agreement.
We use specific terminology to better define and track the staging and billing of the individual components of the CareView Patient Safety System. The CareView Patient Safety System includes three components which are separately billed; the CareView Controller (previously known as RCP), the CareView SitterView Monitor, and the CareView Application Server (each component referred to as a “unit”). The term “bed” refers to each healthcare facility bed as part of the overall potential volume that a healthcare facility represents. For example, if a healthcare facility has 200 beds, the aggregate of those beds is the overall potential volume of that healthcare facility. The term “bed” is often used interchangeably with “CareView Controller” as this component of the CareView Patient Safety System consistently resides within each room where the “bed” is located. On average, there are six SitterView Monitors for each 100 beds. The term “deployed” means that the units have been delivered to the healthcare facility but have not yet been installed at their respective locations within the facility. The term “installed” means that the units have been mounted and are operational. The term “billable” refers to the aggregate of all units on which we charge fees. Units become billable once they are installed and the required personnel have been trained in their use. Units are only deployed upon the execution of a P&S Agreement or P&S Pilot Agreement.
CareView Patent Safety System Sales-Based Model
CareView’s sales-based model has commenced with the introduction of our updated technology. CareView has also aligned its contracting model to meet the preferred acquisition model in the hospital industry. CareView now sells its proprietary equipment to facilities in lieu of lending the equipment as defined above, under the subscription-based model. In doing so, the facility is billed for the hardware on acceptance of the contract. After CareView’s equipment is delivered to the facility, CareView begins the process of installing and securely integrating the equipment and software. Upon completion of installation, training, and “go-live”; referring to all systems in full operation, CareView bills the facility for the installation, training, and an annual software license fee. CareView will continue to bill the facility an annual software license fee until the end of the contract. The shift in our new contracting model has an immediate impact on the company’s operations resulting in greater cash flow within 30 days of contract signing.
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CareView continues its dedication to provide service and support on a 24x7x365 basis for every customer under the prior and updated revenue models.
CareView Connect®
Our mission is to be the leading provider of resident monitoring products and services for the long-term care industry. We took what we learned in our medical facility business and applied it to developing a product to serve the long-term care market. With CareView Connect Quality of Life System (“CareView Connect”), CareView has again positioned itself as a technology leader with its innovative suite of products specifically designed for all aspects of the long-term care market, including Nursing Care, Home Care, Assisted Living and Independent Living.
With this mission in mind, in the second quarter of 2018, the Company introduced a new sensor product that has application in both the assisted living center market and the home health market. CareView Connect leverages both passive and active sensors to track the activities of daily life. CareView Connect provides peace of mind by using data from the resident’s activity, existing conditions, and environment to notify a caregiver of potential emergencies and identify the need for dignified support. CareView Connect consists of a small emergency assist button, two motion sensors, one sleep sensor, and one event sensor. Resident activity levels, medication administration, sleep patterns, and requests for assistance can all be monitored depending on which options are selected.
The skilled nursing home market consists of approximately 2,000,000 beds, which is double the size of the current hospital/healthcare facility bed market. The assisted living center market is even larger at approximately 3,000,000 beds. Our products flow naturally into the nursing home space as it is substantially the same setting as hospital rooms.
CareView Connect is a platform consisting of several products and applications targeted at improving the level of care and efficiency. CareView is building a cohesive and tightly integrated solution that solves several problems that long-term care facilities face. We offer an array of wearable and stationary buttons that allow a resident to summon help either for an emergency or assistance, which can be anything from toileting help to assistance putting on their shoes. We offer a mobile app capable of delivering an alert to the caregiver and allows them document information around that alert. This allows for workflows and reports around the alerts, i.e. how long before the alert was handled, what was the cause of the alert, and if it was not acknowledged in a timely manner then the alert is escalated to another individual or group. This ensures that every alert is responded to timely and is verifiable. In addition, the caregiver usually is carrying out a litany of daily activities directed at each facility resident.
Alert Management and Monitoring System
CareView Connect provides a suite of hardware and software that facilitate a data-driven solution for alert management and monitoring. CareView Connect’s solution provides additional context, including location of the resident, which improves response time by the staff. The alert system includes a documentation platform that allows the facility’s staff to classify reasons for alerts and provides metrics around response time. CareView Connect’s solution involves several passive sensors that monitor the resident.
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Caregiver Platform
The caregiver platform includes a “Leave of Absence” component, which allows the facility to document when the resident is outside of their room for a duration of time. This information is incorporated with known data from the workflows and sensors to improve awareness. The Caregiver Connect mobile application provides a convenient and intuitive interface to the CareView Connect platform. The caregiver can use the mobile app to capture important information and interface with critical workflows, such as acknowledging and documenting alert presses by the resident. CareView Connect also provides a product focused on capturing and measuring the mental state and pain experienced by the resident. “How are you feeling today?” provides a convenient way to capture information about the mental state of the resident using emojis. Similarly, “What is your pain today?” allows the staff to categorize and document pain. Connect Resident is a tablet application intended for the resident’s direct use. This product currently supports video conferencing with a remote caregiver, becoming a communications conduit for telehealth. Connect Resident also supports “How are you feeling today?”, which allows the resident to submit this information directly.
Quality of Life Metrics
CareView is developing its own algorithm for measuring quality of life based on “best of breed” research and leveraging the data collected by the platform. CareView Connect’s Quality of Life Metrics focuses on several categories, including Physical Activity, Bodily Pain, General Health, Vitality, Social Interaction, Mental Health, and Sleep Quality. Leveraging this data, the facility and their staff have improved visibility into the health and well-being of their residents. By applying machine learning and predictive analytics, subtle patterns and trends that may not otherwise be visible become actionable. The facility can use this information to present a more compassionate and capable level of care, differentiating the facility from their competition. The Quality of Life Metrics information can be made available to the family and loved ones, opening a new channel of remote awareness and care. Because the information is collected automatically, the family gains awareness on issues of which their loved ones may normally be unaware. The Connect Family mobile application allows family members to monitor their loved one and receive alerts and notifications based on their preferences.
Pricing Structure and Revenue Streams
The CareView Connect suite of products and services offers multiple pricing models. We work with each facility on pricing to offer an affordable package based on the demographics of the residents of the facility. The pricing structure with each facility is negotiated separately. Typically, we offer the CareView Connect basic package at a price per monitored room with varying price structures based on number of sensors and number of residents in each facility.
Purchasing Agreement with Decisive Point Consulting Group, LLC
On February 2, 2021, we partnered with Decisive Point Consulting Group, a Department of Veterans Affairs Contractor Verification Enterprise (CVE) and a Verified Service-Disabled Veteran Owned Small Business (SDVOSB), to expand our reach within the VA hospitals and Community Living Centers space. Our partnership reflects our desire to collaborate with companies that share our vision of patient safety.
Indefinite Delivery Indefinite Quality (IDIQ) Contract
On September 10, 2021, the Company entered an Indefinite Delivery Indefinite Quality (IDIQ) contract for Telecare Services with their partnership, Shore Systems and Solutions, LLC (S3). The award provides S3 with a path to providing the CareView Patient Safety System to veterans and their families receiving care at the 1,293 Veterans Health Administration (“VHA”) facilities across the United States and Territories.
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General Service Administration Multiple Award Schedule
Pursuant to the terms of the Company’s General Service Administration (“GSA”) Multiple Award Schedule contract (“MAS”), the MAS allows us to sell the CareView Patient Safety System at a negotiated rate to the approximate 169 United States Department of Veterans Affairs (“VA”) facilities with over 39,000 licensed beds and the approximate 42 DOD hospitals with over 2,600 licensed beds. The updated contracting model was added to the MAS, which allows us to sell the proprietary hardware and license the software on an annualized basis. The MAS is one of the most widely accepted government contract vehicles available to agency procurement officers. GSA’s application process requires potential vendors to be recognized as highly credible and well established. CareView is a sole source provider. Our products and services represent an enormous opportunity to improve the health and safety of our Nation’s veterans.
Innovative Technology Designation
In the 4th quarter of 2022 CareView received innovative Technology designation after the Innovative Technology Exchange in Dallas, TX on October 17th. Every year, healthcare experts serving on the Vizient member-led councils review select products and technologies for their potential to enhance clinical care, patient safety, healthcare worker safety or to improve business operations of healthcare organizations. Vizient’s diverse membership and customer base includes academic medical centers, pediatric facilities, community hospitals, integrated health delivery networks, and non-acute health care providers, and represents more than 130 billion in annual purchase volume. Technology designations are awarded to previously contracted products to signal to healthcare providers the impact of these innovations on patient care and business models of healthcare organizations.
Group Purchasing Agreement with HealthTrust Purchasing Group, LP
On December 14, 2016, the Company entered a Group Purchasing Agreement with HealthTrust Purchasing Group, L.P. (“HealthTrust”) (the “HealthTrust GPO Agreement”), the nation’s only committed-model Group Purchasing Organization (“GPO”) headquartered in Nashville, Tennessee. HealthTrust serves approximately 1,600 acute care facilities and members in more than 26,000 other locations, including ambulatory surgery centers, physician practices, long-term care, and alternate care sites. The agreement was effective on January 1, 2017 and all CareView Patient Safety System components and modules are available for purchase by HealthTrust’s exclusive membership. HealthTrust members may order CareView’s products and services included in the agreement directly from CareView.
On October 1, 2018, the Company added CareView Connect to the HealthTrust GPO Agreement.
On November 1, 2020, the updated contracting model has been added to the HealthTrust GPO Agreement which allows us to sell the proprietary hardware and license the software on an annualized basis. On December 1, 2021, the HealthTrust GPO Agreement was renewed for another 3 year term.
Group Purchasing Agreement with Premier, Inc.
On June 8, 2022 the Company entered a Group Purchasing Agreement with Premier, Inc. (“Premier”), headquartered in Charlotte, N.C. Premier is a leading healthcare improvement company, uniting an alliance of more than 4,400 U.S. hospitals and health systems and approximately 225,000 other providers and organizations to transform healthcare. The agreement was effective on June 15, 2022 and all Gen 5 CareView Patient Safety System components and modules are available for purchase by Premier’s exclusive membership. Premier members may order CareView’s products and services included in the agreement directly from CareView.
Group Purchasing Agreement with Vizient
On February 15, 2023, the Company entered a Group Purchasing Agreement with Vizient, headquartered in Irving, TX. Vizient, the nation’s largest health care performance improvement company, has a diverse membership and customer base, including academic medical centers, pediatric facilities, community hospitals, integrated health delivery networks, and non-acute health care providers, and represents more than $130 billion in annual purchasing volume. The multi-year agreement allows Vizient members the opportunity to benefit from pre-negotiated pricing for CareView products. The agreement was effective on February 15, 2023 and all Gen 5 CareView System components and modules are available for purchase by Vizient’s exclusive membership. Vizient members may order CareView’s products and services included in the agreement directly from CareView. We are continuing to work with Vizient on new contracts.
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Vetted Partner Agreement with Panda Health, Inc.
On December 22, 2023, the Company entered a Vetted Partner Agreement, with Panda Health, Inc. (“Panda Health”) (the “Panda Partner Master Service Agreement”), a digital health contracting platform and marketplace headquartered in Atlanta, Georgia. Panda Health serves approximately 35 health systems members including more than 165 hospitals. The agreement was effective on January 1, 2024 and all CareView Patient Safety System components and modules are available for purchase by Panda Health’s membership. Panda Health members may order CareView’s products and services included in the agreement directly from CareView.
Summary of Product and Service of Sales-Based Contracts
Our contracts typically include multiple combinations of our products, software solutions, and related services with multiple payment options. Customers can continue to lease our equipment under our subscription model or can purchase our equipment upfront under our recently implemented sales-based contract model with an auto-renewal at the end of each contract period. The new sales-based contract offers our customers the flexibility of capitalizing on their investment, which in turn, replenishes our cash reserves. For the years ended December 31, 2023, and 2022, the Company executed sales-based contracts with an approximate aggregated contract sales price of $8,223,000 and $4,309,000. An additional $1,001,000 of annual contracted software renewal “option years” for the next four years has been excluded but may be considered in addition to our 2023 aggregated contract sales price.
Availability of Suppliers
We are not dependent on, nor do we expect to become dependent on, a single, or a limited number of suppliers. We purchase parts and components to assemble our equipment and products. We do not manufacture or fabricate our own products or systems but rely on sub-suppliers and third-party vendors to procure and/or fabricate components based on our designs, engineering, and specifications. Along with our employee installers, we enter subcontracts for field installation of our products which we supervise. We manage all technical, physical, and commercial aspects of the performance of our contracts with sub-suppliers and third-party vendors. To date, we have experienced no difficulties in obtaining fabricated components, materials, and parts or in identifying qualified subcontractors for installation work.
Sales, Marketing and Customer Service
We do not consider our business to be seasonal; however, the availability of hospital staff is typically less available in December which impacts our ability to sell/install our CareView Patient Safety System. We generate sales leads through a variety of means including direct one-to-one marketing, email and web campaigns, customer and industry referrals, strategic partnerships, and trade shows and events. Our sales team consists of highly trained professionals with many years of experience in the healthcare market.
Our initial focus has been to pursue large for-profit hospital management companies that own multiple facilities and large not-for-profit integrated delivery networks in major metropolitan areas. Our sales staff approaches decision makers for hospitals, integrated delivery networks, and major owners and operators of hospitals to demonstrate the CareView product line. Our sales process includes an inside sales team and we have expanded our capabilities of providing web-based demonstrations and presentations. We also have begun to rely more heavily on arranging reference calls and site visits between our current customers and our prospects. These efforts have provided a higher volume of qualified sales leads and have resulted in more substantive conversations with a larger number of prospects.
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We ensure high levels of customer service through our account representatives and our technical support processes. We attempt to position our account representatives geographically close to our customer hospitals to allow them to make regular visits to proactively train staff and address any issues. We offer 24/7 monitoring and phone support through our technical support team which allows us to quickly identify and resolve any technical issues. From time to time, we are called upon to service the installed hardware at customer facilities. To facilitate expedient service, our account representatives typically maintain a small supply of CareView Controllers should they need repair or replacement. Historically, our CareView Controllers and Nursing Station units have required little, if any, servicing. We believe that we handle requests quickly and efficiently, and that overall, our customers are satisfied with our level of service.
Intellectual Property
Our success depends, in part, on our ability to obtain patents, maintain trade secret protection and operate without infringing the proprietary rights of others. Our intellectual property portfolio is one of the means by which we attempt to protect our competitive position. We rely primarily on a combination of know- how, trade secrets, patents, trademarks, and contractual restrictions to protect our products and to maintain our competitive position. We are constantly seeking ways to protect our intellectual property through registrations in relevant jurisdictions.
We have received patents from the U.S. Patent and Trademark Office and have numerous patents pending. We intend to file additional patent applications when appropriate; however, we may not file any such applications or, if filed, the patents may not be issued. We also have numerous registered trademarks.
We intend to aggressively prosecute, enforce, and defend our patents, trademarks, and proprietary technology. The loss, by expiration or otherwise, of any patents may have a material effect on our business. Defense and enforcement of our intellectual property rights can be expensive and time consuming, even if the outcome is favorable to us. It is possible that the patents issued to or licensed to us will be successfully challenged, that a court may find that we are infringing validly issued patents of third parties, or that we may have to alter or discontinue the development of our products or pay licensing fees to consider patent rights of third parties.
Agreement with Rockwell Holdings I, LLC
Effective as of November 30, 2021, the Company and Rockwell entered into a Sixth Amendment to the Rockwell Note (the “Sixth Rockwell Note Amendment”), pursuant to which Rockwell agreed to extend the term of the Rockwell Note by three months, to March 31, 2022, and agreed that the quarterly principal payment that would otherwise be due on December 31, 2021, will not be required to be made until March 31, 2022.
As of March 31, 2022, the Rockwell Note was paid off.
Installation and Technical Support
Along with our employee installers and technical support staff, we provide installation and technical support for our customers through third-party providers located across the United States that we contract on a per-job basis.
Competition
We offer a unique solution to clinical video monitoring, sitter reduction, and fall prevention by leveraging our patented Virtual Bed Rails and Virtual Chair Rails technology. This technology allows an individual to watch more patients with a higher level of safety than they could without. We have competitors in clinical video monitoring; however, we believe that we offer a superior solution that provides for best ROI, reduction in patient falls, and reduction and sitter requirements. We compete with them based on price, engineering and technological expertise, knowledge, and the quality of our products, systems, and services. Additionally, we believe that the successful performance of our installed products and systems is a key factor in retaining current business and gaining new business as customers typically prefer to make significant purchases from a company with a solid performance history.
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Clinical Video Monitoring and Fall Prevention: Cisco Systems, Inc., Avasure (a division of AvaSure Holdings, Inc.), Caregility, Royal Philips Electronics and Cerner Corporation all provide clinical video monitoring tools. Cisco offers Virtual Patient Observation, a video monitoring tool aimed at reducing sitter costs and preventing patient falls. AvaSure and Caregility offer a similar application using cameras mounted on a rolling camera stand, aimed at preventing patient falls. Philips offers the eICU product, which primarily targets a high-definition monitoring of patients in intensive-care applications and provides telephonic consults. Cerner offers the Cerner Patient Observer product, which uses depth sensors aimed at preventing patient falls.
Alternative fall prevention mechanisms include physical sensors manufactured by Stanley and Posey, and beds which include fall alarms manufactured by Stryker and Hill-Rom. Customers may consider these physical fall prevention mechanisms to be alternatives to a video-based fall prevention system such as the one we offer.
We believe we also compete based on the success of our products and services which provide our customers with:
• significant and tangible cost savings,
• reductions in patient falls,
• improved documentation, quality, and timeliness of patient care,
• enhanced safety and security for patients and facilities,
• support for new technologies,
• business growth,
• return on investment, and
• enhanced patient satisfaction.
We are currently unable to predict what competitive impact any regulatory development and advances in technology will have on our future business and results of operations. We believe our success depends upon our ability to maintain and enhance the performance, content, and reliability of our products in response to the evolving demands of the industry and any competitive products that may emerge. We cannot give assurances that we will be able to do so successfully or that any enhancements or new products that we introduce will gain acceptance in the marketplace. If we are not successful or if our products are not accepted, we could lose potential customers to our competitors.
Major Customers
In 2023, our revenue was driven significantly by two customers, accounting for 17% and 13% respectively, while in 2022, a single customer contributed 12% to our revenue. As of December 31, 2023, one customer accounted for 21% of our accounts receivable.
Backlog
Our estimated backlog is driven by signed Master and Product & Service Agreements (P&S Agreement(s)). Each Master and P&S Agreement establishes the rates that we will charge for the use of our products and services as well as an approximate number of billable units that will be installed. Our Controllers, Nursing Stations and mobile devices are billed on a per unit basis. Most Master and P&S Agreements are for three years, but include options to continue in perpetuity on a monthly basis. Backlog of sales-based contracts, which covers the non-cancellable period, as of December 31, 2023 is approximately $5,403,000, of which approximately $3,274,000 is expected to be billed during 2024. Most of the current backlog will have future value as the Master and P&S Agreements continue beyond the three years and the Master and P&S Agreements move toward expiration and potential renewal. The amount of the non-cancellable sales-based backlog to be billed beyond December 31, 2024, is approximately $2,129,000. For the monthly subscription-based contracts, the monthly billable amount as of December 31, 2023 is approximately $293,000 under contract and $57,500 month to month. We foresee 2024 total annual subscription billable of approximately $4,206,000.
11
Government Approval
Neither our Company nor our products are subject to government approval beyond required Federal Communication Commission (“FCC”) certifications. Certain medical devices and applications may be subject to Section 510(k) of the Food, Drug, and Cosmetics Act, which regulates the ability of medical device manufacturers to market their devices. CareView has reviewed the requirements for registration, and at the current time, we do not believe that our suite of applications is subject to 510(k) regulation. Although the parameters of our CareView Patient Safety System products and services complies with HIPAA as far as use by health care providers, CareView itself, as the manufacturer and installer of the units, is not subject to HIPAA regulations. We do not know of any other privacy laws that affect our business as we are not in control of, nor do we keep, patient medical records in our possession. We are unaware of any probable government regulations that may affect our business in the future. We have received Underwriters Laboratories (“UL”) and FCC approval on our products. Additionally, the Center for Medicare and Medicaid Services does not pay or reimburse any party for use of our products and services.
Environmental Laws
Our Company and our products are not affected by any federal, state, or local environmental laws; therefore, we have reserved no funds for compliance purposes.
Employees
As of March 29, 2023, we employed 63 people on a full-time basis, two of whom are executive officers. None of our employees are covered by collective bargaining agreements and we have never experienced a major work stoppage, strike, or dispute. We consider our relationship with our employees to be outstanding.
Reports to Security Holders
We are subject to the requirements of Section 13(a) under the Exchange Act which requires us to file annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, and we are required to comply with all other obligations of the Exchange Act applicable to issuers filing registration statements pursuant to Section 12(g) of the Exchange Act. You may read and copy any materials we file with the Securities and Exchange Commission (the “SEC”) at the SEC’s Public Reference Room at 100 F Street NE, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information filed electronically with the SEC at https://www.sec.gov/
You may obtain a copy, free of charge, of our annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with the SEC. You may obtain these reports by making a request in writing addressed to Steven G. Johnson, Chief Executive Officer, CareView Communications, Inc., 405 State Highway 121, Suite B-240, Lewisville, TX 75067, or by downloading these reports and further information about our company on our website at http://www.careview.com.
We have adopted a Code of Business Conduct and Ethics for all our officers and directors and a Code of Ethics for Financial Executives. These codes are available for download on our website or may be obtained free of charge by making a request in writing to Steven G. Johnson, as indicated hereinabove.
12
Domain Names
The Company maintains a website at www.care-view.com.
| ITEM 1A. | RISK FACTORS. |
We are a smaller reporting company, and as such, are not required to provide information pursuant to this item.
| ITEM 1B. | UNRESOLVED STAFF COMMENTS. |
N/A.
| ITEM 2. | PROPERTIES. |
On September 8, 2009, we entered into a Commercial Lease Agreement (the “Lease”) for 10,578 square feet of office and warehouse space. On December 8, 2014, we entered into a Second Amendment to Commercial Lease Agreement (the “Lease Extension”), wherein expanding the premises to 16,610 rentable square feet and extending the Lease through June 30, 2020. On March 4, 2020, we entered into a Fourth Amendment to Commercial Lease Agreement (the “Lease Extension”), wherein we extended the Lease through August 31, 2025. The Lease Extension contains a renewal provision under which we may renew the Lease for an additional five-year period under the same terms and conditions. We believe that our premises are adequate and sufficient for our current needs. See NOTE 12 in accompanying consolidated financial statements.
| ITEM 3. | LEGAL PROCEEDINGS. |
None.
| ITEM 4. | MINE SAFETY DISCLOSURE. |
N/A.
PART II
| ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. |
Market Information
Our Common Stock is traded on the OTCQB as provided by OTC Market Group, Inc. (“OTCQB”) under the symbol "CRVW."
Holders
Records of our stock transfer agent indicate that as of March 29, 2024, we had approximately 114 record holders of our Common Stock. The number of registered shareholders excludes any estimate by us of the number of beneficial owners of shares of our Common Stock held in "street name." We estimate that there are approximately 694 beneficial shareholders who hold their shares in street name.
13
Securities Authorized for Issuance under Equity Compensation Plans
As of December 31, 2023, the following table shows the number of securities to be issued upon exercise of outstanding stock options under equity compensation plans approved by our shareholders, which plans do not provide for the issuance of warrants or other rights.
| Plan Category | Number of Securities to be issued upon exercise of outstanding options (a) | Weighted-average exercise price of outstanding options (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a) (c) | |||||||||
| Equity compensation plan approved by security holders: 2007 Plan | — | — | — | |||||||||
| Equity compensation plan approved by security holders: 2009 Plan | 711,444 | $ | 0.67 | — | ||||||||
| Equity compensation plan not approved by security holders: 2015 Plan | 3,773,500 | $ | 0.29 | 580,055 | ||||||||
| Equity compensation plan not approved by security holders: 2016 Plan | 18,880,509 | $ | 0.06 | 948,936 | ||||||||
| Equity compensation plan not approved by security holders: 2020 Plan | 13,813,357 | $ | 0.04 | 4,819,809 | ||||||||
| Total | 37,178,810 | $ | 0.09 | 6,348,800 | ||||||||
Recent Sales of Unregistered Securities
None.
Cancellation and Expiration of Options
During the year ended December 31, 2023, options to purchase an aggregate of 345,000 shares of our Common Stock were cancelled due to resignation and termination of employees of which 311,667 were made available for reissue. In addition, during the same period, options to purchase an aggregate of 3,063,000 shares of our Common Stock expired.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
| ITEM 6. | [Reserved] |
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| ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
You should read the following discussion and analysis in conjunction with the information set forth under our consolidated financial statements and the notes to those financial statements included elsewhere in this Annual Report. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those contained in or implied by any forward-looking statements.
Going Concern, Liquidity, and Capital Resources
Accounting standards require management to evaluate whether the Company can continue as a going concern for a period of one year after the date of the filing of this Form 10-K (“evaluation period”). In evaluating the Company’s ability to continue as a going concern, Management considers the conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months after the Company issues its financial statements. For the year ended December 31, 2023, Management considers the Company’s current financial condition and liquidity sources, including current funds available, forecasted future cash flows, and the Company’s conditional and unconditional obligations due before March 28, 2025.
The Company is subject to risks like those of healthcare technology companies whereby revenues are generated based on both on a sales-based and subscription-based business model such as dependence on key individuals, uncertainty of product development, generation of revenues, positive cash flow, dependence on outside sources of capital, risks associated with research, development, and successful testing of its products, successful protection of intellectual property, ability to maintain and grow its customer base, and susceptibility to infringement on the proprietary rights of others. The attainment of profitable operations is dependent on future events, including obtaining adequate financing to fulfill the Company’s growth and operating activities and generating a level of revenues adequate to support the Company’s cost structure.
The Company has experienced net losses and significant cash outflows from cash used in operating activities over the past years. As of and for the year ended December 31, 2023, the Company had an accumulated deficit of approximately $207,885,000 a loss from operations of approximately $688,000, net cash provided by operating activities of $703,614 and an ending cash balance of $1,145,871.
As of December 31, 2023, the Company had a working capital of $(37,263,645). Management has evaluated the significance of the conditions described above in relation to the Company’s ability to meet its obligations and concluded that, without additional funding, the Company will not have sufficient funds to meet its obligations within one year from the date the consolidated financial statements were issued. While management will look to continue funding operations by increased sales volumes and raising additional capital from sources such as sales of its debt or equity securities or loans to meet operating cash requirements, there is no assurance that management’s plans will be successful.
Management continues to monitor the immediate and future cash flows needs of the company in a variety of ways which include forecasted net cash flows from operations, capital expenditure control, new inventory orders, debt modifications, increases sales outreach, streamlining and controlling general and administrative costs, competitive industry pricing, sale of equities, debt conversions, new product or services offerings, and new business partnerships.
The Company’s net losses, cash outflows, and working capital deficit raise substantial doubt about the Company’s ability to continue as a going concern 12 months from the date the financial statement was issued. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business. A successful transition to attaining profitable operations is dependent upon achieving a level of positive cash flows adequate to support the Company’s cost structure.
15
Operating loss was approximately $688,000 and $1,270,000 for the years ended December 31, 2023, and 2022, respectively. Our net loss was approximately $3,952,000 and $6,042,000 for the years ended December 31, 2023, and 2022, respectively.
The following is a summary of cash flow activity for the years ended December 31, 2023, and 2022.
| 2023 | 2022 | |||||||
| (000 ’s) | ||||||||
| Net cash flows provided by (used in) operating activities | $ | 703 | $ | (370 | ) | |||
| Net cash flows used in investing activities | (62 | ) | (5 | ) | ||||
| Net cash provided by (used in) financing activities | (15 | ) | 236 | |||||
| Increase (decrease) in cash | 626 | (139 | ) | |||||
| Cash, cash equivalents and restricted cash at beginning of period | 520 | 659 | ||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 1,146 | $ | 520 | ||||
Net increase in cash during the year ended December 31, 2023 was approximately $626,000. The principal cash provided by operating activities for the year ended December 31, 2023 was primarily related to significantly lower net loss due to sales. The change in cash flows provided by operating activities between 2023 and 2022 of approximately $1,073,000 is primarily a result of cancellation on December 30, 2022 of all non-PDL interest accruals and an increase in deferred revenue. The change in cash flows used in investing activities between 2023 and 2022 of approximately $57,000 is primarily a result of the increase in installation of CareView Patient Systems and the purchases of assets. The change in cash flows used in financing activities between 2023 and 2022 of approximately $251,000 is primarily due to the one-time 2022 board investment.
Results of Operations
Year ended December 31, 2023 compared to year ended December 31, 2022
| Year Ended December 31, | ||||||||||||
| 2023 | 2022 | Change | ||||||||||
| (000 ’s) | ||||||||||||
| Revenue, gross | $ | 9,684 | $ | 7,901 | $ | 1,783 | ||||||
| Operating expenses: | ||||||||||||
| Network operations | 2,746 | 2,572 | 174 | |||||||||
| General and administration | 3,240 | 3,344 | (104 | ) | ||||||||
| Sales and marketing | 1,034 | 781 | 253 | |||||||||
| Research and development | 2,503 | 1,639 | 864 | |||||||||
| Depreciation and amortization | 442 | 589 | (147 | ) | ||||||||
| Cost of equipment | 407 | 246 | 161 | |||||||||
| Operating expenses | 10,372 | 9,171 | 1,201 | |||||||||
| Operating loss | $ | (688 | ) | $ | (1,270 | ) | $ | 582 | ||||
Revenue, net
Revenue increased approximately $1,783,000 for the year ended December 31, 2023 as compared to the same period in 2022. The increase in revenue results from the increase in our sales-based contracts of equipment of $1,969,505 and associated software bundle of $545,681 while subscriptions decreased $731,909.
Operating Expenses
Our principal operating costs include the following items as a percentage of total expense.
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| Year Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Human resource costs, including benefits and non-cash compensation | 51 | % | 57 | % | ||||
| Professional and consulting costs | 8 | % | 9 | % | ||||
| Depreciation and amortization expense | 4 | % | 6 | % | ||||
| Other product deployment costs, excluding human resources and travel and entertainment costs | 7 | % | 3 | % | ||||
| Travel and entertainment expense | 2 | % | 3 | % | ||||
| Cost of equipment | 4 | % | 2 | % | ||||
| Other expenses | 24 | % | 20 | % | ||||
Operating expenses increased by approximately $1,201,000 (or 13%) as a result of the following items:
| (000’s) | ||||
| Human resource costs, including benefits and non-cash compensation | $ | 104 | ||
| Professional and consulting costs | 78 | |||
| Depreciation and amortization expense | (149 | ) | ||
| Other product deployment costs, excluding human resources and travel and entertainment costs | 457 | |||
| Travel and entertainment expense | (101 | ) | ||
| Equipment cost | 162 | |||
| Other expenses | 650 | |||
| $ | 1,201 | |||
Human resource related costs (including salaries and benefits and non-cash compensation) increased approximately $104,000 primarily because of higher employee pay during the twelve months ended December 31, 2023 as compared to the twelve months ended December 31, 2022. Professional and consulting fees increased approximately $78,000, primarily because of higher legal costs for the debt-to-equity conversion. Depreciation and amortization expense decreased by approximately $149,000 due to fully depreciated and amortized assets. Other product development costs increased approximately $457,000 primarily because of increases in cost of sales (installation, training and service as well as freight) costs. Travel and entertainment expense decreased approximately $101,000 with less corporate travel and instead cost of sales during the twelve months ended December 31, 2023 as compared to the same period in 2022. Equipment cost increased by approximately $162,000 due to inventory replenishment. The increase of approximately $650,000 in other expense is due to asset disposable of patents, more advertising and marketing, and higher public entity costs.
Critical Accounting Estimates and New Accounting Pronouncements
Critical Accounting Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect reported amounts and related disclosures in the financial statements. Management considers an accounting estimate to be critical if:
● if requires assumptions to be made that were uncertain at the time the estimate was made, and
● changes in the estimate or different estimates that could have been selected could have a material impact on our results of operations or financial condition.
17
We base our estimates and judgments on our experience, our current knowledge, our beliefs of what could occur in the future, our observation of trends in the industry, information provided by our customers and information available from other sources. Actual results may differ from these estimates under different assumptions or conditions. We have identified the following accounting policies and estimates as those that we believe are most critical to our financial condition and results of operations and that require management’s most subjective and complex judgments in estimating the effect of inherent uncertainties: income taxes, impairment of long-lived assets, sales-based revenue recognition and credit agreement amendments.
Income Taxes. As part of the process of preparing our consolidated financial statements, we are required to estimate income taxes in each of the jurisdictions in which we operate. Our provision for income taxes is determined using the asset and liability approach to account for income taxes. A current liability is recorded for the estimated taxes payable for the current year. Deferred tax assets and liabilities are recorded for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted tax rates in effect for the year in which the timing differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of changes in tax rates or tax laws are recognized in the provision for income taxes in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount more-likely-than-not to be realized. Changes in valuation allowances will flow through the statement of operations unless related to deferred tax assets that expire unutilized or are modified through translation, in which case both the deferred tax asset and related valuation allowance are similarly adjusted. Where a valuation allowance was established through purchase accounting for acquired deferred tax assets, any future change will be credited or charged to income tax expense. See NOTE 5 in the accompanying Notes to Consolidated Financial Statements for discussion related to Tax Reform.
The determination of our provision for income taxes requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. In the ordinary course of our business, there are transactions and calculations for which the ultimate tax determination is uncertain. Despite our belief that we have appropriate support for all the positions taken on our tax returns, we acknowledge that certain positions may be successfully challenged by the taxing authorities. We determine the tax benefits more likely than not to be recognized with respect to uncertain tax positions. Although we believe our recorded tax assets and liabilities are reasonable, tax laws and regulations are subject to interpretation and inherent uncertainty; therefore, our assessments can involve both a series of complex judgments about future events and rely on estimates and assumptions. Although we believe these estimates and assumptions are reasonable, the final determination could be materially different than that which is reflected in our provision for income taxes and recorded tax assets and liabilities.
Impairment of Long-Lived Assets. Carrying values of property and equipment and finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying values may not be recoverable. If impairment indicators are present, we determine whether an impairment loss should be recognized by testing the applicable asset or asset group’s carrying value for recoverability. This assessment requires the exercise of judgment in assessing the future use of and projected value to be derived from the eventual disposal of the assets to be held and used. Assessments also consider changes in asset utilization, including the temporary idling of capacity and the expected timing for placing this capacity back into production. If the carrying value of the assets is not recoverable, then a loss is recorded for the difference between the assets’ fair value and respective carrying value. The fair value of the assets is determined using an “income approach” based upon a forecast of all the expected discounted future net cash flows associated with the subject assets. Some of the more significant estimates and assumptions include market size and growth, market share, projected selling prices, manufacturing cost and discount rate. Our estimates are based upon historical experience, commercial relationships, market conditions and available external information about future trends.
Sales-based Revenue Recognition: We enter into contracts with customers that may provide multiple combinations of our products, software solutions, and other related services which are generally capable of being distinct and accounted for as separate performance obligations. Performance obligations that are not distinct at contract inception are combined. Customer contract fulfillment typically involves multiple procurement promises which include various equipment, software subscription, project-related installation and training services, and support. We have implemented formal documentation of customer acceptance for these various performance obligations to help alleviate certain estimated needed to establish specific dates of contract fulfillment. We allocate the transaction price to each performance obligation based on estimated relative standalone selling price. A general assessment must be made to establish the standalone selling price of our equipment and services based on limited comparable market value, which therefore makes the determination of our revenue allocations. Revenue is then recognized for each performance obligation upon transferring control of the hardware, software, and services to the customer and in an amount that reflects the consideration we expect to receive and the estimated benefit the customer receives over the term of the contract.
18
Generally, we recognize revenue under Topic 606 for each of our performance obligations as follows:
| ● | Hardware packages – We recognize revenue related to the sale of hardware packages when control has been transferred to the customer (“point in time”). |
| ● | Software bundle and related services – We recognize on a straight-line basis over the estimated contracted license period (“over time”). |
Credit Agreement Amendments: The company has entered into certain credit agreements in which further amendments have been established. At the time of modification, a classification must be made of the credit risk and economical condition to determine whether the respective modification is granted as a Troubled Debt Restructuring (TDR). Each amendment must be assessed and established to direct the appropriate calculations and accounting treatment. Due to the complexity of certain agreements, necessary judgements are encompassed to establish the appropriate calculations based on the associated effective borrowing rates.
Recently Issued Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06), which simplifies the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments. This guidance also eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method. The Company does not expect this to have a significant impact on its consolidated financial statements and related disclosures at this time. The Company will adopt this guidance on its effective date for smaller reporting companies, January 1, 2024.
Recently Adopted Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments and since issued ASU 2019-10 in November 2019 deferring the effective date until fiscal years beginning after December 15, 2022. Also in March 2022, FASB issued and updated, ASU 2022-02, to become effective in upon adoption of ASU 2016-13. The Company has successfully implemented Accounting Standard 2016-13, Topic 326, and after careful consideration, management has concluded that the adoption did not result in a material impact on the financial position, results of operations, or cash flows of the Company. The Company will continue to monitor and assess the impact of this standard in subsequent reporting periods and provide any necessary updates as required by accounting regulations.
There have been no material changes to our significant accounting policies as summarized in NOTE 2 of our Annual Report on Form 10-K for the year ended December 31, 2023. We do not expect that the adoption of any recent accounting pronouncements will have a material impact on our accompanying consolidated financial statements.
19
Recent Events Since December 31, 2023
March 5, 2024, the board of directors approved 29,837,858 stock option grants to sixteen individuals for merit. These stock options are awarded under the newly approved 2024 Stock Options Plan as well as the remainder of the 2015, 2016 and 2020 Stock Options Plans. The stock price on Tuesday, March 5, 2024 was $0.06.
20
| ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
We are a smaller reporting company as defined in Item 10(f)(l) of Regulation S-K and are not required to provide information under this item.
| ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. |
Financial statements begin on page F-1 following this Report.
| ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. |
Not Applicable.
| ITEM 9A. | CONTROLS AND PROCEDURES. |
Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our chief executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), we carried out an evaluation, with the participation of our management, including Steve G. Johnson, our Chief Executive Officer (“CEO”) and principal executive officer, and Jason T. Thompson, our principal financial officer and chief accounting officer, of the effectiveness of our disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this Report.
Under the supervision and with the participation of our CEO and principal financial and chief accounting officer, our management evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2022. Based on that evaluation, our CEO and principal financial and chief accounting officer concluded that our disclosure controls and procedures were not effective as of December 31, 2022 due to the continuing existence of a material weakness in internal control over financial reporting described below (which we view as an integral part of our disclosure controls and procedures). Based on the performance of additional procedures designed to ensure the reliability of our financial reporting, we believe that the consolidated financial statements included in this Annual Report on Form 10-K fairly present, in all material respects, our financial position, results of operations and cash flows as of the dates, and for the periods presented, in conformity with accounting principles generally accepted in the United States (“GAAP”).
Cybersecurity Incident Disclosure Provision
In compliance with recent Securities and Exchange Commission (SEC) cybersecurity requirements, we acknowledge the heightened risks associated with cyber threats that could adversely affect our business operations, financial condition, and reputation. Recognizing the evolving regulatory environment, we have implemented a comprehensive cybersecurity program, encompassing regular risk assessments, employee training, advanced security technologies, and incident response plans. In accordance with SEC guidelines, we commit to timely and accurate disclosure of material cybersecurity incidents, detailing their nature, scope, potential impact, and remediation efforts. We actively evaluate and update our cybersecurity measures to adapt to evolving threats, collaborate with third-party service providers to mitigate risks, and engage with cybersecurity experts to ensure ongoing compliance and transparency. Investors are advised to carefully consider the cybersecurity risks outlined herein before making investment decisions. We have updated our cybersecurity policies and procedures accordingly.
21
Material Weakness and Remediation Plan
A material weakness is a deficiency, or a combination of deficiencies, in internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has determined that the Company did not maintain effective internal control over financial reporting as of the year ended December 31, 2023 due to the existence of the material weaknesses described below.
Based on additional procedures and post-closing review, Management concluded that the consolidated financial statements including this report present fairly, in all material respects, results of operations, and cash flows for the periods presented, in conformity with accounting principles accepted in the United States.
We began to take steps to address our material weaknesses, through our remediation plan. We implemented the following measures:
| ● | Identify and employ additional full-time highly qualified accounting personnel to join the corporate accounting function to enhance overall monitoring, maintain standard internal controls, and accounting oversight within the Company. |
| ● | The Company hired an Accounting Manager on June 21, 2023 and a Staff Accountant on August 16, 2023 in addition to the certified public accountant (“CPA”) as its Controller. |
| ● | Implement enhanced documentation associated with management review controls and validation of the completeness and accuracy of financial reporting and key management financial reports. |
| ● | Provide training of standard operating procedures and internal controls to key stakeholders within the supply chain, logistics, and inventory processes. |
| ● | Enhance and automate existing internal control to ensure proper authorization, review, and recording of financial transactions. |
| ● | On an as-needed basis, identify and engage certain third-party subject matter experts to assist with the preparation and reporting of complex business and accounting transactions. |
| ● | Engaged Bass Tax Group as our tax consultants and Advaion, LLC as our technical accounting consultant. |
Changes in Internal Control Over Financial Reporting
Other than as described above, there were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the quarter ended December 31, 2023 that materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.
Limitations on Controls
Our management can provide no assurance that our disclosure controls and procedures or our internal control over financial reporting can prevent all errors and all fraud under all circumstances. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been or will be detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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| ITEM 9B. | OTHER INFORMATION. |
None.
PART III
| ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE. |
Directors, Executive Officers, Promoter and Control Persons
The following table sets forth information on our executive officers and directors as of the filing of this Report. All executive officers serve at the discretion of the Board of Directors. The term of office of each of our directors expire at our next Annual Meeting of Shareholders or until their successors are duly elected and qualified. We do not have any promoters or control persons.
| Name | Age | Position | Date Elected Director | Date Appointed Officer |
| Steven G. Johnson | 64 | Chief Executive Officer, President, Secretary, Treasurer, Director | April 11, 2006 | April 11, 2006 |
| Jason T. Thompson | 49 | Director, Principal Financial Officer, Chief Accounting Officer | January 1, 2014 | January 24, 2018 |
| Sandra K. McRee | 67 | Chief Operating Officer | N/A | November 1, 2013 |
| L. Allen Wheeler | 91 | Chairman of the Board | January 26, 2006 | N/A |
| Jeffrey C. Lightcap | 64 | Director | April 21, 2011 | N/A |
| David R. White | 76 | Director | January 1, 2014 | N/A |
| Steven B. Epstein | 80 | Director | April 1, 2014 | N/A |
| Dr. James R. Higgins | 74 | Director | April 1, 2014 | N/A |
Mr. Lightcap was elected to serve on our Board of Directors pursuant to the terms of the HealthCor Note Purchase Agreement executed on April 21, 2011. Other than Mr. Lightcap, there are no arrangements or understandings between our directors and executive officers and any other person pursuant to which any director or officer was or is to be selected as a director or officer, and there are no arrangements, plans or understandings as to whether non-management shareholders will exercise their voting rights to continue to elect the current board of directors. There are also no arrangements, agreements or understandings to our knowledge between non-management shareholders that may directly or indirectly participate in or influence the management of our affairs.
In December 2017, our Chief Financial Officer, Treasurer and Secretary resigned. Until such time as those positions are filled, Steven Johnson, our Chief Executive Officer and President, will also serve as our Secretary and Treasurer. In addition, Jason T. Thompson, our Chairman of the Audit Committee, will serve as our Principal Financial Officer and Chief Accounting Officer as those positions relate to our annual and quarterly filings with the SEC.
Identification of Certain Significant Employees
Kyle Johnson, our Director of Engineering, and Matthew E. Jackson, General Counsel, are considered significant employees. An overview of their business experience follows in Business Experience found within this Item 10.
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Family Relationships
There are no family relationships between our officers and members of our Board of Directors.
Business Experience of Directors, Executive Officers and Significant Employees
The business experience of each of our directors, executive officers and significant employee follows:
Steve G. Johnson – Chief Executive Officer, President, Secretary, Treasurer, Director
Steven G. Johnson currently serves as Chief Executive Officer (effective January 1, 2014), President, Secretary, Treasurer and Director. Mr. Johnson also served as Chief Operating Officer until November 1, 2013. In December 2003, he filed for patent protection as the inventor of a Non-Intrusive Data Transmission Network for Use in an Enterprise Facility and Method for Implementing in the United States, which invention was subsequently assigned to CareView and was issued a patent number by the USPTO. The technology underlying this patent is the basis of the CareView Patient Safety System suite. Mr. Johnson is also one of the inventors on three issued patents for a Non-intrusive data transmission network for use in an enterprise facility and method for implementing in the U.S., a System and Method for Documenting Patient Procedures in the U.S., and a System and Method for Using a Video Monitoring System to Prevent and Manage Decubitus Ulcers in Patients in the U.S., and five additional pending patent applications for a System and Method for Predicting Falls in the U.S., a continuation patent for System and Method for Using a Video Monitoring System to Prevent and Manage Decubitus Ulcers, an Electronic Patient Sitter Management System and Method for Implementing in the U.S., a Noise Correcting Patient Fall Risk State System and Method for Predicting Patient Falls in the U.S., and a System and method for monitoring a fall state of a patient and minimizing false alarms in the U.S., all technology currently being deployed or in further development by CareView. Mr. Johnson has over 20 years of experience in the cable and wireless industry.
Before joining CareView in 2006, he served as Chief Executive Officer of Cadco Systems, a manufacturer of CATV and telecommunications equipment from 1997. From February 1991 to February 1996, he served as CEO, President and Director of American Wireless Systems, which he restructured and sold to Heartland Wireless Communications. Mr. Johnson also served as founder and President of Hanover Systems, a manufacturer of telecommunications equipment. Mr. Johnson has been actively involved with the wireless cable industry since 1984 and has served on the board of directors of the Wireless Cable Association and its FCC regulatory committee. Mr. Johnson developed various electronic telecommunications equipment for the wireless cable industry including microwave downconverters, wireless cable set top converters, antennas, and transmitters. Mr. Johnson’s accumulated knowledge in the field of technology, coupled with his development of patentable technology, makes him an invaluable member of our management team. Mr. Johnson earned his BA in Economics and Business Administration from Simpson College and currently serves as a Trustee on the Simpson College Board of Trustees. Mr. Johnson is the father of Kyle Johnson, our Director of Engineering.
Jason T. Thompson – Director, Principal Financial Officer, Chief Accounting Officer
Jason T. Thompson was elected as a Director of CareView effective as of January 1, 2014. In addition, he currently serves as our Principal Financial Officer and Chief Accounting Officer while we seek a qualified candidate to fill those positions. Mr. Thompson is a partner and a member of the transactional group of Michael Best & Friedrich LLP where he focuses on mergers and acquisitions and general corporate matters, having joined Michael Best in September 2006. Mr. Thompson assists his clients with negotiating and structuring many types of transactions and agreements, including those related to corporate reorganizations, buyout transactions and venture capital investment transactions. In addition, he is President of Thompson Family Holdings, LLC, which invests in, and consults for, a number of healthcare companies, having joined Thompson Holdings in 2010. From 1999 to 2004, Mr. Thompson served as Vice President of Development and Planning for Bulk Petroleum Corporation, where he oversaw sales, operations, client maintenance, scheduling accounting and workforce management for its construction projects. Prior to joining Bulk Petroleum, Mr. Thompson was a senior auditor with Arthur Andersen. He is a certified public accountant. Mr. Thompson received a BBA in Accounting from the University of Wisconsin – Madison in 1996 and in 2006, received his JD from the University of Wisconsin, where he was a member of the Wisconsin Law Review. His business, accounting and legal experience makes him well-qualified to serve as one of the Company’s directors.
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Sandra K. McRee – Chief Operating Officer
Sandra K. McRee joined CareView as Chief Operating Officer effective November 1, 2013. Ms. McRee also currently serves as President of McRee Consulting. Ms. McRee most recently served as the Vice Chair of the Board of Directors of IASIS Healthcare Corporation (“IASIS”) from April 2010 until October 2011. Previously, she served as Chief Operating Officer of IASIS from May 2001 until October 2010, and President from May 2004 to April 2010. At IASIS, she was responsible for overseeing all aspects of IASIS’s hospital operations and was responsible for overseeing clinical systems; developing an appropriate mix of quality services, physician relationships, effective staffing and supply utilization; and managing capital investments related to operations. From April 1999 through May 2001, Ms. McRee was Regional Vice President for Province Healthcare Corporation where she oversaw five facilities in Florida, Louisiana and Mississippi. Ms. McRee has more than 35 years of healthcare management experience. Ms. McRee has spent her entire professional career in the healthcare industry. She currently serves on the Board of Directors of Denver School of Nursing. Ms. McRee previously served on the Boards of EDCare, a national emergency room management company owned by Gemini Investors from August 2005 to July 2008, Mid-Western University from July 2000 to August 2004 and All About Women. Ms. McRee is a member of Women Business Leaders of the U.S. HealthCare Industry Foundation, a nonprofit organization that was established in 2001 to address the unique needs of women serving in a senior executive capacity in the U.S. healthcare industry and was a member of the Executive Leadership Team of Go Red for Women.
L. Allen Wheeler – Chairman of the Board
Mr. Wheeler has served as a Director of CareView since January 2006 and on January 1, 2014 became our Chairman of the Board. Mr. Wheeler has been a private investor for over 50 years with interests in nursing homes, banks, cable television, radio stations, real estate and ranching. Currently, Mr. Wheeler owns and operates three Abstract and Title companies in Bryan County, Oklahoma. Mr. Wheeler served on the Board of Directors of Texoma Medical Center from 1994 to 2005 and acted as Chairman of the Board from 2002 to 2005. Mr. Wheeler served as President of the Durant Industrial Authority for numerous years. Mr. Wheeler’s knowledge of the healthcare industry (as it relates to nursing homes), his technical knowledge of the broadcast television industry, and his expertise relative to investments and equity placements, qualifies him as a significant member of our board of directors. Mr. Wheeler earned his B.A. from Southeastern Oklahoma State University. Mr. Wheeler was elected Alumni of the Year of Southeastern Oklahoma State University in 2001.
Jeffrey D. Lightcap – Director
Mr. Lightcap was elected as a Director of CareView on April 21, 2011. Since October 2006, Mr. Lightcap has served as a Senior Managing Director at HealthCor Partners Management, LP, a growth equity investor focused on late stage venture and early commercial stage healthcare companies in the diagnostic, therapeutic and med tech, sectors. From 1997 to mid-2006, Mr. Lightcap served as a Senior Managing Director at JLL Partners, a leading middle-market private equity firm. Prior to JLL Partners, from 1993 to 1997, Mr. Lightcap served as a Managing Director at Merrill Lynch & Co., Inc. Prior to joining Merrill Lynch, Mr. Lightcap was a Senior Vice President in the mergers and acquisitions group at Kidder, Peabody & Co. and briefly at Salomon Brothers. Mr. Lightcap received a B.E. in Mechanical Engineering from the State University of New York at Stony Brook in 1981 and in 1985 received an MBA from the University of Chicago. Mr. Lightcap currently also serves as a director of the following companies: Heartflow Inc., a medical technology company redefining the way heart disease is diagnosed and treated; KellBenx, Inc., a prenatal diagnostic technology company; and RTI Surgical, Inc. (Nasdaq: RTIX), a spinal implant company. Mr. Lightcap’s experience with fundraising in the private equity market and his leadership skills exhibited throughout his career make him well-qualified to serve as one of the Company’s directors.
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David R. White – Director
David R. White was elected as a director on January 1, 2014. From December 1, 2000 to November 1, 2010, Mr. White served as the Chief Executive Officer of IASIS Healthcare Corporation, and he served as the Chief Executive Officer of IASIS Healthcare LLC from December 1, 2000 to October 2010. Mr. White served as the President of IASIS Healthcare Corporation from May 22, 2001 to May 2004 and also served as the President of IASIS Healthcare LLC from May 22, 2001 to May 2004. He served as the President and Chief Executive Officer of LifeTrust, from November 1998 to November 2000. From June 1994 to September 1998, Mr. White served as President of the Atlantic Group at Columbia/HCA, where he was responsible for 45 hospitals located in nine states. He has also served as Regional Vice President of Republic Health Corporation. Previously, Mr. White served as an Executive Vice President and Chief Operating Officer at Community Health Systems, Inc. He was Executive Chairman of Anthelio Healthcare Solutions Inc. from June 2012 to September 2016 and was its Independent Director from July 28, 2011 to September 2016. He has been Chairman of the Board at IASIS Healthcare Corporation since October 1999. He has been a Member of Strategic Advisory Board of Satori World Medical, Inc. since 2011. He was a Director of REACH Health, Inc. from August 30, 2011 to June 2015. He also serves as a director to CareView Communications, Inc. (OTCQB:CRVW), a healthcare technology company. He served as Non-Executive Director at Parkway Holdings Limited from July 15, 2005 to March 8, 2007. Mr. White earned a B.S. in Business Administration from the University of Tennessee in Knoxville, TN in 1970, and an MS in Healthcare Administration from Trinity University in San Antonio, TX in 1973. Mr. White’s lifetime career and knowledge in the healthcare industry makes him well-qualified to serve as a director of the Company.
Steven B. Epstein - Director
Steven B. Epstein was elected as a Director of CareView effective as of April 1, 2014. Mr. Epstein is the founder of Epstein Becker & Green, P.C., a leading law firm in health care law with over 250 lawyers in 11 cities, where he serves as a senior health adviser. Mr. Epstein is a pioneer in the legal specialty known as health care law and provides a wide range of health care organizations and providers with strategic legal guidance responding to the legal challenges and opportunities of the rapidly changing American health care system. Mr. Epstein was instrumental in the acceptance of managed care as the prominent form of health care delivery and has been referred to as the “father of the healthcare [legal] industry”, as stated in Chambers USA. Mr. Epstein received his Bachelor of Arts from Tufts University in 1965, where he was awarded the Tufts University Distinguished Alumni Award and served as a member of the Board of Trustees from 1999-2009. He received his Juris Doctor from Columbia Law School in 1968. He is the recipient of Columbia University’s Distinguished Alumni Award and Columbia Law School’s Medal for Excellence, Columbia Law School’s most prestigious award and served as chairman of the Columbia Law School Board of Visitors from 2002-2015. Mr. Epstein has previously served as a director of the following companies among others: Accumen, Inc., a private lab services company; National Compliance Solutions, Inc.; a private drug and background search company; OrthoSensor, Inc.; a private orthopedic medical device company; ResCare, Inc. a private disability care company and Solis Women’s Health, a private mammography company. Mr. Epstein’s lifetime legal career and knowledge in the healthcare industry makes him well-qualified to serve as a director of the Company.
Dr. James R. Higgins - Director
Dr. James R. Higgins was elected as a director of CareView effective as of April 1, 2014. Dr. Higgins is a cardiologist practicing in Tulsa, Oklahoma. In addition to being boarded in cardiology he has sub-specialty boards in nuclear cardiology, electrophysiology, invasive cardiology, cardiac CT angiography, echocardiography, carotid and peripheral sonography, pacemakers and defibrillators. He graduated summa cum laude with a BS degree in electrical engineering from South Dakota State University and sum cum laude with a MD degree from the University of Rochester School of Medicine and Dentistry. He was an extern at the Massachusetts General Hospital in Boston, and intern, resident, and chief resident at Barnes Hospital, Washington University, in St. Louis Missouri. His cardiology fellowship was obtained at the University of California, San Francisco, Moffitt and Long Hospital. He was then the Director of research and invasive cardiology at Wilford Hall Medical Center, United States Air Force, San Antonio, Texas. In addition to his busy cardiology practice, Dr. Higgins has started and owns a real estate company, an electronic medical billing company, an oil pipeline supply company, and has a large cattle ranch operation in Oklahoma. He has published more than 300 peer review articles and has multiple patents on medical devices, mainly related to pacemakers and internal defibrillators. Dr. Higgin’s vast experience in the healthcare industry makes him well-qualified to serve as a director of the Company.
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Kyle Johnson - Director of Engineering
Kyle Johnson has served as our Director of Engineering since August 2006 and is responsible for the design and development of our Room Control Platform and deployment of systems to hospitals. From June 2004 to August 2006, he served as Senior Product Manager of Cadco Systems, a company that specializes in broadband electronic design and manufacturing. As Senior Project Manager, Mr. Johnson managed the design and development of several products including the development of the technology used in the CareView Patient Safety System suite. Mr. Johnson is also one of the inventors on an issued patent for a System and Method for Using a Video Monitoring System to Prevent and Manage Decubitus Ulcers in Patients in the U.S. and an issued patent for a System and Method for Predicting Falls in the U.S. (the technology underlying CareView’s Virtual Bed Rails). From February 2000 to June 2004, Mr. Johnson served as General Manager and Chief Engineer for 391 Communications, a company that is a service provider to cable and wireless cable companies. Mr. Johnson has been involved in several large-scale deployments of CATV, MMDS, and DBS satellite systems, as well as designing and building numerous CATV/MMDS head-ends for major domestic and foreign CATV/MMDS providers. Mr. Johnson is the son of Steven Johnson, our Chief Executive Officer and President.
Matthew E. Jackson – General Counsel
Mr. Jackson joined CareView in 2012. Mr. Jackson is responsible for all company legal matters including drafting and negotiating contracts, litigation, risk management, labor and employment, corporate securities and corporate governance. Mr. Jackson is admitted to practice law in both Texas and California.
Other Directorships
Other than as indicated within this section at Business Experience, none of our directors hold or have been nominated to hold a directorship in any company with a class of securities registered pursuant to Section 12 of the Exchange Act (the “Act”) or subject to the requirements of Section 15(d) of the Securities Act of 1933, or any company registered as an investment company under the Investment Company Act of 1940.
Committees of the Board
Audit Committee
The Audit Committee reviews and discusses the audited consolidated financial statements with management, discusses with our independent registered public accounting firm matters required to be discussed by Public Company Accounting Oversight Board Auditing Standard 1301: Communications with Audit Committees, and makes recommendations to the Board of Directors regarding the inclusion of our audited financial statements in this Annual Report on Form 10-K.
Our Audit Committee’s primary function is to provide advice with respect to our financial matters and to assist our Board of Directors in fulfilling its oversight responsibilities regarding finance, accounting, and legal compliance. The Audit Committee’s primary duties and responsibilities are to: (i) serve as an independent and objective party to monitor our financial reporting process and internal control system, (ii) review and appraise the audit efforts of our independent registered accounting firm, (iii) evaluate our quarterly financial performance as well as its compliance with laws and regulations, (iv) oversee management’s establishment and enforcement of financial policies and business practices, and (v) provide an open avenue of communication among the independent accountants, management and our Board of Directors.
For the year ended December 31, 2023, and as of the filing date of this Report, our Audit Committee consisted of three members of our Board of Directors, namely Jason Thompson as Chair, Allen Wheeler and Jeffrey Lightcap. Messrs. Thompson and Lightcap are deemed to be financial experts. Although our Board of Directors believes the members of our Audit Committee will exercise their judgment independently, no member is totally free of relationships that, in the opinion of the Board of Directors, might interfere with their exercise of independent judgment as a committee member. The Audit Committee’s Chair and members are to be designated annually by a majority vote of the Board of Directors. Any member may be removed at any time, with or without cause, and vacancies may be filled by a majority vote of the Board of Directors.
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Compensation Committee
Our Compensation Committee’s function is to aid our Board of Directors in fulfilling their responsibility to our shareholders, potential shareholders, and the investment community relating to developing policies and making specific recommendations to the Board of Directors with respect to the direct and indirect compensation of our executive officers. The goal of such policies is to ensure that an appropriate relationship exists between executive pay and the creation of shareholder value, while at the same time motivating and retaining key employees. Our Compensation Committee’s primary duties and responsibilities are to: (i) review and approve our Company’s goals relevant to the compensation of our Chief Executive Officer, evaluate the Chief Executive Officer’s performance with respect to those goals, and set the Chief Executive Officer’s compensation based on that evaluation; (ii) assess the contributions of individual executives and recommend to our Board of Directors levels of salary and incentive compensation payable to them; (iii) compare compensation levels with those of other leading companies in the industry; (iv) grant stock incentives to key employees and administer our stock incentive plans; (v) monitor compliance with legal prohibition on loans to directors and executive officers; and (vi) recommend to our Board of Directors compensation packages for new corporate officers and termination packages for corporate officers as requested.
For the year ended December 31, 2023, and as of the filing date of this Report, our Compensation Committee consisted of three members of our Board of Directors, namely Allen Wheeler as Chair, Jeffrey Lightcap and David White. Although our Board of Directors believes the members of our Compensation Committee will exercise their judgment independently, no member is totally free of relationships that, in the opinion of our Board of Directors, might interfere with their exercise of independent judgment as a committee member. Our Compensation Committee’s Chair and members are to be designated annually by a majority vote of our Board. Any member may be removed at any time, with or without cause, and vacancies may be filled by a majority vote of our Board.
Nominating Committee
We do not currently have a Nominating Committee; therefore, our Board, as a whole, identifies director nominees by reviewing the desired experience, mix of skills and other qualities to assure appropriate Board composition, taking into consideration our current Board members and the specific needs of our Company and our Board. Among the qualifications to be considered in the selection of candidates, our Board considers the following attributes and criteria of candidates: experience, knowledge, skills, expertise, diversity, personal and professional integrity, character, business judgment and independence. Our Board recognizes that nominees for the Board should reflect a reasonable diversity of backgrounds and perspectives, including those backgrounds and perspectives with respect to business experience, professional expertise, age, gender and ethnic background. Nominations for the election of directors may be made by any member of the Board.
Our Board will also evaluate whether the nominee’s skills are complementary to the existing Board members’ skills; our Board’s needs for operational, management, financial, technological or other expertise; and whether the individual has sufficient time to devote to the interests of our Company. The prospective Board member cannot be a board member or officer at a competing company nor have relationships with a competing company and must be clear of any investigation or violations that would be perceived as affecting the duties and performance of a director.
Our Board identifies nominees by first evaluating the current members of our Board willing to continue in service. Current members of our Board with skills and experience that are relevant to the business and who are willing to continue in service are considered for re-nomination, balancing the value of continuity of service by existing members of the Board with that of obtaining a new perspective. If any member of our Board does not wish to continue in service, or if our Board decides not to nominate a member for re-election, our Board identifies the desired skills and experience of a new nominee and discusses with our Board suggestions as to individuals that meet the criteria.
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Our Board is comprised of accomplished professionals who represent diverse and key areas of expertise including national business, operations, manufacturing, government, finance and investing, management, entrepreneurship, higher education and science, research and technology. We believe our directors’ wide range of professional experiences and backgrounds; education and skills has proven invaluable to our Company, and we intend to continue leveraging this strength.
Board Involvement in Risk Oversight
Our Board of Directors is responsible for oversight of our risk assessment and management process. We believe risk can arise in every decision and action taken by us, whether strategic or operational. Our comprehensive approach is reflected in the reporting processes by which our management provides timely information to our Board of Directors to support its role in oversight, approval and decision-making.
Our Board of Directors closely monitors the information it receives from management and provides oversight and guidance to our management team concerning the assessment and management of risk. Our Board of Directors approves our high-level goals, strategies and policies to set the tone and direction for appropriate risk taking within the business.
Our Board of Directors serving on the Compensation Committee have basic responsibility for oversight of management’s compensation risk assessment, and that committee reports to the Board on its review. Our Board of Directors also delegated tasks related to risk process oversight to our Audit Committee, which reports the results of its review process to our Board of Directors. The Audit Committee’s process includes a review, at least annually, of our internal audit process, including the organizational structure, as well as the scope and methodology of the internal audit process. The Board, as a whole, functions as the nominating committee to oversee risks related to our corporate governance, including director performance, director succession, director education and governance documents.
Code of Business Conduct and Ethics
Our Board of Directors adopted a Code of Business Conduct and Ethics applicable to all of our directors and executive officers. This code is intended to focus the members of our Board of Directors and each executive officer on areas of ethical risk, provide guidance to directors and executive officers to help them recognize and deal with ethical issues, provide mechanisms to report unethical conduct, and help foster a culture of honesty and accountability. All members of our Board of Directors and all executive officers are required to sign this code on an annual basis.
Code of Ethics for Financial Executives
Our Board of Directors adopted a Code of Ethics applicable to all financial executives and any other senior officer with financial oversight responsibilities. This code governs the professional and ethical conduct of our financial executives, and directs that they: (i) act with honesty and integrity; (ii) provide information that is accurate, complete, objective, relevant, and timely; (iii) comply with federal, state, and local rules and regulations; (iv) act in good faith with due care, competence and diligence; and (v) respect the confidentiality of information acquired in the course of their work and not use the information acquired for personal gain. All of our financial executives are required to sign this code on an annual basis.
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Insider Trading Policy
Our Board of Directors adopted an Insider Trading Policy applicable to all directors and officers. Insider trading generally refers to the buying or selling of a security in breach of a fiduciary duty or other relationship of trust and confidence while in possession of material, non-public information about the security. Insider trading violations may also include ‘tipping’ such information, securities trading by the person ‘tipped,’ and securities trading by those who misappropriate such information. The scope of insider trading violations can be wide reaching. As such, our Insider Trading Policy outlines the definitions of insider trading, the penalties and sanctions determined, and what constitutes material, non-public information. Illegal insider trading is against our policy as such trading can cause significant harm to our reputation for integrity and ethical conduct. Individuals who fail to comply with the requirements of the policy are subject to disciplinary action including dismissal for cause. All members of our Board of Directors and all executive officers are required to ratify the terms of this policy on an annual basis.
Whistleblower Policy
Our Board of Directors adopted a Whistleblower Policy to establish and maintain a complaint program to facilitate (i) the receipt, retention and treatment of complaints received by us regarding our accounting, internal accounting controls, auditing matters or violations of the Code of Conduct and (ii) the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters. Any person with a concern relating to the Accounting Policies or compliance with our Code of Conduct should submit their concern in writing to the Chair of our Audit Committee. Complaints may be made without fear of dismissal, disciplinary action or retaliation of any kind. We will not discharge, discipline, demote, suspend, threaten or in any manner discriminate against any officer or employee in the terms and conditions of employment based on any lawful actions with respect to (i) good faith reporting of concerns or complaints regarding Accounting Policies, or otherwise specified in Section 806 of the U.S. Sarbanes-Oxley Act of 2002, (ii) compliance with our Code of Conduct, or (iii) providing assistance to the Audit Committee, management or any other person or group, including any governmental, regulatory or law enforcement body, investigating a concern.
Related Party Transactions Policy
Our Board of Directors adopted a Related Party Transactions Policy as we recognize that transactions involving related parties present a heightened risk of conflicts of interest and/or improper valuation (or the perception thereof). Therefore, our Board determined that our Audit Committee shall review, approve and, if necessary, recommend to the Board for its approval all related party transactions and any material amendments to such related party transactions. Our Board may determine that a particular related party transaction or a material amendment thereto shall instead be reviewed and approved by a majority of directors disinterested in the related party transaction. No director shall participate in any approval of a related party transaction for which the director is a related party, except that the director shall provide all material information concerning the related party transaction to the committee. Our President is responsible for providing to the Audit Committee, on a quarterly basis, a summary of all payments made by or to us in connection with duly approved related party transactions during the preceding fiscal quarter. The President is responsible for reviewing and approving all payments made by or to us in connection with duly approved related party transactions and shall certify to the Audit Committee that any payments made by or to us in connection with such related party transactions have been made in accordance with the policy. All related party transactions shall be disclosed in our applicable filings as required by the Securities Act of 1933 and the Securities Exchange Act of 1934 and related rules and regulations.
Committee Charters, Corporate Governance Guidelines, and Codes of Ethics
Our Board of Directors adopted charters for the Audit and Compensation Committees describing the authority and responsibilities delegated to each committee. We post on our website the charters of our Audit and Compensation Committees, our Code of Conduct and Ethics, our Code of Ethics for Financial Executive, and any amendments or waivers thereto applicable to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions; and any other corporate governance materials contemplated by SEC regulations. These documents are also available in print to any stockholder requesting a copy in writing from our Secretary at our executive offices set forth in this Report.
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Board Meetings and Committees; Annual Meeting Attendance
We held 4 meetings of the Board of Directors during the year ended December 31, 2023 and conducted other business through unanimous written actions.
Indemnification
Section 145 of the Nevada Corporation Law provides in relevant parts as follows:
(1) A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against expenses (including attorneys’ fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit, or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit, or proceeding by judgment, order, settlement, conviction, or on a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.
(2) A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue, or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the corporation unless and only to the extent that the court in which such action or suit was brought shall determine on application that, despite the adjudication of liability but in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper.
(3) To the extent that a director, officer, employee, or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit, or proceeding referred to in (1) or (2) of this subsection, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection therewith.
(4) The indemnification provided by this section shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any bylaws, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of such a person.
The foregoing discussion of indemnification merely summarizes certain aspects of indemnification provisions and is limited by reference to the above discussed sections of the Nevada Corporation Law.
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Our Articles of Incorporation and Bylaws provide that we may indemnify to the full extent of its power to do so, all directors, officers, employees, and/or agents. Insofar as indemnification by us for liabilities arising under the Securities Act that may be permitted to our officers and directors pursuant to the foregoing provisions or otherwise, we are aware that in the opinion of the Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
| ITEM 11. | EXECUTIVE COMPENSATION. |
Summary Compensation Table
The table below shows certain compensation information for services rendered in all capacities for the last two fiscal years ended December 31, 2023, and 2022. The information includes the dollar value of base salaries, bonus awards, the number of non-qualified stock options (“Options”) granted and certain other compensation, if any, whether paid or deferred.
| Name and Principal Position |
Year | Salary ($) |
Bonus ($) | Stock Awards ($) |
Option Awards ($) | Non-Equity Incentive Plan Compen-sation ($) |
Nonquali-fied Deferred Compen-sation Earnings ($) | All Other Compen-sation ($) |
Total ($) |
| Steven G. Johnson (1) (President, CEO, Sec., Treas.) | 2023 | $256,878 | $24,266 | $281,144 | |||||
| 2022 | $265,046 | $17,232 | $282,278 | ||||||
| Sandra K McRee (2) (COO) | 2023 | $217,248 | $15,266 | $232,514 | |||||
| 2022 | $216,045 | $8,232 | $224,277 | ||||||
| Jason T. Thompson (3) (Principal Financial Officer) | 2023 | — | — | — | — | — | — | — | — |
| 2022 | — | — | — | — | — | — | — | — | |
| (1) | For 2023: All Other Compensation includes $9,000 for car allowance and $15,266 for health insurance premiums paid on Mr. Johnson’s behalf. |
For 2022: All Other Compensation includes $9,000 for car allowance and $8,232 for health insurance premiums paid on Mr. Johnson’s behalf..
| (2) | For 2023 and 2022: All Other Compensation is for health insurance premiums paid on Ms. McRee’s behalf. |
| (3) | Mr. Thompson was named Principal Financial Officer and Chief Accounting Officer effective January 1, 2018, upon the resignation of our former CFO. |
Outstanding Equity Awards at Fiscal Year End
The table below shows outstanding equity awards for our executive officers as of the fiscal year ended December 31, 2023, which equity awards consists solely of ten-year, non-qualified stock options (the “Options”). No executive officers have exercised any of their Options.
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|
Name and Office |
Option Awards | Stock Awards | |||||||||||
|
Number of Securities Underlying Unexercised Options (#) Exercisable |
Number of Securities Underlying Unexercised Options (#) Unexercis- able |
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) |
Option Exercise Price ($) |
Option Expiry Date |
Number of Shares or Units of Stock That Have Not Vested (#) |
Market Value of Shares or Units of Stock That Have Not Vested ($) |
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
Equity Incentive Plan Awards Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | |||||
| Steve G. Johnson (Pres., CEO, Sec., Treas.) |
2,000,000(1) | — | — | $0.10 | 12/05/26 | — | — | — | — | ||||
| 666,667(2) | — | — | $0.06 | 11/28/27 | — | — | — | — | |||||
| 400,000 | 800,000(3) | — | $0.04 | 08/08/30 | — | — | — | — | |||||
| Sandra K McRee (COO) | 1,000,000(4) | — | — | $0.53 | 02/22/25 | ||||||||
| 2,000,000(5) | — | — | $0.10 | 12/05/26 | |||||||||
| 2,000,000(6) | — | — | $0.10 | 12/02/27 | |||||||||
| 2,466,667 | 4,933,333(7) | — | $0.04 | 08/08/30 | |||||||||
| Jason T. Thompson (Principal Financial Officer) | 235,295(8) | — | — | $0.17 | 08/29/26 | ||||||||
| 666,667(9) | — | — | $0.06 | 11/28/27 | |||||||||
| 400,000 | 800,000(10) | — | $0.04 | 08/08/30 | |||||||||
(1) All underlying shares vested on December 7, 2019.
(2) All underlying shares vested on November 11, 2020.
(3) One third of the underlying shares vested on August 10, 2021.
(4) All underlying shares vested on February 25, 2018.
(5) All underlying shares vested on December 7, 2019.
(6) All underlying shares vested on December 3, 2020.
(7) One third of the underlying shares vested on August 10, 2021.
(8) All underlying shares vested on August 31, 2019.
(9) All underlying shares vested on November 20, 2020.
(10) One third of the underlying shares vested on August 10, 2021.
Employment Agreements with Executive Officers
We have no employment agreements with our executive officers.
Director Compensation
Our Directors Compensation Policy state that a cash retainer to outside directors shall be paid quarterly in advance as of the first day of each fiscal quarter. Cash retainers shall commence effective as of January 1, 2017, or at such later date as the Company is in a position to pay cash retainers. No cash retainers were paid in 2023 or 2022 per the terms of the Directors Compensation Policy as the Company was not in a financial position to pay such cash retainers.
Our Directors have also been granted non-qualified stock options from time to time as detailed in the table below. During the period ended December 31, 2023, there were no options granted to Directors.
The table below shows outstanding equity awards for our directors who are not executive officers, which equity awards consists solely of ten-year, non-qualified stock options. No options have been exercised.
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|
Name |
Fees Earned or Paid in Cash |
Stock Awards ($) |
Option Awards ($)(1) |
Non-Equity Incentive Plan Compensation ($) |
Nonqual- ified Deferred Compen- sation Earnings ($) |
All Other Com- pensation ($) |
Total ($) |
| $24,000 | $24,000 | ||||||
| $50,700 | $50,700 | ||||||
| $24,000 | $24,000 | ||||||
| L. Allen Wheeler (2) | — | — | $36,000 | — | — | — | $36,000 |
| $16,900 | $16,900 | ||||||
| $24,000 | $24,000 | ||||||
| $24,000 | $24,000 | ||||||
| Steven B. Epstein (3) | — | — | $36,000 | — | — | — | $36,000 |
| $24,000 | $24,000 | ||||||
| — | — | $24,000 | — | — | — | $24,000 | |
| Dr. James R. Higgins (4) | $36,000 | $36,000 | |||||
|
Jeffery C. Lightcap |
— |
— |
— |
— |
— |
— |
— |
| $24,000 | $24,000 | ||||||
| $24,000 | $24,000 | ||||||
| David R. White (5) | — | — | $36,000 | — | — | — | $36,000 |
| (1) | The valuation methodology used to determine the fair value of the options granted during the year was the Black-Scholes Model. The Black-Scholes-Merton model requires the use of a number of assumptions including volatility of the stock price, the weighted average risk-free interest rate, and the weighted average expected life of the options. For more detail, see NOTE 4 of the Notes to Consolidated Financial Statements attached hereto. |
| (2) | An aggregate of 2,251,962 are vested as of December 31, 2023. |
| (3) | An aggregate of 2,651,962 are vested as of December 31, 2023 |
| (4) | An aggregate of 2,101,962 are vested as of December 31, 2023. |
| (5) | An aggregate of 2,101,962 are vested as of December 31, 2023. |
| ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. |
Beneficial Security Ownership Table
The following table sets forth certain information, as of March 29, 2024, with respect to the beneficial ownership of our Common Stock by (i) each shareholder known by us to be the beneficial owner of more than five percent (5%) of our Common Stock, (ii) by each of our current directors and executive officers as identified herein, and (iii) all of our directors and executive officers as a group. Each person has sole voting and investment power with respect to the shares of Common Stock, except as otherwise indicated. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of Common Stock and non-qualified stock options (“Options”) exercisable into shares of our Common Stock within sixty (60) days of the date of this document, are deemed to be outstanding and to be beneficially owned by the person holding the Options, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise noted, the address for all officers and directors listed below is 405 State Highway 121, Suite B-240, Lewisville, Texas 75067.
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Title of Class |
Name and Address of Officer and Directors | Amount and Nature of Beneficial Ownership (1) |
Percent of Class |
|
Common Stock |
Steve G. Johnson (Chief Executive Officer, President, Secretary, Treasurer, Director) | 37,637,260 (2) |
6.40% |
| Common Stock | Sandra K. McRee (Chief Operating Officer) | 16,150,000 (3) | 2.71% |
| Common Stock | Jason T. Thompson (Director and Chief Accounting Officer, Principal Financial Officer) | 5,711,762 (4) |
0.97% |
| Common Stock | L. Allen Wheeler (Chairman of the Board) | 31,381,855 (5) | 5.35% |
| Common Stock | Steven B. Epstein (Director) | 10,711,962 (6) | 1.83% |
| Common Stock | Dr. James R. Higgins (Director) | 32,446,874 (7) | 5.54% |
| Common Stock | Jeffrey C. Lightcap (Director) | 374,000,000 (8) | 64.05% |
| Common Stock | David R. White (Director) | 2,371,962 (9) | 0.40% |
| Common Stock | All Officers & Directors as a Group (8 persons) | 510,411,675(10) | 83.39% |
| (1) | Unless otherwise noted, we believe that all shares are beneficially owned and that all persons named in the table have sole voting and investment power with respect to all shares of Common Stock owned by them. Applicable percentage of ownership is based on 583,880,748 shares of Common Stock currently outstanding, as adjusted for each shareholder. |
| (2) | This amount includes (i) 18,208,977 shares directly owned by Johnson, (ii) 3,866,667 shares due to Johnson upon exercise of vested Options, and (iii) 15,561,616 shares beneficially owned by SJ Capital, LLC, a company controlled by Johnson. The percentage of class for Johnson is based on 587,747,415 shares which would be outstanding if all of Johnson’s vested Options were exercised. |
| (3) | This amount includes (i) 1,750,000 shares directly owned by McRee, (ii) 2,000,000 shares owned by Sandra McRee IRA, and (iii) 12,400,000 shares due to McRee upon exercise of vested Options. The percentage of class for McRee is based on 596,280,748 shares which would be outstanding if all of McRee’s vested Options were exercised. |
| (4) | This amount includes (i) 2,237,500 shares directly owned by Thompson, (ii) 1,372,300 owned by Thompson Family Investments, LLC, of which Thompson is sole manager, and (iii) 2,101,962 shares due to Thompson upon exercise of vested Options. The percentage of class for Thompson is based on 585,982,710 shares which would be outstanding if all of Thompson’s vested Options were exercised. |
| (5) | This amount includes (i) 11,424,428 shares directly owned by Wheeler, (ii) 2,251,962 shares due to Wheeler upon exercise of Options, (iii) 1,340,000 shares owned by Mr. Wheeler’s wife, and (iv) 16,365,465 shares beneficially owned by Dozer Man, LLC, an entity controlled by Wheeler. The percentage of class for Wheeler is based on 586,132,710 shares which would be outstanding if all of Wheeler’s vested Options were exercised. |
| (6) | This amount includes (i) 4,280,000 shares directly owned by Epstein, (ii) 2,151,962 shares due to Epstein upon exercise of vested Options, (iii) 1,780,000 shares held by Epstein Partners, LLC, to which Mr. Epstein disclaims 890,000 shares, and (iv) 2,500,000 shares held by Steven and Deborah L. Epstein. The percentage of class for Epstein is based on 586,032,710 shares which would be outstanding if all of Epstein’s vested Options were exercised. |
| (7) | This amount includes (i) 22,462,890 shares directly owned by Higgins, (ii) 1,361,538 shares jointly owned by Higgins and his wife, (iii) 5,270,484 shares held in trust by Higgins’ wife, (iv) 2,101,962 shares due to Higgins upon exercise of vested Options, and (v) 1,250,000 shares due to Higgins upon exercise of Warrants. The percentage of class for Higgins is based on 587,232,710 shares which would be outstanding if all of Higgins’ vested Options were exercised. |
| (8) | HealthCor Management, LP, HealthCor Associates, LLC, HealthCor Hybrid Offshore Master Fund, LP, HealthCor Hybrid Offshore GP, LLC, HealthCor Group, LLC, HealthCor Partners Management, L.P., HealthCor Partners Management GP, LLC, HealthCor Partners Fund, LP, HealthCor Partners, LP HealthCor Partners GP, LLC, and Jeffrey C. Lightcap, as an individual (collectively, the Reporting Persons), beneficially own an aggregate of 374,000,000 shares, representing (i) 186,970,000 shares owned directly by HealthCor Hybrid Offshore Master Fund, LP, (iii) 173,030,000 shares owned by HealthCor Partners Fund, LP, (ii) 7,000,000 shares owned directly by Mr. Lightcap, and (iii) 7,000,000 shares held by PENSCO Trust Company, LLC, not in a corporate capacity but solely as Custodian for Individual Retirement Account of Jeffrey C. Lightcap. The percentage of class for Reporting Persons is based on 583,880,748 shares. |
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| (9) | This amount includes (i) 270,000 shares directly owned by White (ii) 2,101,962 shares due to White upon exercise of vested Options. The percentage of class for White is based on 585,982,710 shares which would be outstanding if all of White’s vested Options were exercised. |
| (10) | This amount includes all shares directly and beneficially owned by all officers and directors and all shares to be issued directly and beneficially upon exercise of vested shares under Options. The percentage of class for all officers and directors is based on 612,107,225 shares which would be outstanding if all the Options were exercised. |
Under Rule 144 promulgated under the Securities Act, our officers, directors and beneficial shareholders may sell up to one percent (1%) of the total outstanding shares (or an amount of shares equal to the average weekly reported volume of trading during the four calendar weeks preceding the sale) every three months provided that (1) current public information is available about our Company, (2) the shares have been fully paid for at least one year, (3) the shares are sold in a broker’s transaction or through a market-maker, and (4) the seller files a Form 144 with the SEC if seller is an affiliate.
Section 16(a) Beneficial Ownership Reporting Compliance
During the year ended December 31, 2023, we acknowledge that none of our officers or directors failed to file on a timely basis certain ownership forms required by Section 16(a) of the Exchange Act.
| ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND |
DIRECTOR INDEPENDENCE.
In addition to the participation of certain funding activities in February and July 2018, May 2019, February 2020, April, November, and December 2022 (for more detail, see NOTE 13 and 14 of the Notes to Consolidated Financial Statements attached hereto), our directors, officers, principal shareholders, and associate or affiliate completed a debt-to-equity conversion between March and May 2023.
Related Party Transactions Policy
As indicated hereinabove, our Board of Directors adopted a Related Party Transactions Policy and all related party transactions have been disclosed in our applicable filings as required by the Securities Act of 1933 and the Securities Exchange Act of 1934 and related rules and regulations.
Director Independence
Although our Board of Directors believes that our directors will exercise their judgment independently, no director is totally free of relationships that, in the opinion of the Board of Directors, might interfere with their exercise of independent judgment as a director.
Promoters and Certain Control Persons
None.
| ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
Audit Fees. The aggregate amount expected to be billed for professional services rendered by Rosenberg Rich Baker Berman & Co. / RRBB for the 2023 quarterly reviews and the annual audit for the year ended December 31, 2023 was approximately $150,000. For the 2022 quarterly reviews and annual audit we were billed $288,614. BDO USA, LLP (“BDO”) reviewed the periods ended March 31, 2022, June 30, 2022 and consented to the annual audit for $111,979. RRBB reviewed the period ended September 30, 2022 and rendered the annual audit for the year ended December 31, 2022 for $176,635.
36
Tax Fees. The aggregate amount expected to be billed for tax return preparation for the year ended December 31, 2023 rendered by Bass Tax Group is approximately $25,000. RRBB and Bass Tax Group billed us $32,175 for tax return preparation for the year ended December 31, 2022.
The Audit Committee of our Board of Directors adopted a policy requiring that it pre-approve all fees paid to our independent registered public accounting firm, regardless of the type of service. All non-audit services were reviewed with the Audit Committee, which concluded that the provision of such services by RRBB were compatible with the maintenance of that firm’s independence in the conduct of its auditing functions.
| ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. |
| Exhibit No. | Date of Document | Name of Document |
| 3.08 | 11/06/07 | Notice of Conversion filed in State of Nevada (to convert CareView Communications, Inc. from a California corporation to a Nevada corporation) (1) |
| 3.09 | 11/06/07 | Articles of Incorporation for CareView Communications, Inc. filed in State of Nevada (1) |
| 3.10 | 06/26/19 | Certificate of Amendment to Articles of Incorporation of CareView Communications, Inc. (incorporated herein by reference to Exhibit 3.01 to the Company’s Current Report on Form 8-K filed on June 27, 2019 (File No. 000-54090)) |
| 3.11 | n/a | Bylaws of CareView Communications, Inc., a Nevada corporation (1) |
| 3.12 | 04/11/19 | Amendments to the Bylaws of CareView Communications, Inc., a Nevada corporation (incorporated herein by reference to the Company’s Current Report on Form 8-K filed on May 20, 2019 (File No. 000-54090)) |
| 10.01 | 02/02/18 | Modification Agreement by and among the Company, CareView Communications, Inc., a Texas corporation, CareView Operations, L.L.C., a Texas limited liability company, and PDL Investment Holdings, LLC (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 2, 2018 (File No. 000-54090)) |
| 10.02 | 02/02/18 | Second Amended and Restated Warrant to Purchase Common Stock of the Company, issued to PDL Investment Holdings, LLC (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on February 2, 2018 (File No. 000-54090)) |
| 10.03 | 02/02/18 | Amended and Restated Registration Rights Agreement by and between the Company and PDL Investment Holdings, LCC (incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on February 2, 2018 (File No. 000-54090)) |
| 10.04 | 02/02/18 | Consent and Amendment to Note and Warrant Purchase Agreement and Subordination and Intercreditor Agreement by and among the Company, CareView Communications, Inc., a Texas corporation, PDL Investment Holdings, LLC and the note investors signatory to the Note and Warrant Purchase Agreement, as amended (incorporated herein by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on February 2, 2018 (File No. 000-54090)) |
| 10.05 | 02/02/18 | Consent to Credit Agreement by and among the Company, CareView Communications, Inc., a Texas corporation, and PDL Investment Holdings, LLC (incorporated herein by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on February 2, 2018 (File No. 000-54090)) |
| 10.06 | 02/02/18 | Amendment to Promissory Note to Rockwell Holdings I, LLC (incorporated herein by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on February 2, 2018 (File No. 000-54090)) |
| 10.07 | 02/02/18 | Amendment to Common Stock Purchase Warrant issued to Rockwell Holdings I, LLC (incorporated herein by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed on February 2, 2018 (File No. 000-54090)) |
| 10.08 | 02/23/18 | Eighth Amendment to Note and Warrant Purchase Agreement, among the Company HealthCor Partners Fund LP, HealthCor Hybrid Offshore Master Fund, LP and the investors party thereto (incorporated herein by reference to Exhibit 10.34 to the Company’s Current Report on Form 8-K filed on February 26, 2018 (File No. 000-54090)) |
| 10.09 | 02/23/18 | Form of Eighth Amendment Supplemental Closing Note (incorporated herein by reference to Exhibit 10.35 to the Company’s Current Report on Form 8-K filed on February 26, 2018 (File No. 000-54090)) |
37
| 10.10 | 02/23/18 |
Form of Eighth Amendment Supplemental Warrant (incorporated herein by reference to Exhibit 10.36 to the Company’s Current Report on Form 8-K filed on February 26, 2018 (File No. 000- 54090)) |
| 10.11 | 02/23/18 | Second Amendment to Credit Agreement, by and among the Company, CareView Communications, Inc., and PDL Investment Holding, LLC (incorporated herein by reference to Exhibit 10.37 to the Company’s Current Report on Form 8-K filed on February 26, 2018 (File No. 000-54090)) |
| 10.12 | 05/31/18 | Amendment to Modification Agreement, by and among the Company, CareView Communications, Inc., a Texas corporation, CareView Operations, L.L.C., a Texas limited liability company, and PDL Investment Holdings, LLC (incorporated herein by reference to Exhibit 10.05 to the Company’s Current Report on Form 8-K filed on June 4, 2018 (File No. 000-54090)) |
| 10.13 | 06/14/18 | Second Amendment to Modification Agreement, by and among the Company, CareView Communications, Inc., a Texas corporation, CareView Operations, L.L.C., a Texas limited liability company, and PDL Investment Holdings, LLC (incorporated herein by reference to Exhibit 10.06 to the Company’s Current Report on Form 8-K filed on June 15, 2018 (File No. 000-54090)) |
| 10.14 | 06/28/18 | Third Amendment to Modification Agreement, by and among the Company, CareView Communications, Inc., a Texas corporation, CareView Operations, L.L.C., a Texas limited liability company, and PDL Investment Holdings, LLC (incorporated herein by reference to Exhibit 10.08 to the Company’s Current Report on Form 8-K filed on July 5, 2018 (File No. 000-54090)) |
| 10.15 | 07/10/18 | Ninth Amendment to Note and Warrant Purchase Agreement, among the Company HealthCor Partners Fund LP, HealthCor Hybrid Offshore Master Fund, LP and the investors party thereto (incorporated herein by reference to Exhibit 10.43 to the Company’s Current Report on Form 8-K filed on July 11, 2018 (File No. 000-54090)) |
| 10.16 | 07/13/18 | Tenth Amendment to Note and Warrant Purchase Agreement, among the Company HealthCor Partners Fund LP, HealthCor Hybrid Offshore Master Fund, LP and the investors party thereto (incorporated herein by reference to Exhibit 10.53 to the Company’s Current Report on Form 8-K filed on July 16, 2018 (File No. 000-54090)) |
| 10.17 | 07/13/18 | Form of Tenth Amendment Supplemental Closing Note (incorporated herein by reference to Exhibit 10.54 to the Company’s Current Report on Form 8-K filed on July 16, 2018 (File No. 000- 54090)) |
| 10.18 | 07/13/18 | Third Amendment to Credit Agreement, by and among the Company, CareView Communications, Inc., a Texas corporation, and PDL Investment Holdings, LLC (incorporated herein by reference to Exhibit 10.55 to the Company’s Current Report on Form 8-K filed on July 16, 2018 (File No. 000-54090)) |
| 10.19 | 08/31/18 | Fourth Amendment to Modification Agreement, by and among the Company, CareView Communications, Inc., a Texas corporation, CareView Operations, L.L.C., a Texas limited liability company, and PDL Investment Holdings, LLC (incorporated herein by reference to Exhibit 10.09 to the Company’s Current Report on Form 8-K filed on September 5, 2018 (File No. 000-54090)) |
| 10.20 | 09/28/18 | Fifth Amendment to Modification Agreement, by and among the Company, CareView Communications, Inc., a Texas corporation, CareView Operations, L.L.C., a Texas limited liability company, and PDL Investment Holdings, LLC (incorporated herein by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K filed on October 4, 2018 (File No. 000-54090)) |
| 10.21 | 11/12/18 | Sixth Amendment to Modification Agreement, by and among the Company, CareView Communications, Inc., a Texas corporation, CareView Operations, L.L.C., a Texas limited liability company, and PDL Investment Holdings, LLC (incorporated herein by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K filed on November 16, 2018 (File No. 000-54090)) |
| 10.22 | 11/19/18 | Seventh Amendment to Modification Agreement, by and among the Company, CareView Communications, Inc., a Texas corporation, CareView Operations, L.L.C., a Texas limited liability company, and PDL Investment Holdings, LLC (incorporated herein by reference to Exhibit 10.12 to the Company’s Current Report on Form 8-K filed on November 21, 2018 (File No. 000-54090)) |
| 10.23 | 12/03/18 | Eighth Amendment to Modification Agreement, by and among the Company, CareView Communications, Inc., a Texas corporation, CareView Operations, L.L.C., a Texas limited liability company, and PDL Investment Holdings, LLC (incorporated herein by reference to Exhibit 10.13 to the Company’s Current Report on Form 8-K filed on December 6, 2018 (File No. 000-54090)) |
| 10.24 | 12/17/18 | Ninth Amendment to Modification Agreement, by and among the Company, CareView Communications, Inc., a Texas corporation, CareView Operations, L.L.C., a Texas limited liability company, and PDL Investment Holdings, LLC (incorporated herein by reference to Exhibit 10.14 to the Company’s Current Report on Form 8-K filed on December 21, 2018 (File No. 000-54090)) |
38
| 10.25 | 01/31/19 | Tenth Amendment to Modification Agreement, by and among the Company, CareView Communications, Inc., a Texas corporation, CareView Operations, L.L.C., a Texas limited liability company, and PDL Investment Holdings, LLC (incorporated herein by reference to Exhibit 10.15 to the Company’s Current Report on Form 8-K filed on February 5, 2019 (File No. 000-54090)) |
| 10.26 | 02/28/19 | Eleventh Amendment to Modification Agreement, by and among the Company, CareView Communications, Inc., a Texas corporation, CareView Operations, L.L.C., a Texas limited liability company, and PDL Investment Holdings, LLC (incorporated herein by reference to Exhibit 10.16 to the Company’s Current Report on Form 8-K filed on March 4, 2019 (File No. 000-54090)) |
| 10.27 | 03/27/19 | Eleventh Amendment to Note and Warrant Purchase Agreement, among the Company HealthCor Partners Fund LP, HealthCor Hybrid Offshore Master Fund, LP and the investors party thereto (incorporated herein by reference to the Company’s Current Report on Form 8-K filed on March 29, 2019 (File No. 000-54090)) |
| 10.28 | 03/29/19 | Twelfth Amendment to Modification Agreement, by and among the Company, CareView Communications, Inc., a Texas corporation, CareView Operations, L.L.C., a Texas limited liability company, and PDL Investment Holdings, LLC (incorporated herein by reference to the Company’s Annual Report on Form 10-K filed on March 29, 2019 (File No. 000-54090)) |
| 10.29 | 04/09/19 | Fourth Amendment to Credit Agreement (incorporated herein by reference to Exhibit 10.18 to the Company’s Current Report on Form 8-K filed on April 15, 2019 (File No. 000-54090)) |
| 10.30 | 04/09/19 | Amended and Restated Tranche One Term Note (incorporated herein by reference to Exhibit 10.19 to the Company’s Current Report on Form 8-K filed on April 15, 2019 (File No. 000-54090)) |
| 10.31 | 04/29/19 | Thirteenth Amendment to Modification Agreement (incorporated herein by reference to Exhibit 10.20 to the Company’s Current Report on Form 8-K filed on May 1, 2019 (File No. 000-54090)) |
| 10.32 | 05/15/19 | Fourteenth Amendment to Modification Agreement (incorporated herein by reference to Exhibit 10.32 to the Company’s Current Report on Form 8-K filed on May 20, 2019 (File No. 000-54090)) |
| 10.33 | 05/15/19 | Twelfth Amendment to Note and Warrant Purchase Agreement (incorporated herein by reference to Exhibit 10.33 to the Company’s Current Report on Form 8-K filed on May 20, 2019 (File No. 000-54090)) |
| 10.34 | 05/15/19 | Form of Twelfth Amendment Supplemental Closing Note (incorporated herein by reference to Exhibit 10.34 to the Company’s Current Report on Form 8-K filed on May 20, 2019 (File No. 000- 54090)) |
| 10.35 | 05/15/19 | Fifth Amendment to Credit Agreement (incorporated herein by reference to Exhibit 10.35 to the Company’s Current Report on Form 8-K filed on May 20, 2019 (File No. 000-54090)) |
| 10.36 | 05/15/19 | Form of Tranche Three Term Note (incorporated herein by reference to Exhibit 10.36 to the Company’s Current Report on Form 8-K filed on May 20, 2019 (File No. 000-54090)) |
| 10.37 | 05/15/19 | Form of Tranche Three Loan Warrant (incorporated herein by reference to Exhibit 10.37 to the Company’s Current Report on Form 8-K filed on May 20, 2019 (File No. 000-54090)) |
| 10.38 | 09/30/19 | Fifteenth Amendment to Modification Agreement, by and among the Company, CareView Communications, Inc., a Texas corporation, CareView Operations, L.L.C., a Texas limited liability company, and PDL Investments, LLC (incorporated herein by reference to Exhibit 10.22 to the Company’s Current Report on Form 8-K filed on October 4, 2019 (File No. 000-54090)) |
| 10.39 | 11/29/19 | Sixteenth Amendment to Modification Agreement, by and among the Company, CareView Communications, Inc., a Texas corporation, CareView Operations, L.L.C., a Texas limited liability company, and PDL Investments, LLC (incorporated herein by reference to Exhibit 10.23 to the Company’s Current Report on Form 8-K filed on December 5, 2019 (File No. 000-54090)) |
| 10.40 | 12/31/19 | Seventeenth Amendment to Modification Agreement, by and among the Company, CareView Communications, Inc., a Texas corporation, CareView Operations, L.L.C., a Texas limited liability company, and PDL Investments, LLC (incorporated herein by reference to Exhibit 10.22 to the Company’s Current Report on Form 8-K filed on January 7, 2020 (File No. 000-54090)) |
| 10.41 | 12/31/19 | Second Amendment to Promissory Note to Rockwell Holdings I, LLC (incorporated herein by reference to Exhibit 10.27 to the Company’s Current Report on Form 8-K filed on January 7, 2020 (File No. 000-54090)) |
| 10.42 | 01/17/20 | Eighteenth Amendment to Modification Agreement, by and among the Company, CareView Communications, Inc., a Texas corporation, CareView Operations, L.L.C., a Texas limited liability company, and PDL Investment Holdings, LLC (incorporated herein by reference to Exhibit 10.25 to the Company’s Current Report on Form 8-K filed on January 23, 2002 (File No. 000-54090)) |
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| 10.43 | 01/28/20 | Nineteenth Amendment to Modification Agreement, by and among the Company, CareView Communications, Inc., a Texas corporation, CareView Operations, L.L.C., a Texas limited liability company, and PDL Investment Holdings, LLC (incorporated herein by reference to Exhibit 10.27 to the Company’s Current Report on Form 8-K filed on February 3, 2020 (File No. 000-54090)) |
| 10.44 | 01/31/20 | Third Amendment to Promissory Note to Rockwell Holdings I, LLC (incorporated herein by reference to Exhibit 10.04 to the Company’s Current Report on Form 8-K filed on February 6, 2020 (File No. 000-54090)) |
| 10.45 | 02/06/20 | Sixth Amendment to Credit Agreement, by and among the Company, CareView Communications, Inc., a Texas corporation, PDL Investment Holdings, LLC, Steven G. Johnson and Dr. James R. Higgins (incorporated herein by reference to Exhibit 10.43 to the Company’s Current Report on Form 8-K filed on February 10, 2020 (File No. 000-54090)) |
| 10.46 | 02/06/20 | Form of Additional Tranche Three Term Note (incorporated herein by reference to Exhibit 10.46 to the Company’s Current Report on Form 8-K filed on February 10, 2020 (File No. 000-54090)) |
| 10.47 | 03/31/20 | Fourth Amendment to Promissory Note to Rockwell Holdings I, LLC (incorporated herein by reference to Exhibit 10.05 to the Company’s Current Report on Form 8-K filed on April 17, 2020 (File No. 000-54090)) |
| 10.48 | 04/17/20 | Twentieth Amendment to Modification Agreement, by and among the Company, CareView Communications, Inc., a Texas corporation, CareView Operations, L.L.C., a Texas limited liability company, and PDL Investment Holdings, LLC (incorporated herein by reference to Exhibit 10.30 to the Company’s Current Report on Form 8-K filed on April 23, 2020 (File No. 000-54090)) |
| 10.49 | 09/30/20 | Twenty-First Amendment to Modification Agreement, by and among the Company, CareView Communications, Inc., a Texas corporation, CareView Operations, L.L.C., a Texas limited liability company, PDL Investment Holdings, LLC, Steven G. Johnson and Dr. James R. Higgins (incorporated herein by reference to Exhibit 10.32 to the Company’s Current Report on Form 8-K filed on October 6, 2020 (File No. 000-54090)) |
| 10.50 | 11/30/20 | Twenty-Second Amendment to Modification Agreement, by and among the Company, CareView Communications, Inc., a Texas corporation, CareView Operations, L.L.C., a Texas limited liability company, PDL Investment Holdings, LLC, Steven G. Johnson and Dr. James R. Higgins (incorporated herein by reference to Exhibit 10.33 to the Company’s Current Report on Form 8-K filed on December 4, 2020 (File No. 000-54090)) |
| 10.51 | 12/31/20 | Fifth Amendment to Promissory Note to Rockwell Holdings I, LLC (incorporated herein by reference to Exhibit 10.06 to the Company’s Current Report on Form 8-K filed on January 5, 2022 (File No. 000-54090)) |
| 10.52 | 1/31/21 | Twenty-Third Amendment to Modification Agreement, by and among the Company, CareView Communications, Inc., a Texas corporation, CareView Operations, L.L.C., a Texas limited liability company, PDL Investment Holdings, LLC, Steven G. Johnson and Dr. James R. Higgins (incorporated herein by reference to Exhibit 10.34 to the Company’s Current Report on Form 8-K filed on February 4, 2022 (File No. 000-54090)) |
| 10.53 | 5/25/21 | Twenty-Fourth Amendment to Modification Agreement, by and among the Company, CareView Communications, Inc., a Texas corporation, CareView Operations, L.L.C., a Texas limited liability company, PDL Investment Holdings, LLC, Steven G. Johnson and Dr. James R. Higgins (incorporated herein by reference to Exhibit 10.35 to the Company’s Current Report on Form 8-K filed on May 27, 2022 (File No. 000-54090)) |
| 10.54 | 11/29/21 | Twenty-Fifth Amendment to Modification Agreement, by and among the Company, CareView Communications, Inc., a Texas corporation, CareView Operations, L.L.C., a Texas limited liability company, PDL Investment Holdings, LLC, Steven G. Johnson and Dr. James R. Higgins (incorporated herein by reference to Exhibit 10.42 to the Company’s Current Report on Form 8-K filed on December 3, 2022 (File No. 000-54090)) |
| 10.55 | 11/30/21 | Sixth Amendment to Promissory Note to Rockwell Holdings I, LLC (incorporated herein by reference to Exhibit 10.43 to the Company’s Current Report on Form 8-K filed on December 3, 2022 (File No. 000-54090)) |
| 10.56 | 03/08/22 | Allonge No. 4 to 2011 Senior Secured Convertible Note of the Company payable to HealthCor Partners Fund, L.P. (incorporated herein by reference to Exhibit 10.34 to the Company’s Current Report on Form 8-K filed on March 9, 2022 (File No. 000-54090)) |
| 10.57 | 03/08/22 | Allonge No. 4 to 2011 Senior Secured Convertible Note of the Company payable to HealthCor Hybrid Offshore Master Fund, L.P. (incorporated herein by reference to Exhibit 10.35 to the Company’s Current Report on Form 8-K filed on March 9, 2022 (File No. 000-54090)) |
40
| 10.58 | 03/08/22 | Allonge No. 4 to 2012 Senior Secured Convertible Note of the Company payable to HealthCor Partners Fund, L.P. (incorporated herein by reference to Exhibit 10.36 to the Company’s Current Report on Form 8-K filed on March 9, 2022 (File No. 000-54090)) |
| 10.59 | 03/08/22 | Allonge No. 4 to 2012 Senior Secured Convertible Note of the Company payable to HealthCor Hybrid Offshore Master Fund, L.P. (incorporated herein by reference to Exhibit 10.37 to the Company’s Current Report on Form 8-K filed on March 9, 2022 (File No. 000-54090)) |
| 10.60 | 03/08/22 | Form of 2022 HealthCor Warrants (incorporated herein by reference to Exhibit 10.38 to the Company’s Current Report on Form 8-K filed on March 9, 2022 (File No. 000-54090)) |
| 10.61 | 03/08/22 | Consent and Agreement Pursuant to Note and Warrant Purchase Agreement, by and among the Company, HealthCor Partners Fund, L.P., HealthCor Hybrid Offshore Master Fund, L.P). and the investors party thereto (incorporated herein by reference to Exhibit 10.39 to the Company’s Current Report on Form 8-K filed on March 9, 2022 (File No. 000-54090)) |
| 10.62 | 03/08/22 | Consent and Agreement Regarding Note Extensions, by and among the Company, CareView Communications, Inc., a Texas corporation, CareView Communications, LLC., a Texas limited liability company, and PDL Investment Holdings, LLC (incorporated herein by reference to Exhibit 10.40 to the Company’s Current Report on Form 8-K filed on March 9, 2022 (File No. 000-54090)) |
| 10.63 | 06/23/22 | Twenty-Sixth Amendment to Modification Agreement, by and among the Company, CareView Communications, Inc., a Texas corporation, CareView Operations, L.L.C., a Texas limited liability company, PDL Investment Holdings, LLC, Steven G. Johnson and Dr. James R. Higgins (incorporated herein by reference to Exhibit 10.43 to the Company’s Current Report on Form 8-K filed on June 29, 2022 (File No. 000-54090)) |
| 10.64 | 07/12/22 | Allonge No. 3 to 2014 Senior Secured Convertible Note of the Company payable to HealthCor Hybrid Offshore Master Fund, L.P and HealthCor Partners Fund, L.P. (incorporated herein by reference to Exhibit 10.41 to the Company’s Current Report on Form 8-K filed on July 12, 2022 (File No. 000-54090)) |
| 10.65 | 07/12/22 | Allonge No. 3 to 2015 Senior Secured Convertible Note of the Company payable to HealthCor Partners Fund, L.P. and the investors party thereto (incorporated herein by reference to Exhibit 10.42 to the Company’s Current Report on Form 8-K filed on July 12, 2022 (File No. 000-54090)) |
| 10.66 | 07/12/22 | Allonge No. 2 to February 2018 Senior Secured Convertible Note of the Company payable to the investors party thereto (incorporated herein by reference to Exhibit 10.43 to the Company’s Current Report on Form 8-K filed on July 12, 2022 (File No. 000-54090)) |
| 10.67 | 07/12/22 | Allonge No. 1 to July 2018, May 2019 and February 2020 Senior Secured Convertible Notes of the Company payable to the investors party thereto (incorporated herein by reference to Exhibit 10.44 to the Company’s Current Report on Form 8-K filed on July 12, 2022 (File No. 000-54090)) |
| 10.68 | 11/14/22 | Form of Securities Purchase Agreement between the Company and the investors party thereto (incorporated herein by reference to Exhibit 10.00 to the Company’s Current Report on Form 8-K filed on November 18, 2022 (File No. 000-54090)) |
| 10.69 | 12/30/22 | Twenty-Seventh Amendment to Modification Agreement, by and among the Company, CareView Communications, Inc., a Texas corporation, CareView Operations, L.L.C., a Texas limited liability company, PDL Investment Holdings, LLC, Steven G. Johnson and Dr. James R. Higgins (incorporated herein by reference to Exhibit 10.44 to the Company’s Current Report on Form 8-K filed on December 30, 2022 (File No. 000-54090)) |
| 10.70 | 12/30/22 | Consent and Agreement to Cancel and Exchange Existing Notes and Issue Replacement Notes and Cancel Warrants between the Company and the investors party thereto (incorporated herein by reference to Exhibit 10.01 to the Company’s Current Report on Form 8-K filed on December 30, 2022 (File No. 000-54090)) |
| 10.71 | 12/30.22 |
Form of Replacement Notes of the Company payable to the investors party thereto (incorporated herein by reference to Exhibit 10.02 to the Company’s Current Report on Form 8-K filed on December 30, 2022 (File No. 000-54090)) |
| 10.72 | 02/28/23 | Twenty-Eight Amendment to Modification Agreement, by and among the Company, CareView Communications, Inc., a Texas corporation, CareView Operations, L.L.C., a Texas limited liability company, PDL Investment Holdings, LLC, Steven G. Johnson and Dr. James R. Higgins (incorporated herein by reference to Exhibit 10.45 to the Company’s Current Report on Form 8-K filed on March 2, 2023 (File No. 000-54090)) |
| 10.73 | 03/30/23 | Form of Replacement Note Conversion Agreement between the Company and the investors party thereto (incorporated herein by reference to Exhibit 10.01 to the Company’s Current Report on Form 8-K filed on March 31, 2023 (File No. 000-54090)) |
| 10.74 | 03/31/23 | Twenty-Ninth Amendment to Modification Agreement, by and among the Company, CareView Communications, Inc., a Texas corporation, CareView Operations, L.L.C., a Texas limited liability company, PDL Investment Holdings, LLC, Steven G. Johnson and Dr. James R. Higgins (incorporated herein by reference to Exhibit 10.46 to the Company’s Current Report on Form 8-K filed on April 3, 2023 (File No. 000-54090)) |
41
| 10.75 | 04/29/23 | Thirtieth Amendment to Modification Agreement, by and among the Company, CareView Communications, Inc., a Texas corporation, CareView Operations, L.L.C., a Texas limited liability company, PDL Investment Holdings, LLC, Steven G. Johnson and Dr. James R. Higgins (incorporated herein by reference to Exhibit 10.47 to the Company’s Current Report on Form 8-K filed on May 2, 2023 (File No. 000-54090)) |
| 21.00 | 05/19/23 | Subsidiaries of the Registrant* |
| 31.1 | 03/29/24 | Certification of Chief Executive Officer of Periodic Report pursuant to Rule 13a-14a and Rule 14d-14(a). * |
| 31.2 | 03/29/24 | Certification of Chief Financial Officer of Periodic Report pursuant to Rule 13a-14a and Rule 15d-4(a). * |
| 32.1 | 03/29/24 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350. * |
| 32.2 | 03/29/24 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350. * |
| 101.INS | n/a | XBRL Instance Document* |
| 101.SCH | n/a | XBRL Taxonomy Extension Schema Document* |
| 101.CAL | n/a | XBRL Taxonomy Extension Calculation Linkbase Document* |
| 101.DEF | n/a | XBRL Taxonomy Extension Definition Linkbase Document* |
| 101.LAB | n/a | XBRL Taxonomy Extension Label Linkbase Document* |
| 101.PRE | n/a | XBRL Taxonomy Extension Presentation Linkbase Document* |
*Filed herewith.
| ITEM 16. | FORM 10-K SUMMARY. |
None.
42
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
DATE: March 29, 2024
| CAREVIEW COMMUNICATIONS, INC. | ||
| By: | /s/ Steven G. Johnson | |
| Steven G. Johnson Chief Executive Officer Principal Executive Officer |
||
| By: | /s/ Jason T. Thompson | |
| Jason
T. Thompson Principal Financial Officer Chief Accounting Officer | ||
43
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Steven G. Johnson and Jason T. Thompson and each of them, his attorney-in-fact with power of substitution for him in any and all capacities, to sign any amendments, supplements or other documents relating to this Annual Report on Form 10-K he deems necessary or appropriate, and to file the same, with exhibits thereto, and other documents in connection therewith, with the SEC, hereby ratifying and confirming all that such attorney-in-fact or their substitute may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ Steven G. Johnson | Chief Executive Officer, President, Secretary, Treasurer, Director | March 29, 2024 | ||
| Steven G. Johnson | ||||
| /s/ Jason T. Thompson | Director, Principal Financial Officer, Chief Accounting Officer | March 29, 2024 | ||
| Jason T. Thompson | ||||
| /s/ Sandra K. McRee | Chief Operating Officer | March 29, 2024 | ||
| Sandra K. McRee | ||||
| /s/ L. Allen Wheeler | Chairman of the Board, | March 29, 2024 | ||
| L. Allen Wheeler | ||||
| /s/ Jeffrey C. Lightcap | Director | March 29, 2024 | ||
| Jeffrey C. Lightcap | ||||
| /s/ David R. White | Director | March 29, 2024 | ||
| David R. White | ||||
| /s/ Steven B. Epstein | Director | March 29, 2024 | ||
| Steven B. Epstein | ||||
| /s/ Dr. James R. Higgins | Director | March 29, 2024 | ||
| Dr. James R. Higgins |
44
INDEX TO FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Careview Communications, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Careview Communications, Inc. (the Company) as of the years ended December 31, 2023 and 2022, and the related statements of operations, changes in stockholders' deficit, and cash flows for each of the years in the two-year period ended December 31, 2023, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company outlines the net losses, cash outflows, and working capital deficit that raise substantial doubt about its ability to continue as a going concern. Management's plans regarding these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
F-1
Revenue recognition
The Company earns sales-based contract revenue from services rendered under specific agreements, which hinge on a third-party reseller who possesses the exclusive authority to engage directly with veteran-owned hospitals. Evaluating the Company's role in these contracts necessitates assessing whether it functions as the principal or agent, a determination that involves analyzing the extent of control the Company wields over the contracts.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to evaluating the Company’s revenue and revenue recognition policy and related accounts included the following, among others:
| ● | Independent assessment of whether the Company’s conclusion that it maintains control in its revenue generating contracts is reasonable, and as such, gross presentation of revenue is appropriate. |
| ● | Performed analytical procedures of revenue and cash receipt activities during the year to determine any unusual fluctuations that required further inquiry or substantiation. |
| ● | Testing of a sample of revenue transactions during the year, including transactions near year end, to determine the agreed-upon services were completed, and recorded in the appropriate period. |
| ● | Direct confirmation with significant third parties that were party to these contracts, confirming the contract details, status, nature of the Company’s involvement in fulfilling the services and oversight of the projects, and the Company’s control over the pricing arrangements for the contracts. |
We have served as the Company’s auditor since 2022.
March 27, 2024
F-2
CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2023 AND 2022
| December 31, 2023 | December 31, 2022 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and restricted cash | $ | $ | ||||||
| Restricted cash | ||||||||
| Accounts receivable | ||||||||
| Inventory | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Other Assets: | ||||||||
| Intangible assets, net | ||||||||
| Operating lease asset | ||||||||
| Other assets, net | ||||||||
| Total other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Notes payable | ||||||||
| Notes payable - related parties | ||||||||
| Senior secured notes - related/non-related parties, net of debt discount and debt costs | ||||||||
| Deferred revenue | ||||||||
| Accrued interest payable | ||||||||
| Operating lease liability | ||||||||
| Other current liabilities | ||||||||
| Total current liabilities | ||||||||
| Long-term Liabilities: | ||||||||
| Senior secured convertible notes - related/non-related parties; net of debt discount and debt costs | ||||||||
| Senior secured convertible notes, net of debt discount and debt costs | ||||||||
| Operating lease liability | ||||||||
| Other liability | ||||||||
| Total long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies (Note 11) | ||||||||
| Stockholders' Deficit: | ||||||||
| Preferred stock - par value $; shares authorized; shares issued and outstanding | ||||||||
| Common stock - par value $; shares authorized; issued and outstanding | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders' deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders' deficit | $ | $ | ||||||
The accompanying footnotes are an integral part of these consolidated financial statements.
F-3
CAREVIEW COMMUNICATIONS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
| Year Ended | ||||||||
| December 31, 2023 | December 31, 2022 | |||||||
| Revenues: | ||||||||
| Subscription-based lease revenue | $ | $ | ||||||
| Sales-based equipment package revenue | ||||||||
| Sales-based software bundle revenue | ||||||||
| Total revenues | ||||||||
| Operating expenses: | ||||||||
| Cost of equipment | ||||||||
| Network operations | ||||||||
| General and administration | ||||||||
| Sales and marketing | ||||||||
| Research and development | ||||||||
| Depreciation and amortization | ||||||||
| Total operating expenses | ||||||||
| Operating income (loss) | ( | ) | ( | ) | ||||
| Other income and (expense) | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Interest income | ||||||||
| Gain on trouble debt restructuring | ||||||||
| Other income | ||||||||
| Total other income (expense) | ( | ) | ( | ) | ||||
| Loss before taxes | ( | ) | ( | ) | ||||
| Provision for income taxes | ( | ) | ||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Net loss per share | $ | ) | $ | ) | ||||
| Weighted average number of common shares outstanding, basic and diluted | ||||||||
The accompanying footnotes are an integral part of these consolidated financial statements.
F-4
| CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT |
| FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022 |
| Common Stock | Additional Paid in | Accumulated | ||||||||||||||||||
| Shares | Amount | Capital | Deficit | Total | ||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Issuance of common stock | $ | $ | $ | |||||||||||||||||
| Issuance of warrants to purchase common stock | — | |||||||||||||||||||
| Stock based compensation | — | |||||||||||||||||||
| Debt to equity conversion at $ | ||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Stock based compensation | — | |||||||||||||||||||
| Debt to equity conversion at $ | ||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
The accompanying footnotes are an integral part of these consolidated financial statements.
F-5
CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
| Year Ended | ||||||||
| December 31 2023 | December 31 2022 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||||||||
| Depreciation | ||||||||
| Amortization of intangible assets | ||||||||
| Impairment of intangible assets | ||||||||
| Amortization of deferred installation costs | ||||||||
| Amortization of debt discount | ||||||||
| Non-cash lease expense | ||||||||
| Interest incurred and paid in kind | ||||||||
| Stock based compensation related to options granted and warrants issued | ||||||||
| Gain on extinguishment of debt | ( | ) | ||||||
| Loss on disposal of assets | ||||||||
| Loss on disposal of intangibles | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Inventory | ||||||||
| Other current assets | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Accrued interest | ( | ) | ||||||
| Other current liabilities | ( | ) | ||||||
| Deferred revenue | ( | ) | ||||||
| Deferred sales commissions | ( | ) | ||||||
| Operating lease liability | ( | ) | ( | ) | ||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Payment for deferred installation costs | ( | |||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from board investment | ||||||||
| Repayment of notes payable | ( | ) | ||||||
| Repayment of vehicle loan | ( | ) | ||||||
| Net cash flows provided by (used) in financing activities | ( | ) | ||||||
| Increase in cash | ( | ) | ||||||
| Cash and restricted cash, beginning of year | ||||||||
| Cash and restricted cash (2022 only), end of year | $ | $ | ||||||
| SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITES: | ||||||||
| Cancellation of accrued interest | $ | $ | ||||||
| Issuance of warrants for debt discount | $ | $ | ||||||
| Non-cash debt-to-equity conversion | $ | $ | ||||||
The accompanying footnotes are an integral part of these consolidated financial statements.
F-6
NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
CareView Communications, Inc., a Nevada corporation (“CareView”, the “Company”, “we”, “us” or “our”), was originally formed in California on July 8, 1997 under the name Purpose, Inc., changing our name to Ecogate, Inc. in April 1999, and CareView Communications, Inc. in October 2007. We began our current operation in 2003 as a healthcare information technology company with a patented patient monitoring and entertainment system.
Our business consists of a single segment of products and services all of which are sold and provided within the United States.
Description of Business and Products
CareView’s video monitoring solutions include the following:
SitterView® and TeleMedView allow hospital staff to use CareView’s video cameras to observe and communicate with patients remotely. TeleMedView leverages the CareView Mobile Controller’s built-in monitor and can work with the CareView Portable Controller as well.
Our CareView Patient Safety System® suite of video monitoring, guest services, and related applications connect patients, families and healthcare providers. CareView's video monitoring system connects the patient room to a touchscreen monitor at the nursing station or a mobile handheld device allowing the nursing staff to maintain a level of visual contact with each patient. We also provide a suite of services including on-demand movies, Internet access via the patient's television, and video visits with family and friends.
CareView ConnectTM Quality of Life System (“CareView Connect”) consists of an emergency assist button, motion sensors, sleep sensor, and event sensor. Resident activity levels, medication administration, sleep patterns, and requests for assistance can be monitored depending on which options are selected. CareView's suite of products are designed for the long-term care market, including Nursing Care, Home Care, Assisted Living and Independent Living.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of CareView and CareView Communications, Inc., a Texas corporation, our wholly owned subsidiary. All inter-company balances and transactions have been eliminated in consolidation.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Restricted Cash
During 2022,
the Company maintained $
Trade Accounts Receivable
Trade accounts receivable are customer obligations
due under normal trade terms. We provide an allowance for credit losses, which is based upon a review of outstanding receivables, historical
collection information and existing economic conditions. Trade accounts receivable past due more than 90 days are considered delinquent.
Delinquent receivables are written off based on individual credit evaluations, results of collection efforts, and specific circumstances
of the customer. Recoveries of accounts previously written off are recorded as reductions of bad debt expense when received. At December
31, 2023 and 2022, an allowance for credit losses of $
F-7
Property and Equipment
Property and equipment is stated at cost, net
of accumulated depreciation. Maintenance costs, which do not significantly extend the useful lives of the respective assets, and repair
costs are charged to operating expense as incurred. We include network equipment in fixed assets upon receipt and begin depreciating such
equipment when it passes our incoming inspection and is available for use. We attribute no salvage value to the network equipment and
depreciation is computed using the straight-line method based on the estimated useful life of
Inventories
Inventory is valued at the lower of cost, determined on a first-in, first-out (FIFO), or net realizable value. Inventory items are analyzed to determine cost and net realizable value, and appropriate valuation adjustments are then established. See Note 6 for more details.
Allowance for System Removal
On occasion, the Company will remove subscription
equipment from its larger customer premises due to contract expiration/non-renewal. When the equipment is removed, the costs for removal
are calculated and recorded against the allowance. At December 31, 2023 and 2022, an allowance of $
Impairment of Long-Lived Assets
Carrying values of property and equipment and finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying values may not be recoverable. Such events or circumstances include, but are not limited to:
| ● | significant declines in an asset’s market price; |
| ● | significant deterioration in an asset’s physical condition; |
| ● | significant changes in the nature or extent of an asset’s use or operation; |
| ● | significant adverse changes in the business climate that could impact an asset’s value, including adverse actions or assessments by regulators; |
| ● | accumulation of costs significantly in excess of original expectations related to the acquisition or construction of an asset; |
| ● | current-period operating, or cash flow losses combined with a history of such losses, or a forecast that demonstrates continuing losses associated with an asset’s use; and |
| ● | expectations that it is more likely than not that an asset will be sold or otherwise disposed of significantly before the end of our previously estimated useful life. |
If impairment indicators are present, we determine
whether an impairment loss should be recognized by testing the applicable asset or asset groups’ carrying value for recoverability.
This test requires long-lived assets to be grouped at the lowest level for which identifiable cash flows are largely independent of the
cash flows of other assets and liabilities, the determination of which requires judgment. We estimate the undiscounted future cash flows
expected to be generated from the use and eventual disposal of the assets and compare that estimate to the respective carrying values
in order to determine if such carrying values are recoverable. This assessment requires the exercise of judgment in assessing the future
use of and projected value to be derived from the eventual disposal of the assets to be held and used. Assessments also consider changes
in asset utilization, including the temporary idling of capacity and the expected timing for placing this capacity back into production.
If the carrying value of the asset is not recoverable, then a loss is recorded for the difference between the assets’ fair value
and respective carrying value. The fair value of the asset is determined using an “income approach” based upon a forecast
of all the expected discounted future net cash flows associated with the subject assets. Some of the more significant estimates and assumptions
include market size and growth, market share, projected selling prices, manufacturing cost and discount rate. Our estimates are based
upon our past experience, our commercial relationships, market conditions and available external information about future trends. We believe
our current assumptions and estimates are reasonable and appropriate; however, unanticipated events and changes in market conditions could
affect such estimates resulting in the need for an impairment charge in future periods. For the year ended December 31, 2023, $
F-8
Research and Development
Research and development costs are expensed as incurred. Costs regarding the development of software to be sold, leased or otherwise marketed are subject to capitalization beginning when a product’s technological feasibility has been established and ending when a product is available for general release to customers. We did not capitalize any such costs during the years ended December 31, 2023, and 2022.
Intellectual Property
We capitalize certain costs of developing software
upon the establishment of technological feasibility and prior to the availability of the product for general release to customers for
our CareView Patient Safety System in accordance with GAAP. Capitalized costs are reported at the lower of unamortized cost or net realizable
value and are amortized over the estimated useful life of the CareView Patient Safety System not to exceed
Patents and Trademarks
We amortize our intangible assets with a finite
life on a straight-line basis, over
Fair Value of Financial Instruments
Our financial instruments consist primarily of receivables, accounts payable, accrued expenses and short and long-term debt. The carrying amount of receivables, accounts payable and accrued expenses approximate our fair value because of the short-term maturity of such instruments, and they are considered Level 1 assets under the fair value hierarchy. We have elected not to carry our debt instruments at fair value. The carrying amount of our debt approximates fair value. Interest rates that are currently available to us for issuance of short- and long-term debt with similar terms. Remaining maturities are used to estimate the fair value of our short- and long-term debt and would be considered Level 3 inputs under the fair value hierarchy.
We have categorized our assets and liabilities that are valued at fair value on a recurring basis into a three-level fair value hierarchy in accordance with GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and lowest priority to unobservable inputs (Level 3).
Assets and liabilities recorded in the consolidated balance sheets at fair value are categorized based on a hierarchy of inputs, as follows:
Level 1 -- Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 -- Quoted prices for similar assets or liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.
F-9
Level 3 -- Unobservable inputs for the asset or liability.
At December 31, 2023, and 2022, we had no financial assets and liabilities reported at fair value.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the related temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized when the rate change is enacted. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized. In accordance with GAAP, we recognize the effect of uncertain income tax positions only if the positions are more likely than not of being sustained in an audit, based on the technical merits of the position. Recognized uncertain income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which those changes in judgement occur. We recognize both interest and penalties related to uncertain tax positions as part of the income tax provision.
Revenue Recognition
We recognize revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606 (“ASC 606”). For our subscription service contracts, 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.
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. 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.
We enter into contracts with customers that may provide multiple combinations of our products, software solutions, and other related services, which are generally capable of being distinct and accounted for as separate performance obligations. Performance obligations that are not distinct at contract inception are combined.
Customer contract fulfillment typically involves multiple procurement promises, which may include various equipment, software subscription, project-related installation and training services, and support. We allocate the transaction price to each performance obligation based on estimated relative standalone selling price. Revenue is then recognized for each performance obligation upon transferring control of the hardware, software, and services to the customer and in an amount that reflects the consideration we expect to receive and the estimated benefit the customer receives over the term of the contract.
Generally, we recognize revenue under each of our performance obligations as follows:
| ● | Subscription services – We recognize subscription revenues monthly over the contracted license period. |
F-10
| ● | Equipment packages – We recognize equipment revenues when control of the devices has been transferred to the client (“point in time”). |
| ● | Software bundle and related services related to sales-based contracts – We recognize our software subscription, installation, training, and other services on a straight-line basis over the estimated contracted license period (“over time”). |
The Company earns sales-based contract revenue from services rendered under specific agreements, which hinge on a third-party reseller who possesses the exclusive authority to engage directly with veteran-owned hospitals. Evaluating the Company's role in these contracts necessitates assessing whether it functions as the principal or agent, a determination that involves analyzing the extent of control the Company wields over the contracts.
Following its assessment, the Company reports revenue from services provided under such contracts on a gross basis. This decision is justified by the Company's primary responsibility to fulfill the contractual obligations, including delivery and installation of equipment and software, training, and its control over other services within the contract period. Furthermore, the Company directly sets the contract price with its customers based on the services outlined in the statement of work. As the Company is responsible for fulling this promise and maintains control, the Company is acting as the principal.
Disaggregation of Revenue
The following presents gross revenues disaggregated by our business models:
| For the years ended | ||||||||
| December 31, | ||||||||
| Sales-based contract revenue | 2023 | 2022 | ||||||
| Equipment package (point in time) | $ | $ | ||||||
| Software bundle (over time) | ||||||||
| Total sales-based contract revenue | ||||||||
| Subscription-based license revenue | ||||||||
| Gross revenue | $ | $ | ||||||
Contract Liabilities
Our subscription-based contracts payment arrangements are required to be paid monthly which are recognized into revenue when received. Some customers choose to pay their subscription fee in advance. Customer payments received in advance of satisfaction of the related performance obligations are deferred as contract liabilities. These amounts are recorded as “deferred revenue” in our condensed consolidated balance sheet and recognized into revenues over time.
Our sales-based contract payment arrangements with our customers typically include an initial equipment payment due upon signing of the contract and subsequent payments when certain performance obligations are completed. Customer payments received in advance of satisfaction of related performance obligations are deferred as contract liabilities. These amounts are recorded as “deferred revenue” in our condensed consolidated balance sheet and recognized into revenues as either a point in time or over time.
During the years ended December 31, 2023, and
2022, a total of $
F-11
| For the years ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Balance, beginning of period | $ | $ | ||||||
| Additions | ||||||||
| Transfer to revenue | ( | ( | ||||||
| Balance, end of period | $ | $ | ||||||
During the years ended December 31, 2023, and 2022, a total of $
| For the years ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Balance, beginning of period | $ | $ | ||||||
| Additions | ||||||||
| Transfer to revenue | ( | ) | ( | ) | ||||
| Balance, end of period | $ | $ | ||||||
As of December 31, 2023, the aggregate amount
of deferred revenue from subscription-based contracts and sales-based contracts allocated to performance obligations that are unsatisfied
or partially satisfied is approximately $
| Years Ending December 31, | Amount | |||
| 2024 | $ | |||
| 2025 | ||||
| Thereafter | — | |||
| $ | ||||
Based on our contracts, except for initial equipment sales, we invoice customers once our performance obligations have been satisfied, at which point payment is unconditional. Accounts receivable is recorded when the right to consideration becomes unconditional and are reported accordingly our consolidated financial statements.
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 years ended December 31, 2023, and 2022, included in other assets in the accompanying consolidated balance sheet.
| For the years ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Balance, beginning of period | $ | $ | ||||||
| Additions | ||||||||
| Transfer to expense | ( | ( | ||||||
| Balance, end of period | $ | $ | ||||||
F-12
Significant Judgements When Applying Topic 606
Contracts with our customers are typically structured similarly and include various combinations of our products, software solutions, and related services. Determining whether the various contract promises are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.
Contract transaction price is allocated to distinct performance obligations using estimated standalone selling price. We determine standalone selling price maximizing observable inputs such as standalone sales, competitor standalone sales, or substantive renewal prices charged to customers when they exist. In instances where standalone selling price is not observable, we utilize an estimate of standalone selling price. Such estimates are derived from various methods that include cost plus margin, and historical pricing practices. Judgment may be required to determine standalone selling prices for each performance obligation and whether it depicts the amount we expect to receive in exchange for the related good or service.
Contract modifications occur when we and our customers agree to modify existing customer contracts to change the scope or price (or both) of the contract or when a customer terminates some, or all, of the existing services provided by us. When a contract modification occurs, it requires us to exercise judgment to determine if the modification should be accounted for as a separate contract, the termination of the original contract and creation of a new contract, a cumulative catch-up adjustment to the original contract, or a combination.
Contracts with our customers include a limited warranty on our products covering materials, workmanship, or design for the duration of the contract. We do not offer paid additional extended or lifetime warranty packages. We determined the limited warranty in our contract is not a distinct performance obligation. We do not believe our estimates of warranty costs to be significant to our determination of revenue recognition and, therefore, did not reserve for warranty costs.
Leases
The Company has an
operating lease primarily consisting of office space with a remaining lease term of
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 common shares 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 to purchase our Common Stock (the “Warrants”) and convertible debt. Potential common shares totaling approximately, and at December 31, 2023, and 2022, respectively, have been excluded from the diluted earnings per share calculation as they are anti-dilutive due to our reported net loss. The potential common shares consist of stock options and warrants.
We recognize compensation expense for all share-based payments granted and amended based on the grant date fair value estimated in accordance with GAAP. Compensation expense is generally recognized on a straight-line basis over the employee’s requisite service period based on the award’s estimated lives for fixed awards with ratable vesting provisions.
F-13
Debt Discount Costs
Costs incurred with parties who are providing long-term financing, with Warrants issued with the underlying debt, are reflected as a debt discount based on the relative fair value of the debt and Warrants. These discounts are generally amortized over the life of the related debt, using the effective interest rate method or other methods approximating the effective interest method. Additionally, convertible debt issued with a beneficial conversion feature is recorded at a discount based on the difference in the effective conversion price and the fair value of the Company’s stock on the date of issuance, if any. Outstanding debt is presented net of any such discounts on the accompanying consolidated financial statements.
Deferred Debt Issuance and Debt Financing Costs
Costs incurred through the issuance of Warrants to parties who are providing long-term financing availability, which includes revolving credit lines, are reflected as deferred debt issuance based on the fair value of the Warrants issued. Costs incurred with third parties related to issuance of debt are recorded as deferred financing costs. These costs are generally amortized over the life of the financing instrument using the effective interest rate method or other methods approximating the effective interest method. Amounts associated with our senior secured convertible notes are netted with the outstanding debt on the accompanying consolidated financial statements while amount associated with credit facilities are presented in other assets on the accompanying consolidated statements of operations.
Shipping and Handling Costs
We expense all shipping and handling costs as incurred. These costs are included in network operations on the accompanying consolidated statements of operations.
Advertising Costs
We consider advertising costs as costs associated
with the promotion of our products through the various media outlets and trade shows. We expense all advertising costs as incurred. Our
advertising expense for the years ended December 31, 2023, and 2022, totaled approximately $
Concentration of Credit Risks and Customer Data
In 2023, our revenue was driven significantly
by two customers, accounting for
Use of Estimates
Our financial statements have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent assets and liabilities. We evaluate our estimates, including those related to contingencies, on an ongoing basis. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Recently Issued and Newly Adopted Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40), (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The ASU 2020-06 amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently evaluating the impact of adopting this standard.
F-14
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments — Credit Losses (Topic 326) (“ASU 2016-13”). ASU 2016-13 modifies the measurement of expected credit losses of certain financial instruments, requiring entities to estimate an expected lifetime credit loss on financial assets. The ASU amends the impairment model to utilize an expected loss methodology and replaces the incurred loss methodology for financial instruments including trade receivables. The amendment requires entities to consider other factors, such as historical loss experience, current conditions and reasonable and supportable forecasts. In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, which deferred the effective date of the new guidance by one year to fiscal years beginning after December 15, 2022, with early adoption permitted. In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments – Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures, which eliminate the accounting guidance for TDRs by creditors in Subtopic 310-40. Rather than applying the recognition and measurement guidance for TDRs, an entity must apply the loan refinancing and restructuring guidance in paragraphs 310-20-35-9 through 35-11 to determine whether a modification results in a new loan or a continuation of an existing loan. The effective date for this amendment is upon adoption of ASU 2016-13 and should be applied prospectively, with option of a modified retrospective transition method. The Company has successfully implemented Accounting Standard 2016-13, Topic 326, and after careful consideration, management has concluded that the adoption did not result in a material impact on the financial position, results of operations, or cash flows of the Company. The Company will continue to monitor and assess the impact of this standard in subsequent reporting periods and provide any necessary updates as required by accounting regulations.
NOTE 3 – GOING CONCERN, LIQUIDITY AND MANAGMENTS PLANS
Accounting standards require management to evaluate our ability to continue as a going concern for a period of one year after the date of the filing of this Form 10-K (“evaluation period”). In evaluating the Company’s ability to continue as a going concern, Management considers the conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months after the Company issues its financial statements. For the year ended December 31, 2023, Management considers the Company’s current financial condition and liquidity sources, including current funds available, forecasted future cash flows, and the Company’s conditional and unconditional obligations due within 12 months of the date these financial statements are issued.
The Company is subject to risks like those of healthcare technology companies whereby revenues are generated based on both sales-based and subscription-based models, which assume dependence on key individuals, uncertainty of product development, generation of revenues, positive cash flow, dependence on outside sources of capital, risks associated with research, development, and successful testing of its products, successful protection of intellectual property, ability to maintain and grow its customer base, and susceptibility to infringement on the proprietary rights of others. The attainment of profitable operations is dependent on future events, including obtaining adequate financing to fulfill the Company’s growth and operating activities and generating a level of revenues adequate to support the Company’s cost structure.
As of the year ended December 31, 2023, the Company
had a working capital deficit of $
F-15
On March 30, 2023, noteholders owning Replacement
Notes in an aggregate of $
Upon this conversion, and as of March 31, 2023, the Company’s officers and board of directors held the majority of the Company’s outstanding voting stock. With controlling interest of the majority of outstanding shares, the Company’s majority shareholders voted to amend its articles of incorporation to increase the authorized shares available for issuance from to , with an effective date of May 22, 2023.
On May 24, 2023, noteholders owning Replacement
Notes in the aggregate of $
Management continues to monitor the immediate and future cash flows needs of the company in a variety of ways which include forecasted net cash flows from operations, capital expenditure control, new inventory orders, debt modifications, increases sales outreach, streamlining and controlling general and administrative costs, competitive industry pricing, sale of equities, debt conversions, new product or services offerings, and new business partnerships.
The Company’s net losses, cash outflows, and working capital deficit raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business. A successful transition to attaining profitable operations is dependent upon achieving a level of positive cash flows adequate to support the Company’s cost structure.
NOTE 4 – STOCKHOLDERS’ EQUITY
Preferred Stock
At December 31, 2023, and 2022, we had shares of Preferred Stock, par value $ authorized, and shares outstanding, which can be designated by our Board of Directors.
Common Stock
At December 31, 2023 and 2022, we had
and authorized shares of Common Stock, $ par value, respectively. and shares of Common Stock
are issued and outstanding, respectively. On May 24, 2023, HealthCor noteholders owning an aggregate of $
F-16
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. 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 and is calculated by using the average daily historical stock prices through the day preceding the grant date. Estimated volatility is a measure of the amount by which our stock price is expected to fluctuate each year during the expected life of the award. Our estimated volatility is an average of the historical volatility of our stock prices (and that of peer entities whose stock prices were publicly available) over a period equal to the expected life of the awards.
Active Warrant Holders
A summary of our Warrants activity and related information follows:
| Number of Shares Under Warrant | Range of Warrant Price Per Share | Weighted | Weighted Average Remaining Contractual Life | |||||||||||||
| Balance at December 31, 2021 | $-$ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Expired | ( | ) | ||||||||||||||
| Canceled | ( | ) | — | |||||||||||||
| Balance at December 31, 2022 | $-$ | $ | ||||||||||||||
| Granted | — | — | — | |||||||||||||
| Expired | — | — | — | |||||||||||||
| Canceled | — | — | — | |||||||||||||
| Ending Balance at December 31, 2023 | $-$ | $ | ||||||||||||||
Warrant Activity During 2022 (see Note 14)
In
March 2022, we issued, -year Warrants (with a fair value of $
In
March 2022, we issued -year Warrants (with a fair value of $
In December 2022, the Existing Investors agreed to the cancellation by the Company and the forfeiting of their respective rights in and to the 2011 Warrants, 2014 Supplemental Warrants, Fifth Amendment Supplemental Warrants, Sixth Amendment Supplemental Warrants, Eighth Amendment Supplemental Warrants, 2021 Warrants and 2022 Warrants (collectively, the “Warrants”)
Stock Options
The Company’s Stock Incentive Plans include the CareView Communications, Inc.’s 2007 Stock Incentive Plan (“2007 Plan”), 2009 Stock Incentive Plan (the “2009 Plan”), 2015 Stock Option Plan (the “2015 Plan”), 2016 Stock Option Plan (the “2016 Plan”), and 2020 Stock Option Plan ( the “2020 Plan”) pursuant to which , , , and shares of Common Stock were reserved for issuance upon the exercise of options, respectively. The Stock Incentive Plans are designed to serve as an incentive for retaining our qualified and competent key employees, officers and directors, and certain consultants and advisors. The Stock Options vest over and have an exercise period of from the date of issuance.
F-17
At December 31, 2023, Plan Options to purchase shares of our Common Stock have been issued with remaining outstanding under the 2007 Plan, Plan Options to purchase shares have been issued with remaining outstanding under the 2009 Plan, Plan Options to purchase shares have been issued with remaining outstanding under the 2015 Plan, Plan Options to purchase shares have been issued with remaining outstanding under the 2016 Plan, and Plan Options to purchase shares have been issued with remaining outstanding under the 2020 Plan.
The valuation methodology used to determine the fair value Plan Options (the “Option(s)”) issued was the Black- Scholes Model. The Black-Scholes Model requires the use of a number of assumptions including volatility of the stock price, the weighted average risk-free interest rate, and the weighted average expected term of the options.
| Number of Shares Under Option | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life | Aggregate Intrinsic Value | |||||||||||||
| Balance at December 31, 2022 | $ | $ | ||||||||||||||
| Granted | — | |||||||||||||||
| Expired | ( | ) | — | — | ||||||||||||
| Canceled | ( | ) | — | — | ||||||||||||
| Balance at December 31, 2023 | $ | $ | ||||||||||||||
| Vested and Exercisable at December 31, 2023 | $ | $ | ||||||||||||||
Share-based compensation expense for Options charged to our operating results for the twelve months ended December 31, 2023, and 2022 were $ and , respectively. The estimate of forfeitures is 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 December 31, 2023, total unrecognized estimated compensation expense related to non-vested Options granted was $, which is expected to be recognized over a weighted- average period of years. No tax benefit was realized due to a continued pattern of operating losses.
NOTE 5 – INCOME TAXES
In assessing the realizability of deferred tax
asset, including the net operating loss carryforwards (NOLs), the Company assesses the available positive and negative evidence to estimate
if sufficient future taxable income will be generated to utilize its existing deferred assets. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the period when those temporary differences become deductible.
Based on its assessment, the Company has provided a full valuation allowance against its net deferred tax assets as their future utilization
remains uncertain at this time. During the years ended December 31, 2023 and 2022, the deferred tax valuation allowance increased / (decreased)
by $
F-18
At December 31, 2023, we had approximately $
The Company applies the FASB's provisions for uncertain tax positions. The Company utilizes the two-step process to determine the amount of recognized tax benefit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company recognizes interest and penalties associated with uncertain tax positions as a component of income tax expense.
As of December 31, 2023, management does not believe the Company has any material uncertain tax positions that would require it to measure and reflect the potential lack of sustainability of a position on audit in its financial statements. The Company will continue to evaluate its uncertain tax positions in future periods to determine if measurement and recognition in its financial statements is necessary. The Company does not believe there will be any material changes in its unrecognized tax positions over the next year.
The provision for income taxes consists of the following:
| 2023 | 2022 | |||||||
| Current: | ||||||||
| Federal | $ | $ | ||||||
| State income tax, net of federal benefit | ||||||||
| Sub-total: | ||||||||
| Deferred: | ||||||||
| Federal | ||||||||
| State income tax, net of federal benefit | ||||||||
| Sub-total: | ||||||||
| Total | $ | $ | ||||||
| Years Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Expected income tax benefit at statutory rate | $ | ( | ) | $ | ( | ) | ||
| Debt discount amortization | ||||||||
| Permanently disallowed interest | ||||||||
| Non-taxable debt forgiveness income | ( | ) | ||||||
| Deferred tax adjustments | ( | ) | ||||||
| State income tax, net of federal benefit | ( | ) | ||||||
| Other reconciling items | ||||||||
| Change in valuation account | ( | ) | ||||||
| Income tax expense (benefit) | $ | $ | ||||||
F-19
The components of the deferred tax assets and liabilities are as follows:
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Deferred Tax Assets (Liabilities): | ||||||||
| Tax benefit of net operating loss carry-forward | $ | $ | ||||||
| Accrued interest | ||||||||
| Stock based compensation | ||||||||
| Intangible assets | ( | ) | ||||||
| Fixed assets | ||||||||
| Accrued liabilities | ||||||||
| Capitalized research expenses | ||||||||
| Research and development credit carry-forward | ||||||||
| Total deferred tax assets | ||||||||
| Valuation allowance for deferred tax assets | ( | ( | ||||||
| Deferred tax assets, net of valuation allowance | $ | $ | ||||||
NOTE 6 – INVENTORY
Inventory is valued at the lower of cost, determined on a first-in, first-out (FIFO), or net realizable value. Inventory items are analyzed to determine cost and net realizable value and appropriate valuation adjustments are then established.
Inventory consists of the following:
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Equipment/components | $ | $ | ||||||
| TOTAL INVENTORY | $ | $ | ||||||
NOTE 7 – OTHER CURRENT ASSETS
Other current assets consist of the following:
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Prepaid insurance | $ | $ | ||||||
| Other prepaid expenses | ||||||||
| Sales tax overpayment | ||||||||
| TOTAL OTHER CURRENT ASSETS | $ | $ | ||||||
F-20
NOTE 8 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Network equipment | $ | $ | ||||||
| Office equipment | ||||||||
| Vehicles | ||||||||
| Test equipment | ||||||||
| Furniture | ||||||||
| Warehouse equipment | ||||||||
| Leasehold improvements | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| TOTAL PROPERTY AND EQUIPMENT | $ | $ | ||||||
Depreciation expense for the years ended December
31, 2023, and 2022, was $
NOTE 9 – OTHER ASSETS
Intangible assets consist of the following:
| December 31, 2023 | ||||||||||||
| Cost | Accumulated Amortization | Net | ||||||||||
| Patents and trademarks | $ | $ | $ | |||||||||
| Other intangible assets | ||||||||||||
| TOTAL INTANGIBLE ASSETS | $ | $ | $ | |||||||||
| December 31, 2022 | ||||||||||||
| Cost | Accumulated Amortization | Net | ||||||||||
| Patents and trademarks | $ | $ | $ | |||||||||
| Other intangible assets | ||||||||||||
| TOTAL INTANGIBLE ASSETS | $ | $ | $ | |||||||||
Amortization expense for the years ended December
31, 2023, and 2022, was $
Other assets consist of the following:
| December 31, 2023 | ||||||||||||
| Cost | Accumulated Amortization | Net | ||||||||||
| Deferred installation costs | $ | $ | $ | |||||||||
| Deferred Sales Commissions | ||||||||||||
| Prepaid license fee | ||||||||||||
| Security deposit | ||||||||||||
| TOTAL OTHER ASSETS | $ | $ | $ | |||||||||
F-21
| December 31, 2022 | ||||||||||||
| Cost | Accumulated Amortization | Net | ||||||||||
| Deferred installation costs | $ | $ | $ | |||||||||
| Deferred Sales Commissions | ||||||||||||
| Prepaid license fee | ||||||||||||
| Security deposit | ||||||||||||
| TOTAL OTHER ASSETS | $ | $ | $ | |||||||||
NOTE 10 – OTHER CURRENT LIABILITIES
Other current liabilities consist of the following:
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Allowance for system removal | ||||||||
| Accrued paid time off | ||||||||
| Deferred officer compensation(1) | ||||||||
| Other accrued liabilities | ||||||||
| TOTAL OTHER CURRENT LIABILITIES | $ | |||||||
| (1) |
NOTE 11– COMMITMENTS AND CONTINGENCIES
Debt Maturity
As of December 31, 2023, future debt payments due are as follows:
| Years Ending December 31, | Total | Loan Payable | ||||||||
| 2024 | Related Party | $ | $ | |||||||
| Other | ||||||||||
| Total | $ | $ | ||||||||
Accrued interest due
related parties totaled $
Consent and Agreement to Cancel and Exchange Existing Notes and Warrants
On December 30, 2022,
CareView Communications, Inc. (“CareView” or the “Company”) entered into a consent and agreement to cancel and
exchange existing notes and issue replacement notes and cancel warrants (the “Cancellation Agreement”) with certain holders
(the “Investors”) of senior secured convertible promissory notes (“Notes”) and warrants (“Warrants”)
to purchase the Company’s common stock, that were issued pursuant to that certain Note and Warrant Purchase Agreement, dated as
of April 21, 2011 (as amended, modified, or supplemented from time to time) (the “Purchase Agreement”). The Cancellation
Agreement provided for the cancellation of all outstanding Notes (with a total aggregate outstanding amount of approximately $
F-22
On March 30, 2023, HealthCor noteholders owning an aggregate of $
On May 24, 2023, HealthCor noteholders owning an aggregate of $
NOTE 12– LEASE
Operating Lease
The Company has an operating lease primarily consisting
of office space with a remaining lease of
On March 4, 2020, we entered into the Fourth Amendment
to Commercial Lease Agreement (the “Lease Extension”), wherein we extended the Lease through
The Company has reassessed the discount rate at
the remeasurement date, at
Lease Position
Operating lease asset and liability for our operating lease were recorded in the consolidated balance sheet as follows:
| December 31, 2023 | ||||
| Assets | ||||
| Operating lease asset | $ | |||
| Total lease asset | $ | |||
| Liabilities | ||||
| Current liabilities: | ||||
| Operating lease liability | $ | |||
| Long-term liabilities: | ||||
| Operating lease liability, net of current portion | $ | |||
| Total lease liability | $ | |||
F-23
Undiscounted Cash Flows
Future lease payments included in the measurement of operating lease liability on the consolidated balance sheet as of December 31, 2023, for the following five fiscal years and thereafter as follows:
| Year ending December 31, | Operating Leases | |||
| 2024 | ||||
| 2025 | ||||
| Total minimum lease payments | ||||
| Less effects of discounting | ( | ) | ||
| Present value of future minimum lease payments | $ | |||
Cash Flows
The table below presents certain information related to the cash flows for the Company’s operating lease for twelve months ending December 31, 2023:
| Twelve Months Ended December 31, 2023 | ||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||
| Operating cash flows for operating leases | $ | |||
NOTE 13– 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 $
On June 23, 2022, the Company, the Borrower, the Subsidiary Guarantor, the Lender and the Tranche Three Lenders entered into a Twenty-Sixth Amendment to Modification Agreement (the “Twenty-Sixth Modification Agreement Amendment”), pursuant to which the parties agreed to amend the 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 June 30, 2022 (with each such date permitted to be extended by the Lender in its sole discretion); and that the Borrower’s (i) interest payments that would otherwise be due under the Credit Agreement on December 31, 2018, March 31, 2019, June 30, 2019, September 30, 2019, December 31, 2019, March 31, 2020, June 30, 2020, September 30, 2020, October 7, 2020 and June 30, 2022 and (ii) payments for principal and for any other Obligations then outstanding under the Tranche One Loan and the Tranche Three Loans that would otherwise be due under the Credit Agreement on June 30, 2022, would each be deferred until December 31, 2022 (the end of the extended Modification) and that such deferrals would be a covered event. The Company has evaluated the Twenty-Sixth Modification Agreement Amendment and as the effective borrowing rate under the restructured agreement is less than the effective borrowing rate on the old agreement, a concession is deemed to have been granted under ASC 470-60-55-10. As a concession has been granted, the agreement is to be accounted for as a troubled debt restructuring by debtors (TDR) under ASC 470-60.
On December 30, 2022, the Company, the Borrower, the Subsidiary Guarantor, the Lender and the Tranche Three Lenders entered into a Twenty-Seventh Amendment to Modification Agreement (the “Twenty-Seventh Modification Agreement Amendment”), pursuant to which the parties agreed to amend the 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 February 28, 2023 (with each such date permitted to be extended by the Lender in its sole discretion); and that the Borrower’s (i) interest payments that would otherwise be due under the Credit Agreement on December 31, 2018, March 31, 2019, June 30, 2019, September 30, 2019, December 31, 2019, March 31, 2020, June 30, 2020, September 30, 2020 and October 7, 2020 and (ii) payments for principal and for any other Obligations then outstanding under the Tranche One Loan and the Tranche Three Loans that would otherwise be due under the Credit Agreement on October 7, 2020, would each be deferred until February 28, 2023 (the end of the extended Modification Period) and that such deferrals would be a covered event. The Company has evaluated the Twenty-seventh Modification Agreement Amendment and as the effective borrowing rate under the restructured agreement is less than the effective borrowing rate on the old agreement, a concession is deemed to have been granted under ASC 470-60-55-10. As a concession has been granted, the agreement is to be accounted for as a troubled debt restructuring by debtors (TDR) under ASC 470-60.
F-24
On February 28, 2023, the Company, the Borrower, the Subsidiary Guarantor, the Lender and the Tranche Three Lenders entered into a Twenty-Eighth Amendment to Modification Agreement (the “Twenty-Eighth Modification Agreement Amendment”), pursuant to which the parties agreed to amend the 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 March 31, 2023 (with each such date permitted to be extended by the Lender in its sole discretion); and that the Borrower’s (i) interest payments that would otherwise be due under the Credit Agreement on December 31, 2018, March 31, 2019, June 30, 2019, September 30, 2019, December 31, 2019, March 31, 2020, June 30, 2020, September 30, 2020 and October 7, 2020 and (ii) payments for principal and for any other Obligations then outstanding under the Tranche One Loan and the Tranche Three Loans that would otherwise be due under the Credit Agreement on October 7, 2020, would each be deferred until March 30, 2023 (the end of the extended Modification Period).
On March 31, 2023, the
Company, the Borrower, the Subsidiary Guarantor, the Lender and the Tranche Three Lenders entered into a Twenty-Ninth Amendment to Modification
Agreement (the “Twenty-Ninth Modification Agreement Amendment”), pursuant to which the parties agreed to amend the 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 April 30, 2023 (with each such date permitted to be extended by the Lender in its sole discretion);
and that the Borrower’s (i) interest payments that would otherwise be due under the Credit Agreement on December 31, 2018, March
31, 2019, June 30, 2019, September 30, 2019, December 31, 2019, March 31, 2020, June 30, 2020, September 30, 2020 and October 7, 2020
and (ii) payments for principal and for any other Obligations then outstanding under the Tranche One Loan and the Tranche Three Loans
that would otherwise be due under the Credit Agreement on October 7, 2020, would each be deferred until April 30, 2023 (the end of the
extended Modification Period). Under debt modification/troubled debt guidance, we determined that the first of the eight amendments had
no cash flow impact, and therefore, had no impact on accounting. Amendments nine through ten qualified for modification accounting, while
the final nineteen amendments qualified for troubled debt restructuring accounting. As appropriate, we expensed the legal costs paid to
third parties. For the three months ended March 31, 2023 and 2022, pursuant to the terms of the PDL Modification Agreement, as amended, $
On April 29, 2023, the Company, the Borrower, the Subsidiary Guarantor, the Lender and the Tranche Three Lenders entered into a Thirtieth Amendment to Modification Agreement (the “Thirtieth Modification Agreement Amendment”), pursuant to which the parties agreed to amend the 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 May 31, 2023 (with each such date permitted to be extended by the Lender in its sole discretion); and that the Borrower’s (i) interest payments that would otherwise be due under the Credit Agreement on December 31, 2018, March 31, 2019, June 30, 2019, September 30, 2019, December 31, 2019, March 31, 2020, June 30, 2020, September 30, 2020 and October 7, 2020 and (ii) payments for principal and for any other Obligations then outstanding under the Tranche One Loan and the Tranche Three Loans that would otherwise be due under the Credit Agreement on October 7, 2020, would each be deferred until May 31, 2023 (the end of the extended Modification Period).
On May 31, 2023 (the
“Effective Date”), the Company, the Borrower, the Lender, Steven G. Johnson, President and Chief Executive Officer of the
Company, and Dr. James R. Higgins, a director of the Company, entered into a Seventh Amendment to Credit Agreement (the “Seventh
Credit Agreement Amendment”), pursuant to which the parties agreed to amend the Credit Agreement to, among other things, (i) provide
that, after the Effective Date, all accrued but unpaid interest (including interest accrued but unpaid prior to the Effective Date and
excluding interest payable on the Maturity Date, in connection with any prepayment, or in the event of an Event of Default, which interest
will be payable in cash) accruing on Tranche One Loans and Tranche Three Loans will be paid-in-kind on each Interest Payment Date by being
added to the aggregate principal balance of the respective loans in arrears on each Interest Payment Date; (ii) require certain mandatory
prepayments of the loans by the Company, including (A) quarterly prepayments in the amount, if any, that the Company’s Excess Cash
Flow exceeds $
F-25
On September 30, 2023 (the “Effective Date”), the Company, the Borrower, the Lender, Steven G. Johnson, President and Chief Executive Officer of the Company, and Dr. James R. Higgins, a director of the Company, entered into an Eighth Amendment to Credit Agreement (the “Eighth Credit Agreement Amendment”), pursuant to which the parties agreed to amend the Credit Agreement to modify certain texts originating within the Seventh Credit Agreement. Stricken texts include “all accrued but unpaid interest (including interest accrued but unpaid prior to the Effective Date and excluding interest payable on the Maturity Date, in connection with any prepayment, or in the event of an Event of Default, which interest will be payable in cash) accruing on Tranche One Loans and Tranche Three Loans will be paid-in-kind on each Interest Payment Date by being added to the aggregate principal balance of the respective loans in arrears on each Interest Payment Date.” Additional texts include Release of Claims, which “in consideration of the Lender’s and Agent’s agreements contained in this Amendment, each of Holdings, the Borrower and the Subsidiary Guarantor hereby releases and discharges the Lender and the Agent and their affiliates, subsidiaries, successors, assigns, directors, officers, employees, agents, consultants and attorneys (each, a “Released Person”) of and from any and all other claims, suits, actions, investigations, proceedings or demands, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute or common law of any kind or character, known or unknown, which Holdings, the Borrower or the Subsidiary Guarantor ever had or now has against the Agent, any Lender or any other Released Person which relates, directly or indirectly, to any acts or omissions of the Agent, any Lender or any other Released Person relating to the Credit Agreement or any other Loan Document on or prior to the date hereof.”
Accounting Treatment
In connection with the PDL Credit Agreement, as amended, we issued the PDL Warrant to the Lender. As of December 31, 2023, the Amended PDL Warrant has not been exercised.
Due to the PDL Eighth Credit Agreement Amendment, the calculations for the “interest paid-in-kind” and quarterly “prepayment(s)” were removed effective with the year ending on December 31, 2023. The Company concluded that the Company is encountering financial hardship and that a concession was not granted. As the Lender has not granted a concession, the guidance contained in ASC 470-50 Modification and Extinguishment was applied. Given the present value of the cash flows under the Eighth Credit Agreement Amendment differed by less than 10% from the present value of the remaining cash flows under the terms of the prior debt agreement, the debt was determined to be not substantially different which resulted in modification accounting. The Company did not have any debt issuance costs, only legal expenses.
NOTE 14 – AGREEMENT WITH HEALTHCOR
On April 21, 2011, we entered into a Note and
Warrant Purchase Agreement (as subsequently amended) with HealthCor Partners Fund, LP (“HealthCor Partners”) and HealthCor
Hybrid Offshore Master Fund, LP (“HealthCor Hybrid” and, together with HealthCor Partners, “HealthCor”) (the “HealthCor
Purchase Agreement”). Pursuant to the terms of the HealthCor Purchase Agreement, we sold and issued Senior Secured Convertible Notes
to HealthCor in the principal amount of $
F-26
On March 8, 2022, we agreed with the HealthCor
Parties to (i) amend the 2011 HealthCor Notes to extend the maturity date of the 2011 HealthCor Notes from
Also on March 8, 2022, in connection with the 2022 HealthCor Note Extensions and the issuance of the 2022 HealthCor Warrants, we entered into a Consent and Agreement Pursuant to Note and Warrant Purchase Agreement (the “NWPA Consent”) with the HealthCor Parties and certain additional Existing Investors (in their capacity as Majority Holders acting together with the HealthCor Parties), pursuant to which, among other things, (i) the Majority Holders consented to the 2022 HealthCor Note Extensions, (ii) the Majority Holders consented to the issuance of the 2022 HealthCor Warrants and (iii) the parties agreed that the holders of the 2022 HealthCor Warrants would have registration rights for the shares of Common Stock issuable upon exercise of the 2022 HealthCor Warrants under the Registration Rights Agreement dated as of April 20, 2011, as amended June 30, 2015, by and among the Company, the HealthCor Parties and the additional investors party thereto (the “Registration Rights Agreement”).
Also on March 8, 2022, the Company issued to the HealthCor Parties the 2022 HealthCor Warrants to purchase an aggregate of shares of Common Stock at an exercise price of $ per share and with an expiration date of March 8, 2032.
On July 1, 2022, we entered into amendments to
the 2014 HealthCor Notes, 2015 Supplemental Notes, Eighth Amendment Supplemental Closing Notes, Tenth Amendment Supplemental Closing Notes,
Twelfth Amendment Supplemental Closing Note and Thirteenth Amendment Supplemental Closing Note (collectively, the “2022 Allonges”)
to suspend the accrual of interest on the 2014 HealthCor Notes as to
F-27
Also on December 30, 2022, the Existing Investors
agree to the cancellation by the Company and the forfeiting of their respective rights in and to the 2011 Warrants, 2014 Supplemental
Warrants, Fifth Amendment Supplemental Warrants, Sixth Amendment Supplemental Warrants, Eighth Amendment Supplemental Warrants, 2021 Warrants
and 2022 Warrants (collectively, the “Warrants”); and the Existing Investors have agreed to waive any and all interest that
has accrued, but remains unpaid on the Existing Notes held by the Existing Investors; in exchange for releasing its second senior secured
position they hold in connection with the 2011 Notes and 2012 Notes. The Existing Investors have agreed to waive all interest that has
accrued but remains unpaid on the Existing Notes held by the Existing Investors with the 2014 Notes along with the 2015 Notes, 2018 Notes,
2019 Note and 2020 Note. In exchange for releasing its second senior secured position they hold in connection with the 2011 Notes and
2012 Notes, the HealthCor Parties will receive an additional $
On March 30, 2023,
HealthCor noteholders owning an aggregate of $
On May 24, 2023, HealthCor noteholders owning
an aggregate of $
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 $
Warrants were issued with
the Fourth, Fifth, Eighth, Ninth, and Allonge 3 Amendment Notes and 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. At each
amendment date, the warrants were recorded as debt discount, as a reduction of the net carrying amount of the debt. The debt discounts
are amortized into interest expense each period under the effective interest method. The value allocated to the Ninth Amendment Warrants
was $
F-28
NOTE 15 – JOINT VENTURE AGREEMENT
On December 31, 2019,
the Company and Rockwell entered into a Second Amendment to the Rockwell Note (the “Second Rockwell Note Amendment”)
pursuant to which Rockwell agreed to extend the term of the Rockwell Note by one year, to December 31, 2020, and agreed to extend
the time to make the quarterly payment that would otherwise be due on
As of March 31, 2022, the Rockwell Note was paid off.
NOTE 16 – SUBSEQUENT EVENTS
March 5, 2024, the board of directors approved stock option grants to sixteen individuals for merit. These stock options are awarded under the newly approved 2024 Stock Options Plan as well as the remainder of the 2015, 2016 and 2020 Stock Options Plans. The stock price on Tuesday, March 5, 2024 was $.
F-29
CareView Communications, Inc. 10-K
EXHIBIT 21.00
Subsidiaries of the registrant
| ● | CareView Communications, Inc., a Texas corporation ("CareView-TX"), a wholly owned subsidiary. |
CareView Communications, Inc. 10-K
Exhibit 31.1
CERTIFICATION PURSUANT TO
EXCHANGE ACT RULES 13a-14(a) AND
15d-14(a),
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Steven G. Johnson, certifies that:
| (1) | I have reviewed this Annual Report on Form 10-K of CareView Communications, Inc. |
| (2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| (3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| (4) | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| (5) | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
March 29, 2024
/s/ Steven G. Johnson
Steven G. Johnson
Chief Executive Officer
Principal Executive Officer
1
CareView Communications, Inc. 10-K
Exhibit 31.2
CERTIFICATION PURSUANT TO
EXCHANGE ACT RULES 13a-14(a) AND
15d-14(a),
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Jason T. Thompson, certifies that:
| (1) | I have reviewed this Annual report on Form 10-K of CareView Communications, Inc. |
| (2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| (3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| (4) | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| (5) | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
March 29, 2024
/s/ Jason T. Thompson
Jason T. Thompson
Principal Financial Officer
Chief Accounting Officer
2
CareView Communications, Inc. 10-K
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of CareView Communications, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission (the “Report”), I, Steven G. Johnson, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
March 29, 2024
/s/ Steven G. Johnson
Steven G. Johnson
Chief Executive Officer
A signed original of this certification has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
3
CareView Communications, Inc. 10-K
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of CareView Communications, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission (the “Report”), I, Jason T. Thompson, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
March 29, 2024
/s/ Jason T. Thompson
Jason T. Thompson
Principal Financial Officer
A signed original of this certification has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
4
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares |
Dec. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| 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 | 800,000,000 | 500,000,000 |
| Common stock, issued | 583,880,748 | 141,880,748 |
| Common stock, outstanding | 583,880,748 | 141,880,748 |
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT (Parenthetical) - $ / shares |
Dec. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Statement of Stockholders' Equity [Abstract] | ||
| Debt to equity conversion (in dollars per share) | $ 0.10 | $ 0.10 |
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION |
12 Months Ended |
|---|---|
Dec. 31, 2023 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION | NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
CareView Communications, Inc., a Nevada corporation (“CareView”, the “Company”, “we”, “us” or “our”), was originally formed in California on July 8, 1997 under the name Purpose, Inc., changing our name to Ecogate, Inc. in April 1999, and CareView Communications, Inc. in October 2007. We began our current operation in 2003 as a healthcare information technology company with a patented patient monitoring and entertainment system.
Our business consists of a single segment of products and services all of which are sold and provided within the United States.
Description of Business and Products
CareView’s video monitoring solutions include the following:
SitterView® and TeleMedView allow hospital staff to use CareView’s video cameras to observe and communicate with patients remotely. TeleMedView leverages the CareView Mobile Controller’s built-in monitor and can work with the CareView Portable Controller as well.
Our CareView Patient Safety System® suite of video monitoring, guest services, and related applications connect patients, families and healthcare providers. CareView's video monitoring system connects the patient room to a touchscreen monitor at the nursing station or a mobile handheld device allowing the nursing staff to maintain a level of visual contact with each patient. We also provide a suite of services including on-demand movies, Internet access via the patient's television, and video visits with family and friends.
CareView ConnectTM Quality of Life System (“CareView Connect”) consists of an emergency assist button, motion sensors, sleep sensor, and event sensor. Resident activity levels, medication administration, sleep patterns, and requests for assistance can be monitored depending on which options are selected. CareView's suite of products are designed for the long-term care market, including Nursing Care, Home Care, Assisted Living and Independent Living.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of CareView and CareView Communications, Inc., a Texas corporation, our wholly owned subsidiary. All inter-company balances and transactions have been eliminated in consolidation. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Restricted Cash
During 2022, the Company maintained $100,000 in cash collateral with Comerica Bank related to its credit card limit. As of December 31, 2023, the funds in that account are no longer restricted. We maintain cash at financial institutions that at times may exceed federally insured limits. As of December 31, 2023, our balance with Bank of Texas is approximately $794,000 above the $250,000 limit.
Trade Accounts Receivable
Trade accounts receivable are customer obligations due under normal trade terms. We provide an allowance for credit losses, which is based upon a review of outstanding receivables, historical collection information and existing economic conditions. Trade accounts receivable past due more than 90 days are considered delinquent. Delinquent receivables are written off based on individual credit evaluations, results of collection efforts, and specific circumstances of the customer. Recoveries of accounts previously written off are recorded as reductions of bad debt expense when received. At December 31, 2023 and 2022, an allowance for credit losses of $0 and $0, respectively, was recorded.
Property and Equipment
Property and equipment is stated at cost, net of accumulated depreciation. Maintenance costs, which do not significantly extend the useful lives of the respective assets, and repair costs are charged to operating expense as incurred. We include network equipment in fixed assets upon receipt and begin depreciating such equipment when it passes our incoming inspection and is available for use. We attribute no salvage value to the network equipment and depreciation is computed using the straight-line method based on the estimated useful life of seven years. Depreciation of office and test equipment, warehouse equipment and furniture is computed using the straight-line method based on the estimated useful lives of the assets, generally three years for office and test equipment, and five years for warehouse equipment and furniture.
Inventories
Inventory is valued at the lower of cost, determined on a first-in, first-out (FIFO), or net realizable value. Inventory items are analyzed to determine cost and net realizable value, and appropriate valuation adjustments are then established. See Note 6 for more details.
Allowance for System Removal
On occasion, the Company will remove subscription equipment from its larger customer premises due to contract expiration/non-renewal. When the equipment is removed, the costs for removal are calculated and recorded against the allowance. At December 31, 2023 and 2022, an allowance of $54,802 and $54,802, respectively, was recorded in other current liabilities in the accompanying consolidated financial statements.
Impairment of Long-Lived Assets
Carrying values of property and equipment and finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying values may not be recoverable. Such events or circumstances include, but are not limited to:
If impairment indicators are present, we determine whether an impairment loss should be recognized by testing the applicable asset or asset groups’ carrying value for recoverability. This test requires long-lived assets to be grouped at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities, the determination of which requires judgment. We estimate the undiscounted future cash flows expected to be generated from the use and eventual disposal of the assets and compare that estimate to the respective carrying values in order to determine if such carrying values are recoverable. This assessment requires the exercise of judgment in assessing the future use of and projected value to be derived from the eventual disposal of the assets to be held and used. Assessments also consider changes in asset utilization, including the temporary idling of capacity and the expected timing for placing this capacity back into production. If the carrying value of the asset is not recoverable, then a loss is recorded for the difference between the assets’ fair value and respective carrying value. The fair value of the asset is determined using an “income approach” based upon a forecast of all the expected discounted future net cash flows associated with the subject assets. Some of the more significant estimates and assumptions include market size and growth, market share, projected selling prices, manufacturing cost and discount rate. Our estimates are based upon our past experience, our commercial relationships, market conditions and available external information about future trends. We believe our current assumptions and estimates are reasonable and appropriate; however, unanticipated events and changes in market conditions could affect such estimates resulting in the need for an impairment charge in future periods. For the year ended December 31, 2023, $334,359 of intangible patent assets were written off.
Research and Development
Research and development costs are expensed as incurred. Costs regarding the development of software to be sold, leased or otherwise marketed are subject to capitalization beginning when a product’s technological feasibility has been established and ending when a product is available for general release to customers. We did not capitalize any such costs during the years ended December 31, 2023, and 2022.
Intellectual Property
We capitalize certain costs of developing software upon the establishment of technological feasibility and prior to the availability of the product for general release to customers for our CareView Patient Safety System in accordance with GAAP. Capitalized costs are reported at the lower of unamortized cost or net realizable value and are amortized over the estimated useful life of the CareView Patient Safety System not to exceed five years. Additionally, we test our intangible assets for impairment whenever circumstances indicate that their carrying value may not be recoverable. No impairment was recorded during the years ended December 31, 2023, and 2022.
Patents and Trademarks
We amortize our intangible assets with a finite life on a straight-line basis, over 10 years for trademarks and 20 years for patents. We begin amortization of these costs on the date patents or trademarks are awarded.
Fair Value of Financial Instruments
Our financial instruments consist primarily of receivables, accounts payable, accrued expenses and short and long-term debt. The carrying amount of receivables, accounts payable and accrued expenses approximate our fair value because of the short-term maturity of such instruments, and they are considered Level 1 assets under the fair value hierarchy. We have elected not to carry our debt instruments at fair value. The carrying amount of our debt approximates fair value. Interest rates that are currently available to us for issuance of short- and long-term debt with similar terms. Remaining maturities are used to estimate the fair value of our short- and long-term debt and would be considered Level 3 inputs under the fair value hierarchy.
We have categorized our assets and liabilities that are valued at fair value on a recurring basis into a three-level fair value hierarchy in accordance with GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and lowest priority to unobservable inputs (Level 3).
Assets and liabilities recorded in the consolidated balance sheets at fair value are categorized based on a hierarchy of inputs, as follows:
Level 1 -- Unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 -- Quoted prices for similar assets or liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 -- Unobservable inputs for the asset or liability.
At December 31, 2023, and 2022, we had no financial assets and liabilities reported at fair value.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the related temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized when the rate change is enacted. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized. In accordance with GAAP, we recognize the effect of uncertain income tax positions only if the positions are more likely than not of being sustained in an audit, based on the technical merits of the position. Recognized uncertain income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which those changes in judgement occur. We recognize both interest and penalties related to uncertain tax positions as part of the income tax provision.
Revenue Recognition
We recognize revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606 (“ASC 606”). For our subscription service contracts, 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.
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. 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.
We enter into contracts with customers that may provide multiple combinations of our products, software solutions, and other related services, which are generally capable of being distinct and accounted for as separate performance obligations. Performance obligations that are not distinct at contract inception are combined.
Customer contract fulfillment typically involves multiple procurement promises, which may include various equipment, software subscription, project-related installation and training services, and support. We allocate the transaction price to each performance obligation based on estimated relative standalone selling price. Revenue is then recognized for each performance obligation upon transferring control of the hardware, software, and services to the customer and in an amount that reflects the consideration we expect to receive and the estimated benefit the customer receives over the term of the contract.
Generally, we recognize revenue under each of our performance obligations as follows:
The Company earns sales-based contract revenue from services rendered under specific agreements, which hinge on a third-party reseller who possesses the exclusive authority to engage directly with veteran-owned hospitals. Evaluating the Company's role in these contracts necessitates assessing whether it functions as the principal or agent, a determination that involves analyzing the extent of control the Company wields over the contracts.
Following its assessment, the Company reports revenue from services provided under such contracts on a gross basis. This decision is justified by the Company's primary responsibility to fulfill the contractual obligations, including delivery and installation of equipment and software, training, and its control over other services within the contract period. Furthermore, the Company directly sets the contract price with its customers based on the services outlined in the statement of work. As the Company is responsible for fulling this promise and maintains control, the Company is acting as the principal.
Disaggregation of Revenue
The following presents gross revenues disaggregated by our business models:
Contract Liabilities
Our subscription-based contracts payment arrangements are required to be paid monthly which are recognized into revenue when received. Some customers choose to pay their subscription fee in advance. Customer payments received in advance of satisfaction of the related performance obligations are deferred as contract liabilities. These amounts are recorded as “deferred revenue” in our condensed consolidated balance sheet and recognized into revenues over time.
Our sales-based contract payment arrangements with our customers typically include an initial equipment payment due upon signing of the contract and subsequent payments when certain performance obligations are completed. Customer payments received in advance of satisfaction of related performance obligations are deferred as contract liabilities. These amounts are recorded as “deferred revenue” in our condensed consolidated balance sheet and recognized into revenues as either a point in time or over time.
During the years ended December 31, 2023, and 2022, a total of $21,145 and $240,302, respectively, of subscription-based deferred contract liability was recognized as revenue. The table below details the subscription-based contract liability activity during the years ended December 31, 2023, and 2022, included in the Other current liabilities.
During the years ended December 31, 2023, and 2022, a total of $1,894,777 and $1,838,056, respectively, of sales-based deferred contract liability was recognized as revenue. The table below details the sales-based contract liability activity during the years ended December 31, 2023 and 2022, included in the Other current liabilities.
As of December 31, 2023, the aggregate amount of deferred revenue from subscription-based contracts and sales-based contracts allocated to performance obligations that are unsatisfied or partially satisfied is approximately $1,922,925 and will be recognized into revenue over time as follows:
Based on our contracts, except for initial equipment sales, we invoice customers once our performance obligations have been satisfied, at which point payment is unconditional. Accounts receivable is recorded when the right to consideration becomes unconditional and are reported accordingly our consolidated financial statements.
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 years ended December 31, 2023, and 2022, included in other assets in the accompanying consolidated balance sheet.
Significant Judgements When Applying Topic 606 Contracts with our customers are typically structured similarly and include various combinations of our products, software solutions, and related services. Determining whether the various contract promises are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.
Contract transaction price is allocated to distinct performance obligations using estimated standalone selling price. We determine standalone selling price maximizing observable inputs such as standalone sales, competitor standalone sales, or substantive renewal prices charged to customers when they exist. In instances where standalone selling price is not observable, we utilize an estimate of standalone selling price. Such estimates are derived from various methods that include cost plus margin, and historical pricing practices. Judgment may be required to determine standalone selling prices for each performance obligation and whether it depicts the amount we expect to receive in exchange for the related good or service.
Contract modifications occur when we and our customers agree to modify existing customer contracts to change the scope or price (or both) of the contract or when a customer terminates some, or all, of the existing services provided by us. When a contract modification occurs, it requires us to exercise judgment to determine if the modification should be accounted for as a separate contract, the termination of the original contract and creation of a new contract, a cumulative catch-up adjustment to the original contract, or a combination.
Contracts with our customers include a limited warranty on our products covering materials, workmanship, or design for the duration of the contract. We do not offer paid additional extended or lifetime warranty packages. We determined the limited warranty in our contract is not a distinct performance obligation. We do not believe our estimates of warranty costs to be significant to our determination of revenue recognition and, therefore, did not reserve for warranty costs.
Leases
The Company has an operating lease primarily consisting of office space with a remaining lease term of 20 months. At the lease commencement date, an operating lease liability and related operating lease asset are recognized. The operating lease liabilities are calculated using the present value of lease payments. The discount rate used is either the rate implicit in the lease, when known, or our estimated incremental borrowing rate. Operating lease assets are valued based on the initial operating lease liabilities plus any prepaid rent and direct costs from executing the leases.
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 common shares 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 to purchase our Common Stock (the “Warrants”) and convertible debt. Potential common shares totaling approximately, and at December 31, 2023, and 2022, respectively, have been excluded from the diluted earnings per share calculation as they are anti-dilutive due to our reported net loss. The potential common shares consist of stock options and warrants.
We recognize compensation expense for all share-based payments granted and amended based on the grant date fair value estimated in accordance with GAAP. Compensation expense is generally recognized on a straight-line basis over the employee’s requisite service period based on the award’s estimated lives for fixed awards with ratable vesting provisions.
Debt Discount Costs
Costs incurred with parties who are providing long-term financing, with Warrants issued with the underlying debt, are reflected as a debt discount based on the relative fair value of the debt and Warrants. These discounts are generally amortized over the life of the related debt, using the effective interest rate method or other methods approximating the effective interest method. Additionally, convertible debt issued with a beneficial conversion feature is recorded at a discount based on the difference in the effective conversion price and the fair value of the Company’s stock on the date of issuance, if any. Outstanding debt is presented net of any such discounts on the accompanying consolidated financial statements.
Deferred Debt Issuance and Debt Financing Costs
Costs incurred through the issuance of Warrants to parties who are providing long-term financing availability, which includes revolving credit lines, are reflected as deferred debt issuance based on the fair value of the Warrants issued. Costs incurred with third parties related to issuance of debt are recorded as deferred financing costs. These costs are generally amortized over the life of the financing instrument using the effective interest rate method or other methods approximating the effective interest method. Amounts associated with our senior secured convertible notes are netted with the outstanding debt on the accompanying consolidated financial statements while amount associated with credit facilities are presented in other assets on the accompanying consolidated statements of operations.
Shipping and Handling Costs
We expense all shipping and handling costs as incurred. These costs are included in network operations on the accompanying consolidated statements of operations.
Advertising Costs
We consider advertising costs as costs associated with the promotion of our products through the various media outlets and trade shows. We expense all advertising costs as incurred. Our advertising expense for the years ended December 31, 2023, and 2022, totaled approximately $335,000 and $111,000, respectively.
Concentration of Credit Risks and Customer Data
In 2023, our revenue was driven significantly by two customers, accounting for 17% and 13% respectively, while in 2022, a single customer contributed 12% to our revenue. As of December 31, 2023, we had one customer that accounted for 21% of our accounts receivable.
Use of Estimates
Our financial statements have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent assets and liabilities. We evaluate our estimates, including those related to contingencies, on an ongoing basis. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Recently Issued and Newly Adopted Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40), (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The ASU 2020-06 amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently evaluating the impact of adopting this standard.
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments — Credit Losses (Topic 326) (“ASU 2016-13”). ASU 2016-13 modifies the measurement of expected credit losses of certain financial instruments, requiring entities to estimate an expected lifetime credit loss on financial assets. The ASU amends the impairment model to utilize an expected loss methodology and replaces the incurred loss methodology for financial instruments including trade receivables. The amendment requires entities to consider other factors, such as historical loss experience, current conditions and reasonable and supportable forecasts. In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, which deferred the effective date of the new guidance by one year to fiscal years beginning after December 15, 2022, with early adoption permitted. In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments – Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures, which eliminate the accounting guidance for TDRs by creditors in Subtopic 310-40. Rather than applying the recognition and measurement guidance for TDRs, an entity must apply the loan refinancing and restructuring guidance in paragraphs 310-20-35-9 through 35-11 to determine whether a modification results in a new loan or a continuation of an existing loan. The effective date for this amendment is upon adoption of ASU 2016-13 and should be applied prospectively, with option of a modified retrospective transition method. The Company has successfully implemented Accounting Standard 2016-13, Topic 326, and after careful consideration, management has concluded that the adoption did not result in a material impact on the financial position, results of operations, or cash flows of the Company. The Company will continue to monitor and assess the impact of this standard in subsequent reporting periods and provide any necessary updates as required by accounting regulations.
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GOING CONCERN, LIQUIDITY AND MANAGMENTS PLANS |
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| Going Concern Liquidity And Managments Plans | |
| GOING CONCERN, LIQUIDITY AND MANAGMENTS PLANS | NOTE 3 – GOING CONCERN, LIQUIDITY AND MANAGMENTS PLANS
Accounting standards require management to evaluate our ability to continue as a going concern for a period of one year after the date of the filing of this Form 10-K (“evaluation period”). In evaluating the Company’s ability to continue as a going concern, Management considers the conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months after the Company issues its financial statements. For the year ended December 31, 2023, Management considers the Company’s current financial condition and liquidity sources, including current funds available, forecasted future cash flows, and the Company’s conditional and unconditional obligations due within 12 months of the date these financial statements are issued.
The Company is subject to risks like those of healthcare technology companies whereby revenues are generated based on both sales-based and subscription-based models, which assume dependence on key individuals, uncertainty of product development, generation of revenues, positive cash flow, dependence on outside sources of capital, risks associated with research, development, and successful testing of its products, successful protection of intellectual property, ability to maintain and grow its customer base, and susceptibility to infringement on the proprietary rights of others. The attainment of profitable operations is dependent on future events, including obtaining adequate financing to fulfill the Company’s growth and operating activities and generating a level of revenues adequate to support the Company’s cost structure.
As of the year ended December 31, 2023, the Company had a working capital deficit of $37,122,344. Management has evaluated the significance of the conditions described above in relation to the Company’s ability to meet its obligations and concluded that, without additional funding, the Company will not have sufficient funds to meet its obligations within one year from the date the consolidated financial statements were issued. While management will look to continue funding operations by increased sales volumes and raising additional capital from sources such as sales of its debt or equity securities or loans to meet operating cash requirements, there is no assurance that management’s plans will be successful.
On March 30, 2023, noteholders owning Replacement Notes in an aggregate of $26,200,000, entered into a Replacement Note Conversion Agreement, wherein the Replacement Notes were converted into shares of the Company’s common stock at a conversion price of $ per share, resulting in the issuance of an aggregate of shares (the “Conversion Shares”). The Conversion Shares bear a lockup legend that expires December 31, 2023.
Upon this conversion, and as of March 31, 2023, the Company’s officers and board of directors held the majority of the Company’s outstanding voting stock. With controlling interest of the majority of outstanding shares, the Company’s majority shareholders voted to amend its articles of incorporation to increase the authorized shares available for issuance from to , with an effective date of May 22, 2023.
On May 24, 2023, noteholders owning Replacement Notes in the aggregate of $18,000,000, presented Conversion Notices, per the terms of the Replacement Notes, to the Company to convert the Replacement Notes into shares of the Company’s common stock at a conversion price of $per share. The shares bear a lock-up legend that expires December 31, 2023.
Management continues to monitor the immediate and future cash flows needs of the company in a variety of ways which include forecasted net cash flows from operations, capital expenditure control, new inventory orders, debt modifications, increases sales outreach, streamlining and controlling general and administrative costs, competitive industry pricing, sale of equities, debt conversions, new product or services offerings, and new business partnerships.
The Company’s net losses, cash outflows, and working capital deficit raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business. A successful transition to attaining profitable operations is dependent upon achieving a level of positive cash flows adequate to support the Company’s cost structure. |
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| STOCKHOLDERS’ EQUITY | NOTE 4 – STOCKHOLDERS’ EQUITY
Preferred Stock
At December 31, 2023, and 2022, we had shares of Preferred Stock, par value $ authorized, and shares outstanding, which can be designated by our Board of Directors.
Common Stock
At December 31, 2023 and 2022, we had and authorized shares of Common Stock, $ par value, respectively. and shares of Common Stock are issued and outstanding, respectively. On May 24, 2023, HealthCor noteholders owning an aggregate of $18,000,000 Replacement Notes, presented Conversion Notices, pursuant to the terms of the Replacement Note, for the conversion of the Replacement Notes into shares of the Company’s common stock at a conversion price of $ per share. The shares bear a lockup legend that expires December 31, 2023. On March 30, 2023, HealthCor noteholders owning an aggregate of $36,000,000 Replacement Notes, entered into a Replacement Note Conversion Agreement, wherein half, fifty percent, of the HealthCor Replacement Notes were converted into shares of the Company’s common stock at a conversion price of $ per share, resulting in the issuance of an aggregate of shares. The other related and non-related parties Replacement Notes of $8,200,000 were likewise converted into shares of the Company’s common stock at a conversion price of $ per share, resulting in the issuance of a combined total aggregate of shares (the “Conversion Shares”). The shares bear a lockup legend that expired December 31, 2023. On November 14, 2022, the Company entered into a Common Stock purchase agreement with five of the Company’s Board of Directors. The Company sold and issued, for $250,000 in cash, shares of Common Stock at $ per share.
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. 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 and is calculated by using the average daily historical stock prices through the day preceding the grant date. Estimated volatility is a measure of the amount by which our stock price is expected to fluctuate each year during the expected life of the award. Our estimated volatility is an average of the historical volatility of our stock prices (and that of peer entities whose stock prices were publicly available) over a period equal to the expected life of the awards.
Active Warrant Holders
A summary of our Warrants activity and related information follows:
Warrant Activity During 2022 (see Note 14)
In March 2022, we issued, -year Warrants (with a fair value of $125,766) at an exercise price of $ per share to HealthCor Partners Fund, LP.
In March 2022, we issued -year Warrants (with a fair value of $144,234) at an exercise price of $ per share to HealthCor Hybrid Offshore Master Fund, LP.
In December 2022, the Existing Investors agreed to the cancellation by the Company and the forfeiting of their respective rights in and to the 2011 Warrants, 2014 Supplemental Warrants, Fifth Amendment Supplemental Warrants, Sixth Amendment Supplemental Warrants, Eighth Amendment Supplemental Warrants, 2021 Warrants and 2022 Warrants (collectively, the “Warrants”)
Stock Options
The Company’s Stock Incentive Plans include the CareView Communications, Inc.’s 2007 Stock Incentive Plan (“2007 Plan”), 2009 Stock Incentive Plan (the “2009 Plan”), 2015 Stock Option Plan (the “2015 Plan”), 2016 Stock Option Plan (the “2016 Plan”), and 2020 Stock Option Plan ( the “2020 Plan”) pursuant to which , , , and shares of Common Stock were reserved for issuance upon the exercise of options, respectively. The Stock Incentive Plans are designed to serve as an incentive for retaining our qualified and competent key employees, officers and directors, and certain consultants and advisors. The Stock Options vest over and have an exercise period of from the date of issuance.
At December 31, 2023, Plan Options to purchase shares of our Common Stock have been issued with remaining outstanding under the 2007 Plan, Plan Options to purchase shares have been issued with remaining outstanding under the 2009 Plan, Plan Options to purchase shares have been issued with remaining outstanding under the 2015 Plan, Plan Options to purchase shares have been issued with remaining outstanding under the 2016 Plan, and Plan Options to purchase shares have been issued with remaining outstanding under the 2020 Plan.
The valuation methodology used to determine the fair value Plan Options (the “Option(s)”) issued was the Black- Scholes Model. The Black-Scholes Model requires the use of a number of assumptions including volatility of the stock price, the weighted average risk-free interest rate, and the weighted average expected term of the options.
Share-based compensation expense for Options charged to our operating results for the twelve months ended December 31, 2023, and 2022 were $ and , respectively. The estimate of forfeitures is 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 December 31, 2023, total unrecognized estimated compensation expense related to non-vested Options granted was $, which is expected to be recognized over a weighted- average period of years. No tax benefit was realized due to a continued pattern of operating losses. |
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INCOME TAXES |
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| Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| INCOME TAXES | NOTE 5 – INCOME TAXES
In assessing the realizability of deferred tax asset, including the net operating loss carryforwards (NOLs), the Company assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize its existing deferred assets. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period when those temporary differences become deductible. Based on its assessment, the Company has provided a full valuation allowance against its net deferred tax assets as their future utilization remains uncertain at this time. During the years ended December 31, 2023 and 2022, the deferred tax valuation allowance increased / (decreased) by $24,114,281 and $(7,601,775), respectively. The increase in the valuation allowance during 2023 was mainly attributable to increases in the Company’s state NOL and other deferred tax assets. The decrease in the valuation allowance during 2022 was mainly attributable to write-downs of gross deferred tax assets.
At December 31, 2023, we had approximately $86,291,000 of U.S. federal net operating tax loss carryforward, some of which begins to expire in . In accordance with Section 382 of the Internal Revenue code, the usage of the Company's Federal Carryforwards could be limited in the event of a change in ownership. As of December 31, 2023, the Company has not completed an analysis as to whether or not an ownership change has occurred. We are currently subject to the general three-year statute of limitations for federal tax. Under this general rule, the earliest period subject to potential audit is 2020. For years in which the Company may utilize its net operating losses, the IRS has the ability to examine the tax year that generated those losses and propose adjustments up to the amount of losses utilized.
The Company applies the FASB's provisions for uncertain tax positions. The Company utilizes the two-step process to determine the amount of recognized tax benefit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company recognizes interest and penalties associated with uncertain tax positions as a component of income tax expense.
As of December 31, 2023, management does not believe the Company has any material uncertain tax positions that would require it to measure and reflect the potential lack of sustainability of a position on audit in its financial statements. The Company will continue to evaluate its uncertain tax positions in future periods to determine if measurement and recognition in its financial statements is necessary. The Company does not believe there will be any material changes in its unrecognized tax positions over the next year.
The provision for income taxes consists of the following:
The components of the deferred tax assets and liabilities are as follows:
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INVENTORY |
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| Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| INVENTORY | NOTE 6 – INVENTORY
Inventory is valued at the lower of cost, determined on a first-in, first-out (FIFO), or net realizable value. Inventory items are analyzed to determine cost and net realizable value and appropriate valuation adjustments are then established.
Inventory consists of the following:
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OTHER CURRENT ASSETS |
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| Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OTHER CURRENT ASSETS | NOTE 7 – OTHER CURRENT ASSETS
Other current assets consist of the following:
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PROPERTY AND EQUIPMENT |
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| Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PROPERTY AND EQUIPMENT | NOTE 8 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
Depreciation expense for the years ended December 31, 2023, and 2022, was $334,676 and $501,521, respectively. |
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OTHER ASSETS |
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| Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OTHER ASSETS | NOTE 9 – OTHER ASSETS
Intangible assets consist of the following:
Amortization expense for the years ended December 31, 2023, and 2022, was $79,447 and $51,967, respectively. Patent impairment costs for the years ended December 31, 2023, and 2022, was $334,358 and $0, respectively.
Other assets consist of the following:
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OTHER CURRENT LIABILITIES |
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| Payables and Accruals [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OTHER CURRENT LIABILITIES | NOTE 10 – OTHER CURRENT LIABILITIES
Other current liabilities consist of the following:
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COMMITMENTS AND CONTINGENCIES |
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| Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| COMMITMENTS AND CONTINGENCIES | NOTE 11– COMMITMENTS AND CONTINGENCIES
Debt Maturity
As of December 31, 2023, future debt payments due are as follows:
Accrued interest due related parties totaled $445,528 and $337,028, as of December 31, 2023 and 2022, respectively.
Consent and Agreement to Cancel and Exchange Existing Notes and Warrants
On December 30, 2022, CareView Communications, Inc. (“CareView” or the “Company”) entered into a consent and agreement to cancel and exchange existing notes and issue replacement notes and cancel warrants (the “Cancellation Agreement”) with certain holders (the “Investors”) of senior secured convertible promissory notes (“Notes”) and warrants (“Warrants”) to purchase the Company’s common stock, that were issued pursuant to that certain Note and Warrant Purchase Agreement, dated as of April 21, 2011 (as amended, modified, or supplemented from time to time) (the “Purchase Agreement”). The Cancellation Agreement provided for the cancellation of all outstanding Notes (with a total aggregate outstanding amount of approximately $87,376,000) and Warrants (for the purchase of an aggregate of approximately 14,204,000 shares of common stock) issued pursuant to the Purchase Agreement in exchange for the issuance of replacement senior secured convertible promissory notes (the “Replacement Notes”) with an aggregate principal amount of $44,200,000.
On March 30, 2023, HealthCor noteholders owning an aggregate of $36,000,000 Replacement Notes, entered into a Replacement Note Conversion Agreement, wherein half, fifty percent, of the HealthCor Replacement Notes were converted into shares of the Company’s common stock at a conversion price of $ per share, resulting in the issuance of an aggregate of shares. The other related ($6,394,168) and non-related () parties Replacement Notes of $8,200,000 were likewise converted into shares of the Company’s common stock at a conversion price of $ per share, resulting in the issuance of a combined total aggregate of shares (the “Conversion Shares”). The shares bear a lockup legend that expires December 31, 2023.
On May 24, 2023, HealthCor noteholders owning an aggregate of $18,000,000 Replacement Notes, presented Conversion Notices, pursuant to the terms of the Replacement Note, for the conversion of the Replacement Notes into shares of the Company’s common stock at a conversion price of $ per share. The shares bear a lockup legend that expires December 31, 2023. |
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LEASE |
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| LEASE | NOTE 12– LEASE
Operating Lease
The Company has an operating lease primarily consisting of office space with a remaining lease of 20 months.
On March 4, 2020, we entered into the Fourth Amendment to Commercial Lease Agreement (the “Lease Extension”), wherein we extended the Lease through August 31, 2025. The Lease Extension contains a renewal provision under which the Lease has been extended for an additional -year period under the same terms and conditions of the original Lease Agreement. Management has identified this extension as a reassessment event, as we have elected to exercise the Lease Extension option even though the Company had previously determined that it was not reasonably certain to do so.
The Company has reassessed the discount rate at the remeasurement date, at 14.8% and the Company has remeasured its ROU asset and lease liability on our balance sheet using the discount rate that applies as of the date of the reassessment event to remeasure its Operating lease asset and lease liability. The reassessment is based on the remaining lease term and lease payments. The Company has further concluded that the Lease Extension has no effects on the classification of the Lease. Rent expenses for the twelve months ended December 31, 2023, and 2022 were $295,223 and $279,005, respectively.
Lease Position
Operating lease asset and liability for our operating lease were recorded in the consolidated balance sheet as follows:
Undiscounted Cash Flows
Future lease payments included in the measurement of operating lease liability on the consolidated balance sheet as of December 31, 2023, for the following five fiscal years and thereafter as follows:
Cash Flows
The table below presents certain information related to the cash flows for the Company’s operating lease for twelve months ending December 31, 2023:
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AGREEMENT WITH PDL BIOPHARMA, INC. |
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| Agreement With Pdl Biopharma Inc. | |
| AGREEMENT WITH PDL BIOPHARMA, INC. | NOTE 13– 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.
On June 23, 2022, the Company, the Borrower, the Subsidiary Guarantor, the Lender and the Tranche Three Lenders entered into a Twenty-Sixth Amendment to Modification Agreement (the “Twenty-Sixth Modification Agreement Amendment”), pursuant to which the parties agreed to amend the 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 June 30, 2022 (with each such date permitted to be extended by the Lender in its sole discretion); and that the Borrower’s (i) interest payments that would otherwise be due under the Credit Agreement on December 31, 2018, March 31, 2019, June 30, 2019, September 30, 2019, December 31, 2019, March 31, 2020, June 30, 2020, September 30, 2020, October 7, 2020 and June 30, 2022 and (ii) payments for principal and for any other Obligations then outstanding under the Tranche One Loan and the Tranche Three Loans that would otherwise be due under the Credit Agreement on June 30, 2022, would each be deferred until December 31, 2022 (the end of the extended Modification) and that such deferrals would be a covered event. The Company has evaluated the Twenty-Sixth Modification Agreement Amendment and as the effective borrowing rate under the restructured agreement is less than the effective borrowing rate on the old agreement, a concession is deemed to have been granted under ASC 470-60-55-10. As a concession has been granted, the agreement is to be accounted for as a troubled debt restructuring by debtors (TDR) under ASC 470-60.
On December 30, 2022, the Company, the Borrower, the Subsidiary Guarantor, the Lender and the Tranche Three Lenders entered into a Twenty-Seventh Amendment to Modification Agreement (the “Twenty-Seventh Modification Agreement Amendment”), pursuant to which the parties agreed to amend the 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 February 28, 2023 (with each such date permitted to be extended by the Lender in its sole discretion); and that the Borrower’s (i) interest payments that would otherwise be due under the Credit Agreement on December 31, 2018, March 31, 2019, June 30, 2019, September 30, 2019, December 31, 2019, March 31, 2020, June 30, 2020, September 30, 2020 and October 7, 2020 and (ii) payments for principal and for any other Obligations then outstanding under the Tranche One Loan and the Tranche Three Loans that would otherwise be due under the Credit Agreement on October 7, 2020, would each be deferred until February 28, 2023 (the end of the extended Modification Period) and that such deferrals would be a covered event. The Company has evaluated the Twenty-seventh Modification Agreement Amendment and as the effective borrowing rate under the restructured agreement is less than the effective borrowing rate on the old agreement, a concession is deemed to have been granted under ASC 470-60-55-10. As a concession has been granted, the agreement is to be accounted for as a troubled debt restructuring by debtors (TDR) under ASC 470-60.
On February 28, 2023, the Company, the Borrower, the Subsidiary Guarantor, the Lender and the Tranche Three Lenders entered into a Twenty-Eighth Amendment to Modification Agreement (the “Twenty-Eighth Modification Agreement Amendment”), pursuant to which the parties agreed to amend the 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 March 31, 2023 (with each such date permitted to be extended by the Lender in its sole discretion); and that the Borrower’s (i) interest payments that would otherwise be due under the Credit Agreement on December 31, 2018, March 31, 2019, June 30, 2019, September 30, 2019, December 31, 2019, March 31, 2020, June 30, 2020, September 30, 2020 and October 7, 2020 and (ii) payments for principal and for any other Obligations then outstanding under the Tranche One Loan and the Tranche Three Loans that would otherwise be due under the Credit Agreement on October 7, 2020, would each be deferred until March 30, 2023 (the end of the extended Modification Period).
On March 31, 2023, the Company, the Borrower, the Subsidiary Guarantor, the Lender and the Tranche Three Lenders entered into a Twenty-Ninth Amendment to Modification Agreement (the “Twenty-Ninth Modification Agreement Amendment”), pursuant to which the parties agreed to amend the 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 April 30, 2023 (with each such date permitted to be extended by the Lender in its sole discretion); and that the Borrower’s (i) interest payments that would otherwise be due under the Credit Agreement on December 31, 2018, March 31, 2019, June 30, 2019, September 30, 2019, December 31, 2019, March 31, 2020, June 30, 2020, September 30, 2020 and October 7, 2020 and (ii) payments for principal and for any other Obligations then outstanding under the Tranche One Loan and the Tranche Three Loans that would otherwise be due under the Credit Agreement on October 7, 2020, would each be deferred until April 30, 2023 (the end of the extended Modification Period). Under debt modification/troubled debt guidance, we determined that the first of the eight amendments had no cash flow impact, and therefore, had no impact on accounting. Amendments nine through ten qualified for modification accounting, while the final nineteen amendments qualified for troubled debt restructuring accounting. As appropriate, we expensed the legal costs paid to third parties. For the three months ended March 31, 2023 and 2022, pursuant to the terms of the PDL Modification Agreement, as amended, $802,125 and $775,000, respectively, was recorded as interest expense on the accompanying unaudited condensed consolidated financial statements.
On April 29, 2023, the Company, the Borrower, the Subsidiary Guarantor, the Lender and the Tranche Three Lenders entered into a Thirtieth Amendment to Modification Agreement (the “Thirtieth Modification Agreement Amendment”), pursuant to which the parties agreed to amend the 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 May 31, 2023 (with each such date permitted to be extended by the Lender in its sole discretion); and that the Borrower’s (i) interest payments that would otherwise be due under the Credit Agreement on December 31, 2018, March 31, 2019, June 30, 2019, September 30, 2019, December 31, 2019, March 31, 2020, June 30, 2020, September 30, 2020 and October 7, 2020 and (ii) payments for principal and for any other Obligations then outstanding under the Tranche One Loan and the Tranche Three Loans that would otherwise be due under the Credit Agreement on October 7, 2020, would each be deferred until May 31, 2023 (the end of the extended Modification Period).
On May 31, 2023 (the “Effective Date”), the Company, the Borrower, the Lender, Steven G. Johnson, President and Chief Executive Officer of the Company, and Dr. James R. Higgins, a director of the Company, entered into a Seventh Amendment to Credit Agreement (the “Seventh Credit Agreement Amendment”), pursuant to which the parties agreed to amend the Credit Agreement to, among other things, (i) provide that, after the Effective Date, all accrued but unpaid interest (including interest accrued but unpaid prior to the Effective Date and excluding interest payable on the Maturity Date, in connection with any prepayment, or in the event of an Event of Default, which interest will be payable in cash) accruing on Tranche One Loans and Tranche Three Loans will be paid-in-kind on each Interest Payment Date by being added to the aggregate principal balance of the respective loans in arrears on each Interest Payment Date; (ii) require certain mandatory prepayments of the loans by the Company, including (A) quarterly prepayments in the amount, if any, that the Company’s Excess Cash Flow exceeds $600,000, (B) monthly transfers to the Inventory Reserve Account in the amount, if any, the Company’s cash exceeds $1,200,000, (C) prepayment in the amount, if any, the Company’s Inventory Reserve Account exceeds $600,000, and (D) prepayment in the amount, if any, of 100% of the gross proceeds of any indebtedness incurred by the Company (other than permitted indebtedness); and (iii) extend the Maturity Date to December 31, 2024.
On September 30, 2023 (the “Effective Date”), the Company, the Borrower, the Lender, Steven G. Johnson, President and Chief Executive Officer of the Company, and Dr. James R. Higgins, a director of the Company, entered into an Eighth Amendment to Credit Agreement (the “Eighth Credit Agreement Amendment”), pursuant to which the parties agreed to amend the Credit Agreement to modify certain texts originating within the Seventh Credit Agreement. Stricken texts include “all accrued but unpaid interest (including interest accrued but unpaid prior to the Effective Date and excluding interest payable on the Maturity Date, in connection with any prepayment, or in the event of an Event of Default, which interest will be payable in cash) accruing on Tranche One Loans and Tranche Three Loans will be paid-in-kind on each Interest Payment Date by being added to the aggregate principal balance of the respective loans in arrears on each Interest Payment Date.” Additional texts include Release of Claims, which “in consideration of the Lender’s and Agent’s agreements contained in this Amendment, each of Holdings, the Borrower and the Subsidiary Guarantor hereby releases and discharges the Lender and the Agent and their affiliates, subsidiaries, successors, assigns, directors, officers, employees, agents, consultants and attorneys (each, a “Released Person”) of and from any and all other claims, suits, actions, investigations, proceedings or demands, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute or common law of any kind or character, known or unknown, which Holdings, the Borrower or the Subsidiary Guarantor ever had or now has against the Agent, any Lender or any other Released Person which relates, directly or indirectly, to any acts or omissions of the Agent, any Lender or any other Released Person relating to the Credit Agreement or any other Loan Document on or prior to the date hereof.”
Accounting Treatment
In connection with the PDL Credit Agreement, as amended, we issued the PDL Warrant to the Lender. As of December 31, 2023, the Amended PDL Warrant has not been exercised.
Due to the PDL Eighth Credit Agreement Amendment, the calculations for the “interest paid-in-kind” and quarterly “prepayment(s)” were removed effective with the year ending on December 31, 2023. The Company concluded that the Company is encountering financial hardship and that a concession was not granted. As the Lender has not granted a concession, the guidance contained in ASC 470-50 Modification and Extinguishment was applied. Given the present value of the cash flows under the Eighth Credit Agreement Amendment differed by less than 10% from the present value of the remaining cash flows under the terms of the prior debt agreement, the debt was determined to be not substantially different which resulted in modification accounting. The Company did not have any debt issuance costs, only legal expenses. |
AGREEMENT WITH HEALTHCOR |
12 Months Ended |
|---|---|
Dec. 31, 2023 | |
| Agreement With Healthcor | |
| AGREEMENT WITH HEALTHCOR | NOTE 14 – AGREEMENT WITH HEALTHCOR
On April 21, 2011, we entered into a Note and Warrant Purchase Agreement (as subsequently amended) with HealthCor Partners Fund, LP (“HealthCor Partners”) and HealthCor Hybrid Offshore Master Fund, LP (“HealthCor Hybrid” and, together with HealthCor Partners, “HealthCor”) (the “HealthCor Purchase Agreement”). Pursuant to the terms of the HealthCor Purchase Agreement, we sold and issued 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 and shares, respectively, of our Common Stock at an exercise price of $ 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 September 30, 2018 interest has been added to the outstanding principal balance. Pursuant to the terms of the Ninth Amendment, the accrual of interest has been suspended after September 30, 2018. 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. Subject to the terms of the Ninth Amendment as discussed below, HealthCor’s ability to convert any portion of the outstanding and unpaid accrued interest on and principal balances of the 2011 HealthCor Notes into fully paid and nonassessable shares of our Common Stock has been eliminated. The warrants issued with this Note were cancelled with the Ninth-Amendment dated July 10, 2018.
On March 8, 2022, we agreed with the HealthCor Parties to (i) amend the 2011 HealthCor Notes to extend the maturity date of the 2011 HealthCor Notes from April 20, 2022 to April 20, 2023 by entering into Allonge No. 4 to the 2011 HealthCor Notes (the “Fourth 2011 Note Allonges”) and (ii) amend the 2012 HealthCor Notes to extend the maturity date of the 2012 HealthCor Notes from April 20, 2022 to April 20, 2023 by entering into Allonge No. 4 to the 2012 HealthCor Notes (the “Fourth 2012 Note Allonges”) (such amendments to the 2011 HealthCor Notes and 2012 HealthCor Notes together, the “2022 HealthCor Note Extensions”). In connection with the 2022 HealthCor Note Extensions, we issued warrants to purchase an aggregate of shares of our Common Stock at an exercise price per share equal to $ per share (subject to adjustment as described therein) and with an expiration date of March 8, 2032 to the HealthCor Parties (collectively the “2022 HealthCor Warrants”).
Also on March 8, 2022, in connection with the 2022 HealthCor Note Extensions and the issuance of the 2022 HealthCor Warrants, we entered into a Consent and Agreement Pursuant to Note and Warrant Purchase Agreement (the “NWPA Consent”) with the HealthCor Parties and certain additional Existing Investors (in their capacity as Majority Holders acting together with the HealthCor Parties), pursuant to which, among other things, (i) the Majority Holders consented to the 2022 HealthCor Note Extensions, (ii) the Majority Holders consented to the issuance of the 2022 HealthCor Warrants and (iii) the parties agreed that the holders of the 2022 HealthCor Warrants would have registration rights for the shares of Common Stock issuable upon exercise of the 2022 HealthCor Warrants under the Registration Rights Agreement dated as of April 20, 2011, as amended June 30, 2015, by and among the Company, the HealthCor Parties and the additional investors party thereto (the “Registration Rights Agreement”).
Also on March 8, 2022, the Company issued to the HealthCor Parties the 2022 HealthCor Warrants to purchase an aggregate of shares of Common Stock at an exercise price of $ per share and with an expiration date of March 8, 2032.
On July 1, 2022, we entered into amendments to the 2014 HealthCor Notes, 2015 Supplemental Notes, Eighth Amendment Supplemental Closing Notes, Tenth Amendment Supplemental Closing Notes, Twelfth Amendment Supplemental Closing Note and Thirteenth Amendment Supplemental Closing Note (collectively, the “2022 Allonges”) to suspend the accrual of interest on the 2014 HealthCor Notes as to 100% of the outstanding principal amount under such notes, 2015 Supplemental Notes as to 100% of the outstanding principal amount under such notes, Eighth Amendment Supplemental Closing Notes as to 100% of the outstanding principal amount under such notes, Tenth Amendment Supplemental Closing Notes as to 100% of the outstanding principal amount under such notes, Twelfth Amendment Supplemental Closing Note as to 100% of the outstanding principal amount under such note, and Thirteenth Amendment Supplemental Closing Note as to 100% of the outstanding principal amount under such note, for all periods beginning on and after January 1, 2022.
Also on December 30, 2022, the Existing Investors agree to the cancellation by the Company and the forfeiting of their respective rights in and to the 2011 Warrants, 2014 Supplemental Warrants, Fifth Amendment Supplemental Warrants, Sixth Amendment Supplemental Warrants, Eighth Amendment Supplemental Warrants, 2021 Warrants and 2022 Warrants (collectively, the “Warrants”); and the Existing Investors have agreed to waive any and all interest that has accrued, but remains unpaid on the Existing Notes held by the Existing Investors; in exchange for releasing its second senior secured position they hold in connection with the 2011 Notes and 2012 Notes. The Existing Investors have agreed to waive all interest that has accrued but remains unpaid on the Existing Notes held by the Existing Investors with the 2014 Notes along with the 2015 Notes, 2018 Notes, 2019 Note and 2020 Note. In exchange for releasing its second senior secured position they hold in connection with the 2011 Notes and 2012 Notes, the HealthCor Parties will receive an additional $5,000,000 in value in the Replacement Notes.
On March 30, 2023, HealthCor noteholders owning an aggregate of $36,000,000 Replacement Notes, entered into a Replacement Note Conversion Agreement, wherein half, fifty percent, of the HealthCor Replacement Notes were converted into shares of the Company’s common stock at a conversion price of $ per share, resulting in the issuance of an aggregate of shares. The other related ($6,394,168) and non-related () parties Replacement Notes of $8,200,000 were likewise converted into shares of the Company’s common stock at a conversion price of $ per share, resulting in the issuance of a combined total aggregate of shares (the “Conversion Shares”). The shares bear a lockup legend that expires December 31, 2023.
On May 24, 2023, HealthCor noteholders owning an aggregate of $18,000,000 Replacement Notes, presented Conversion Notices, pursuant to the terms of the Replacement Note, for the conversion of the Replacement Notes into shares of the Company’s common stock at a conversion price of $ per share. The shares bear a lockup legend that expires December 31, 2023.
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 $0 and $0 in interest for the years ended December 31, 2023 and 2022, respectively, related to these transactions. For the years ended December 31, 2023, and 2022, we recorded $0 and $0, respectively, of PIK related to the notes included in the HealthCor Purchase Agreement. 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. Under the accounting standards, we determined that the restructuring of the HealthCor notes, pursuant to the terms of the Ninth Amendment, resulted in a troubled debt restructuring. As the future cash flows were greater than the carrying amount of the debt at the date of the amendment, we accounted for the change prospectively using the new effective interest rate.
Warrants were issued with the Fourth, Fifth, Eighth, Ninth, and Allonge 3 Amendment Notes and 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. At each amendment date, the warrants were recorded as debt discount, as a reduction of the net carrying amount of the debt. The debt discounts are amortized into interest expense each period under the effective interest method. The value allocated to the Ninth Amendment Warrants was $378,000. The value allocated to the Allonge 3 Amendment Warrants was $420,000. |
JOINT VENTURE AGREEMENT |
12 Months Ended |
|---|---|
Dec. 31, 2023 | |
| Equity Method Investments and Joint Ventures [Abstract] | |
| JOINT VENTURE AGREEMENT | NOTE 15 – JOINT VENTURE AGREEMENT
On December 31, 2019, the Company and Rockwell entered into a Second Amendment to the Rockwell Note (the “Second Rockwell Note Amendment”) pursuant to which Rockwell agreed to extend the term of the Rockwell Note by one year, to December 31, 2020, and agreed to extend the time to make the quarterly payment that would otherwise be due on December 31, 2019 to January 31, 2020. We have evaluated the Second Amendment to the Rockwell Note under ASC 470 and determined that the amendment should be treated as a debt modification.
As of March 31, 2022, the Rockwell Note was paid off. |
SUBSEQUENT EVENTS |
12 Months Ended |
|---|---|
Dec. 31, 2023 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS | NOTE 16 – SUBSEQUENT EVENTS
March 5, 2024, the board of directors approved stock option grants to sixteen individuals for merit. These stock options are awarded under the newly approved 2024 Stock Options Plan as well as the remainder of the 2015, 2016 and 2020 Stock Options Plans. The stock price on Tuesday, March 5, 2024 was $. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash and Restricted Cash | Cash and Restricted Cash
During 2022, the Company maintained $100,000 in cash collateral with Comerica Bank related to its credit card limit. As of December 31, 2023, the funds in that account are no longer restricted. We maintain cash at financial institutions that at times may exceed federally insured limits. As of December 31, 2023, our balance with Bank of Texas is approximately $794,000 above the $250,000 limit. |
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| Trade Accounts Receivable | Trade Accounts Receivable
Trade accounts receivable are customer obligations due under normal trade terms. We provide an allowance for credit losses, which is based upon a review of outstanding receivables, historical collection information and existing economic conditions. Trade accounts receivable past due more than 90 days are considered delinquent. Delinquent receivables are written off based on individual credit evaluations, results of collection efforts, and specific circumstances of the customer. Recoveries of accounts previously written off are recorded as reductions of bad debt expense when received. At December 31, 2023 and 2022, an allowance for credit losses of $0 and $0, respectively, was recorded. |
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| Property and Equipment | Property and Equipment
Property and equipment is stated at cost, net of accumulated depreciation. Maintenance costs, which do not significantly extend the useful lives of the respective assets, and repair costs are charged to operating expense as incurred. We include network equipment in fixed assets upon receipt and begin depreciating such equipment when it passes our incoming inspection and is available for use. We attribute no salvage value to the network equipment and depreciation is computed using the straight-line method based on the estimated useful life of seven years. Depreciation of office and test equipment, warehouse equipment and furniture is computed using the straight-line method based on the estimated useful lives of the assets, generally three years for office and test equipment, and five years for warehouse equipment and furniture. |
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| Inventories | Inventories
Inventory is valued at the lower of cost, determined on a first-in, first-out (FIFO), or net realizable value. Inventory items are analyzed to determine cost and net realizable value, and appropriate valuation adjustments are then established. See Note 6 for more details. |
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| Allowance for System Removal | Allowance for System Removal
On occasion, the Company will remove subscription equipment from its larger customer premises due to contract expiration/non-renewal. When the equipment is removed, the costs for removal are calculated and recorded against the allowance. At December 31, 2023 and 2022, an allowance of $54,802 and $54,802, respectively, was recorded in other current liabilities in the accompanying consolidated financial statements. |
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| Impairment of Long-Lived Assets | Impairment of Long-Lived Assets
Carrying values of property and equipment and finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying values may not be recoverable. Such events or circumstances include, but are not limited to:
If impairment indicators are present, we determine whether an impairment loss should be recognized by testing the applicable asset or asset groups’ carrying value for recoverability. This test requires long-lived assets to be grouped at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities, the determination of which requires judgment. We estimate the undiscounted future cash flows expected to be generated from the use and eventual disposal of the assets and compare that estimate to the respective carrying values in order to determine if such carrying values are recoverable. This assessment requires the exercise of judgment in assessing the future use of and projected value to be derived from the eventual disposal of the assets to be held and used. Assessments also consider changes in asset utilization, including the temporary idling of capacity and the expected timing for placing this capacity back into production. If the carrying value of the asset is not recoverable, then a loss is recorded for the difference between the assets’ fair value and respective carrying value. The fair value of the asset is determined using an “income approach” based upon a forecast of all the expected discounted future net cash flows associated with the subject assets. Some of the more significant estimates and assumptions include market size and growth, market share, projected selling prices, manufacturing cost and discount rate. Our estimates are based upon our past experience, our commercial relationships, market conditions and available external information about future trends. We believe our current assumptions and estimates are reasonable and appropriate; however, unanticipated events and changes in market conditions could affect such estimates resulting in the need for an impairment charge in future periods. For the year ended December 31, 2023, $334,359 of intangible patent assets were written off. |
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| Research and Development | Research and Development
Research and development costs are expensed as incurred. Costs regarding the development of software to be sold, leased or otherwise marketed are subject to capitalization beginning when a product’s technological feasibility has been established and ending when a product is available for general release to customers. We did not capitalize any such costs during the years ended December 31, 2023, and 2022. |
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| Intellectual Property | Intellectual Property
We capitalize certain costs of developing software upon the establishment of technological feasibility and prior to the availability of the product for general release to customers for our CareView Patient Safety System in accordance with GAAP. Capitalized costs are reported at the lower of unamortized cost or net realizable value and are amortized over the estimated useful life of the CareView Patient Safety System not to exceed five years. Additionally, we test our intangible assets for impairment whenever circumstances indicate that their carrying value may not be recoverable. No impairment was recorded during the years ended December 31, 2023, and 2022. |
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| Patents and Trademarks | Patents and Trademarks
We amortize our intangible assets with a finite life on a straight-line basis, over 10 years for trademarks and 20 years for patents. We begin amortization of these costs on the date patents or trademarks are awarded. |
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| Fair Value of Financial Instruments | Fair Value of Financial Instruments
Our financial instruments consist primarily of receivables, accounts payable, accrued expenses and short and long-term debt. The carrying amount of receivables, accounts payable and accrued expenses approximate our fair value because of the short-term maturity of such instruments, and they are considered Level 1 assets under the fair value hierarchy. We have elected not to carry our debt instruments at fair value. The carrying amount of our debt approximates fair value. Interest rates that are currently available to us for issuance of short- and long-term debt with similar terms. Remaining maturities are used to estimate the fair value of our short- and long-term debt and would be considered Level 3 inputs under the fair value hierarchy.
We have categorized our assets and liabilities that are valued at fair value on a recurring basis into a three-level fair value hierarchy in accordance with GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and lowest priority to unobservable inputs (Level 3).
Assets and liabilities recorded in the consolidated balance sheets at fair value are categorized based on a hierarchy of inputs, as follows:
Level 1 -- Unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 -- Quoted prices for similar assets or liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 -- Unobservable inputs for the asset or liability.
At December 31, 2023, and 2022, we had no financial assets and liabilities reported at fair value. |
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| Income Taxes | Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the related temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized when the rate change is enacted. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized. In accordance with GAAP, we recognize the effect of uncertain income tax positions only if the positions are more likely than not of being sustained in an audit, based on the technical merits of the position. Recognized uncertain income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which those changes in judgement occur. We recognize both interest and penalties related to uncertain tax positions as part of the income tax provision. |
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| Revenue Recognition | Revenue Recognition
We recognize revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606 (“ASC 606”). For our subscription service contracts, 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.
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. 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.
We enter into contracts with customers that may provide multiple combinations of our products, software solutions, and other related services, which are generally capable of being distinct and accounted for as separate performance obligations. Performance obligations that are not distinct at contract inception are combined.
Customer contract fulfillment typically involves multiple procurement promises, which may include various equipment, software subscription, project-related installation and training services, and support. We allocate the transaction price to each performance obligation based on estimated relative standalone selling price. Revenue is then recognized for each performance obligation upon transferring control of the hardware, software, and services to the customer and in an amount that reflects the consideration we expect to receive and the estimated benefit the customer receives over the term of the contract.
Generally, we recognize revenue under each of our performance obligations as follows:
The Company earns sales-based contract revenue from services rendered under specific agreements, which hinge on a third-party reseller who possesses the exclusive authority to engage directly with veteran-owned hospitals. Evaluating the Company's role in these contracts necessitates assessing whether it functions as the principal or agent, a determination that involves analyzing the extent of control the Company wields over the contracts.
Following its assessment, the Company reports revenue from services provided under such contracts on a gross basis. This decision is justified by the Company's primary responsibility to fulfill the contractual obligations, including delivery and installation of equipment and software, training, and its control over other services within the contract period. Furthermore, the Company directly sets the contract price with its customers based on the services outlined in the statement of work. As the Company is responsible for fulling this promise and maintains control, the Company is acting as the principal.
Disaggregation of Revenue
The following presents gross revenues disaggregated by our business models:
Contract Liabilities
Our subscription-based contracts payment arrangements are required to be paid monthly which are recognized into revenue when received. Some customers choose to pay their subscription fee in advance. Customer payments received in advance of satisfaction of the related performance obligations are deferred as contract liabilities. These amounts are recorded as “deferred revenue” in our condensed consolidated balance sheet and recognized into revenues over time.
Our sales-based contract payment arrangements with our customers typically include an initial equipment payment due upon signing of the contract and subsequent payments when certain performance obligations are completed. Customer payments received in advance of satisfaction of related performance obligations are deferred as contract liabilities. These amounts are recorded as “deferred revenue” in our condensed consolidated balance sheet and recognized into revenues as either a point in time or over time.
During the years ended December 31, 2023, and 2022, a total of $21,145 and $240,302, respectively, of subscription-based deferred contract liability was recognized as revenue. The table below details the subscription-based contract liability activity during the years ended December 31, 2023, and 2022, included in the Other current liabilities.
During the years ended December 31, 2023, and 2022, a total of $1,894,777 and $1,838,056, respectively, of sales-based deferred contract liability was recognized as revenue. The table below details the sales-based contract liability activity during the years ended December 31, 2023 and 2022, included in the Other current liabilities.
As of December 31, 2023, the aggregate amount of deferred revenue from subscription-based contracts and sales-based contracts allocated to performance obligations that are unsatisfied or partially satisfied is approximately $1,922,925 and will be recognized into revenue over time as follows:
Based on our contracts, except for initial equipment sales, we invoice customers once our performance obligations have been satisfied, at which point payment is unconditional. Accounts receivable is recorded when the right to consideration becomes unconditional and are reported accordingly our consolidated financial statements.
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 years ended December 31, 2023, and 2022, included in other assets in the accompanying consolidated balance sheet.
Significant Judgements When Applying Topic 606 Contracts with our customers are typically structured similarly and include various combinations of our products, software solutions, and related services. Determining whether the various contract promises are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.
Contract transaction price is allocated to distinct performance obligations using estimated standalone selling price. We determine standalone selling price maximizing observable inputs such as standalone sales, competitor standalone sales, or substantive renewal prices charged to customers when they exist. In instances where standalone selling price is not observable, we utilize an estimate of standalone selling price. Such estimates are derived from various methods that include cost plus margin, and historical pricing practices. Judgment may be required to determine standalone selling prices for each performance obligation and whether it depicts the amount we expect to receive in exchange for the related good or service.
Contract modifications occur when we and our customers agree to modify existing customer contracts to change the scope or price (or both) of the contract or when a customer terminates some, or all, of the existing services provided by us. When a contract modification occurs, it requires us to exercise judgment to determine if the modification should be accounted for as a separate contract, the termination of the original contract and creation of a new contract, a cumulative catch-up adjustment to the original contract, or a combination.
Contracts with our customers include a limited warranty on our products covering materials, workmanship, or design for the duration of the contract. We do not offer paid additional extended or lifetime warranty packages. We determined the limited warranty in our contract is not a distinct performance obligation. We do not believe our estimates of warranty costs to be significant to our determination of revenue recognition and, therefore, did not reserve for warranty costs. |
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| Leases | Leases
The Company has an operating lease primarily consisting of office space with a remaining lease term of 20 months. At the lease commencement date, an operating lease liability and related operating lease asset are recognized. The operating lease liabilities are calculated using the present value of lease payments. The discount rate used is either the rate implicit in the lease, when known, or our estimated incremental borrowing rate. Operating lease assets are valued based on the initial operating lease liabilities plus any prepaid rent and direct costs from executing the leases. |
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| 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 common shares 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 to purchase our Common Stock (the “Warrants”) and convertible debt. Potential common shares totaling approximately, and at December 31, 2023, and 2022, respectively, have been excluded from the diluted earnings per share calculation as they are anti-dilutive due to our reported net loss. The potential common shares consist of stock options and warrants. |
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| Stock Based Compensation |
We recognize compensation expense for all share-based payments granted and amended based on the grant date fair value estimated in accordance with GAAP. Compensation expense is generally recognized on a straight-line basis over the employee’s requisite service period based on the award’s estimated lives for fixed awards with ratable vesting provisions. |
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| Debt Discount Costs | Debt Discount Costs
Costs incurred with parties who are providing long-term financing, with Warrants issued with the underlying debt, are reflected as a debt discount based on the relative fair value of the debt and Warrants. These discounts are generally amortized over the life of the related debt, using the effective interest rate method or other methods approximating the effective interest method. Additionally, convertible debt issued with a beneficial conversion feature is recorded at a discount based on the difference in the effective conversion price and the fair value of the Company’s stock on the date of issuance, if any. Outstanding debt is presented net of any such discounts on the accompanying consolidated financial statements. |
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| Deferred Debt Issuance and Debt Financing Costs | Deferred Debt Issuance and Debt Financing Costs
Costs incurred through the issuance of Warrants to parties who are providing long-term financing availability, which includes revolving credit lines, are reflected as deferred debt issuance based on the fair value of the Warrants issued. Costs incurred with third parties related to issuance of debt are recorded as deferred financing costs. These costs are generally amortized over the life of the financing instrument using the effective interest rate method or other methods approximating the effective interest method. Amounts associated with our senior secured convertible notes are netted with the outstanding debt on the accompanying consolidated financial statements while amount associated with credit facilities are presented in other assets on the accompanying consolidated statements of operations. |
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| Shipping and Handling Costs | Shipping and Handling Costs
We expense all shipping and handling costs as incurred. These costs are included in network operations on the accompanying consolidated statements of operations. |
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| Advertising Costs | Advertising Costs
We consider advertising costs as costs associated with the promotion of our products through the various media outlets and trade shows. We expense all advertising costs as incurred. Our advertising expense for the years ended December 31, 2023, and 2022, totaled approximately $335,000 and $111,000, respectively. |
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| Concentration of Credit Risks and Customer Data | Concentration of Credit Risks and Customer Data
In 2023, our revenue was driven significantly by two customers, accounting for 17% and 13% respectively, while in 2022, a single customer contributed 12% to our revenue. As of December 31, 2023, we had one customer that accounted for 21% of our accounts receivable. |
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| Use of Estimates | Use of Estimates
Our financial statements have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent assets and liabilities. We evaluate our estimates, including those related to contingencies, on an ongoing basis. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. |
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| Recently Issued and Newly Adopted Accounting Pronouncements | Recently Issued and Newly Adopted Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40), (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The ASU 2020-06 amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently evaluating the impact of adopting this standard.
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments — Credit Losses (Topic 326) (“ASU 2016-13”). ASU 2016-13 modifies the measurement of expected credit losses of certain financial instruments, requiring entities to estimate an expected lifetime credit loss on financial assets. The ASU amends the impairment model to utilize an expected loss methodology and replaces the incurred loss methodology for financial instruments including trade receivables. The amendment requires entities to consider other factors, such as historical loss experience, current conditions and reasonable and supportable forecasts. In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, which deferred the effective date of the new guidance by one year to fiscal years beginning after December 15, 2022, with early adoption permitted. In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments – Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures, which eliminate the accounting guidance for TDRs by creditors in Subtopic 310-40. Rather than applying the recognition and measurement guidance for TDRs, an entity must apply the loan refinancing and restructuring guidance in paragraphs 310-20-35-9 through 35-11 to determine whether a modification results in a new loan or a continuation of an existing loan. The effective date for this amendment is upon adoption of ASU 2016-13 and should be applied prospectively, with option of a modified retrospective transition method. The Company has successfully implemented Accounting Standard 2016-13, Topic 326, and after careful consideration, management has concluded that the adoption did not result in a material impact on the financial position, results of operations, or cash flows of the Company. The Company will continue to monitor and assess the impact of this standard in subsequent reporting periods and provide any necessary updates as required by accounting regulations. |
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| The following presents gross revenues disaggregated by our business models: | The following presents gross revenues disaggregated by our business models:
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| The table below details the subscription-based contract liability activity during the years ended December 31, 2023, and 2022, included in the Other current liabilities. |
During the years ended December 31, 2023, and 2022, a total of $21,145 and $240,302, respectively, of subscription-based deferred contract liability was recognized as revenue. The table below details the subscription-based contract liability activity during the years ended December 31, 2023, and 2022, included in the Other current liabilities.
During the years ended December 31, 2023, and 2022, a total of $1,894,777 and $1,838,056, respectively, of sales-based deferred contract liability was recognized as revenue. The table below details the sales-based contract liability activity during the years ended December 31, 2023 and 2022, included in the Other current liabilities.
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| As of December 31, 2023, the aggregate amount of deferred revenue from subscription-based contracts and sales-based contracts allocated to performance obligations that are unsatisfied or partially satisfied is approximately $1,922,925 | As of December 31, 2023, the aggregate amount of deferred revenue from subscription-based contracts and sales-based contracts allocated to performance obligations that are unsatisfied or partially satisfied is approximately $1,922,925 and will be recognized into revenue over time as follows:
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| The table below details the activity in these deferred installation costs during the years ended December 31, 2023, and 2022, included in other assets in the accompanying consolidated balance sheet. | The table below details the activity in these deferred installation costs during the years ended December 31, 2023, and 2022, included in other assets in the accompanying consolidated balance sheet.
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STOCKHOLDERS’ EQUITY (Tables) |
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Dec. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| A summary of our Warrants activity and related information follows: | A summary of our Warrants activity and related information follows:
|
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| A summary of our stock option activity and related information follows: |
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INCOME TAXES (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| The provision for income taxes consists of the following: | The provision for income taxes consists of the following:
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| Schedule of income tax reconciliation |
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| The components of the deferred tax assets and liabilities are as follows: | The components of the deferred tax assets and liabilities are as follows:
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INVENTORY (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Inventory consists of the following: | Inventory consists of the following:
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OTHER CURRENT ASSETS (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other current assets consist of the following: | Other current assets consist of the following:
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PROPERTY AND EQUIPMENT (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property and equipment consist of the following: | Property and equipment consist of the following:
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OTHER ASSETS (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Intangible assets consist of the following: | Intangible assets consist of the following:
|
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| Other assets consist of the following: | Other assets consist of the following:
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OTHER CURRENT LIABILITIES (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Payables and Accruals [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of other current liabilities | Other current liabilities consist of the following:
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COMMITMENTS AND CONTINGENCIES (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of future debt payments | As of December 31, 2023, future debt payments due are as follows:
Accrued interest due related parties totaled $445,528 and $337,028, as of December 31, 2023 and 2022, respectively.
Consent and Agreement to Cancel and Exchange Existing Notes and Warrants
On December 30, 2022, CareView Communications, Inc. (“CareView” or the “Company”) entered into a consent and agreement to cancel and exchange existing notes and issue replacement notes and cancel warrants (the “Cancellation Agreement”) with certain holders (the “Investors”) of senior secured convertible promissory notes (“Notes”) and warrants (“Warrants”) to purchase the Company’s common stock, that were issued pursuant to that certain Note and Warrant Purchase Agreement, dated as of April 21, 2011 (as amended, modified, or supplemented from time to time) (the “Purchase Agreement”). The Cancellation Agreement provided for the cancellation of all outstanding Notes (with a total aggregate outstanding amount of approximately $87,376,000) and Warrants (for the purchase of an aggregate of approximately 14,204,000 shares of common stock) issued pursuant to the Purchase Agreement in exchange for the issuance of replacement senior secured convertible promissory notes (the “Replacement Notes”) with an aggregate principal amount of $44,200,000.
On March 30, 2023, HealthCor noteholders owning an aggregate of $36,000,000 Replacement Notes, entered into a Replacement Note Conversion Agreement, wherein half, fifty percent, of the HealthCor Replacement Notes were converted into shares of the Company’s common stock at a conversion price of $ per share, resulting in the issuance of an aggregate of shares. The other related ($6,394,168) and non-related () parties Replacement Notes of $8,200,000 were likewise converted into shares of the Company’s common stock at a conversion price of $ per share, resulting in the issuance of a combined total aggregate of shares (the “Conversion Shares”). The shares bear a lockup legend that expires December 31, 2023.
On May 24, 2023, HealthCor noteholders owning an aggregate of $18,000,000 Replacement Notes, presented Conversion Notices, pursuant to the terms of the Replacement Note, for the conversion of the Replacement Notes into shares of the Company’s common stock at a conversion price of $ per share. The shares bear a lockup legend that expires December 31, 2023. |
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LEASE (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lease | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating lease asset and liability for our operating lease were recorded in the consolidated balance sheet as follows: | Operating lease asset and liability for our operating lease were recorded in the consolidated balance sheet as follows:
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| Future lease payments included in the measurement of operating lease liability on the consolidated balance sheet as of December 31, 2023, for the following five fiscal years and thereafter as follows: | Future lease payments included in the measurement of operating lease liability on the consolidated balance sheet as of December 31, 2023, for the following five fiscal years and thereafter as follows:
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| The table below presents certain information related to the cash flows for the Company’s operating lease for twelve months ending December 31, 2023: | The table below presents certain information related to the cash flows for the Company’s operating lease for twelve months ending December 31, 2023:
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The following presents gross revenues disaggregated by our business models: (Details) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
|
| Product Information [Line Items] | ||
| Gross revenue | $ 9,684,618 | $ 7,901,341 |
| Sales-based equipment package revenue [Member] | ||
| Product Information [Line Items] | ||
| Gross revenue | 3,407,263 | 1,437,758 |
| Sales-based software bundle revenue [Member] | ||
| Product Information [Line Items] | ||
| Gross revenue | 1,894,777 | 1,349,096 |
| Sales-based contract revenue [Member] | ||
| Product Information [Line Items] | ||
| Gross revenue | 5,302,040 | 2,786,854 |
| Subscription-based lease revenue [Member] | ||
| Product Information [Line Items] | ||
| Gross revenue | $ 4,382,578 | $ 5,114,487 |
The table below details the subscription-based contract liability activity during the years ended December 31, 2023, and 2022, included in the Other current liabilities. (Details) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
|
| Disaggregation of Revenue [Line Items] | ||
| Balance, beginning of period | $ 869,485 | $ 752,526 |
| Balance, end of period | 869,485 | |
| Subscription-Based Contract Liability [Member] | ||
| Disaggregation of Revenue [Line Items] | ||
| Balance, beginning of period | 21,145 | 231,141 |
| Additions | 30,306 | |
| Transfer to revenue | (21,145) | (240,302) |
| Balance, end of period | 21,145 | |
| Sales-Based Contract Liability [Member] | ||
| Disaggregation of Revenue [Line Items] | ||
| Balance, beginning of period | 869,485 | |
| Additions | 2,948,217 | 1,955,015 |
| Transfer to revenue | (1,894,777) | (1,838,056) |
| Balance, end of period | $ 1,922,925 | $ 869,485 |
As of December 31, 2023, the aggregate amount of deferred revenue from subscription-based contracts and sales-based contracts allocated to performance obligations that are unsatisfied or partially satisfied is approximately $1,922,925 (Details) |
Dec. 31, 2023
USD ($)
|
|---|---|
| Total | $ 1,922,925 |
| 2024 [Member] | |
| Total | 1,752,061 |
| 2025 [Member] | |
| Total | $ 170,864 |
The table below details the activity in these deferred installation costs during the years ended December 31, 2023, and 2022, included in other assets in the accompanying consolidated balance sheet. (Details) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
|
| Accounting Policies [Abstract] | ||
| Balance, beginning of period | $ 33,461 | $ 68,901 |
| Additions | 45,679 | |
| Transfer to expense | (30,831) | (35,440) |
| Balance, end of period | $ 48,309 | $ 33,461 |
GOING CONCERN, LIQUIDITY AND MANAGMENTS PLANS (Details Narrative) - USD ($) |
12 Months Ended | ||||
|---|---|---|---|---|---|
May 24, 2023 |
Mar. 30, 2023 |
Dec. 31, 2023 |
Dec. 31, 2022 |
May 22, 2023 |
|
| Short-Term Debt [Line Items] | |||||
| Working capital | $ 37,122,344 | ||||
| Noteholders owning replacement notes | $ 44,200,000 | $ 41,360,076 | |||
| Debt to equity conversion (in dollars per share) | $ 0.10 | $ 0.10 | |||
| Common stock, authorized | 800,000,000 | 500,000,000 | 800,000,000 | ||
| Replacement Notes [Member] | |||||
| Short-Term Debt [Line Items] | |||||
| Noteholders owning replacement notes | $ 18,000,000 | $ 26,200,000 | |||
| Debt to equity conversion (in dollars per share) | $ 0.10 | $ 0.10 | |||
| Noteholders owning replacement notes (in shares) | 180,000,000 | 262,000,000 | |||
The provision for income taxes consists of the following: (Details) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
|
| Deferred: | ||
| Total | $ 74,518 | |
| Tax Year 2023 [Member] | ||
| Current: | ||
| Federal | ||
| State income tax, net of federal benefit | 74,518 | |
| Sub-total: | 74,518 | |
| Deferred: | ||
| Federal | ||
| State income tax, net of federal benefit | ||
| Sub-total: | ||
| Total | $ 74,518 | |
| Tax Year 2022 [Member] | ||
| Current: | ||
| Federal | ||
| State income tax, net of federal benefit | 6,045 | |
| Sub-total: | 6,045 | |
| Deferred: | ||
| Federal | ||
| State income tax, net of federal benefit | ||
| Sub-total: | ||
| Total | $ 6,045 | |
Schedule of income tax reconciliation (Details) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
|
| Operating Loss Carryforwards [Line Items] | ||
| Total | $ 74,518 | |
| Tax Year 2023 [Member] | ||
| Operating Loss Carryforwards [Line Items] | ||
| Expected income tax benefit at statutory rate | (814,332) | |
| Debt discount amortization | ||
| Permanently disallowed interest | 1,329,688 | |
| Non-taxable debt forgiveness income | ||
| Deferred tax adjustments | (24,443,804) | |
| State income tax, net of federal benefit | (115,509) | |
| Other reconciling items | 4,194 | |
| Change in valuation account | 24,114,281 | |
| Total | $ 74,518 | |
| Tax Year 2022 [Member] | ||
| Operating Loss Carryforwards [Line Items] | ||
| Expected income tax benefit at statutory rate | (1,204,155) | |
| Debt discount amortization | 55,539 | |
| Permanently disallowed interest | 314,510 | |
| Non-taxable debt forgiveness income | (494,332) | |
| Deferred tax adjustments | 9,019,593 | |
| State income tax, net of federal benefit | 4,776 | |
| Other reconciling items | 1,390 | |
| Change in valuation account | (7,871,276) | |
| Total | $ 6,045 | |
The components of the deferred tax assets and liabilities are as follows: (Details) - USD ($) |
Dec. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Deferred Tax Assets (Liabilities): | ||
| Tax benefit of net operating loss carry-forward | $ 43,401,395 | $ 19,261,098 |
| Accrued interest | 864,050 | 1,522,314 |
| Stock based compensation | 734,667 | 342,341 |
| Intangible assets | (10,922) | 14,723 |
| Fixed assets | 3,991 | 103,619 |
| Accrued liabilities | 52,601 | 67,600 |
| Capitalized research expenses | 649,695 | |
| Research and development credit carry-forward | 1 | 1 |
| Total deferred tax assets | 45,695,478 | 21,311,696 |
| Valuation allowance for deferred tax assets | (45,695,478) | (21,311,696) |
| Deferred tax assets, net of valuation allowance |
INCOME TAXES (Details Narrative) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
|
| Operating Loss Carryforwards [Line Items] | ||
| Deferred tax valuation allowance increase (decrease) | $ 24,114,281 | $ (7,601,775) |
| Internal Revenue Service (IRS) [Member] | ||
| Operating Loss Carryforwards [Line Items] | ||
| Net operating loss carryforwards | $ 86,291,000 | |
| Expiration of net operating tax loss carry-forward | Dec. 31, 2028 | |
Inventory consists of the following: (Details) - USD ($) |
Dec. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Inventory Disclosure [Abstract] | ||
| Equipment/components | $ 294,435 | $ 301,446 |
| TOTAL INVENTORY | $ 294,435 | $ 301,446 |
Other current assets consist of the following: (Details) - USD ($) |
Dec. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
| Prepaid insurance | $ 180,267 | |
| Other prepaid expenses | 62,843 | 71,020 |
| Sales tax overpayment | 91,981 | |
| TOTAL OTHER CURRENT ASSETS | $ 335,091 | $ 71,020 |
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
|
| Property, Plant and Equipment [Abstract] | ||
| Depreciation expense | $ 334,676 | $ 501,521 |
Intangible assets consist of the following: (Details) - USD ($) |
Dec. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Finite-Lived Intangible Assets [Line Items] | ||
| Cost | $ 899,729 | $ 1,299,746 |
| Accumulated amortization | 493,428 | 479,640 |
| Intangible assets, net | 406,301 | 820,106 |
| Patents and Trademarks [Member] | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Cost | 879,492 | 1,213,850 |
| Accumulated amortization | 478,250 | 395,715 |
| Intangible assets, net | 401,242 | 818,135 |
| Other Intangible Assets [Member] | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Cost | 20,237 | 85,896 |
| Accumulated amortization | 15,178 | 83,925 |
| Intangible assets, net | $ 5,059 | $ 1,971 |
Other assets consist of the following: (Details) - USD ($) |
Dec. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Other assets noncurrent gross | $ 2,133,064 | $ 1,812,137 |
| Accumulated amortization | 1,831,054 | 1,602,488 |
| Other assets, net | 302,010 | 209,649 |
| Deferred Installation Costs [Member] | ||
| Other assets noncurrent gross | 1,397,720 | 1,352,041 |
| Accumulated amortization | 1,349,410 | 1,318,580 |
| Other assets, net | 48,310 | 33,461 |
| Deferred Sales Commissions [Member] | ||
| Other assets noncurrent gross | 439,221 | 163,973 |
| Accumulated amortization | 279,459 | 98,116 |
| Other assets, net | 159,762 | 65,857 |
| Prepaid License Fee [Member] | ||
| Other assets noncurrent gross | 249,999 | 249,999 |
| Accumulated amortization | 202,185 | 185,792 |
| Other assets, net | 47,814 | 64,207 |
| Security Deposit [Member] | ||
| Other assets noncurrent gross | 46,124 | 46,124 |
| Accumulated amortization | ||
| Other assets, net | $ 46,124 | $ 46,124 |
OTHER ASSETS (Details Narrative) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
|
| Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
| Amortization expense | $ 79,447 | $ 51,967 |
| Impairment cost | $ 334,358 | $ 0 |
Schedule of other current liabilities (Details) - USD ($) |
Dec. 31, 2023 |
Dec. 31, 2022 |
||
|---|---|---|---|---|
| Payables and Accruals [Abstract] | ||||
| Allowance for system removal | $ 54,802 | $ 54,802 | ||
| Accrued paid time off | 164,566 | 154,776 | ||
| Deferred officer compensation | [1] | 49,528 | 139,041 | |
| Other accrued liabilities | 220,601 | 43,389 | ||
| TOTAL OTHER CURRENT LIABILITIES | $ 489,497 | $ 392,008 | ||
| ||||
Schedule of future debt payments (Details) |
Dec. 31, 2023
USD ($)
|
|---|---|
| Defined Benefit Plan Disclosure [Line Items] | |
| Total | $ 20,700,000 |
| Loans Payable [Member] | |
| Defined Benefit Plan Disclosure [Line Items] | |
| Total | 20,700,000 |
| Related Party [Member] | |
| Defined Benefit Plan Disclosure [Line Items] | |
| 2024 | 700,000 |
| Related Party [Member] | Loans Payable [Member] | |
| Defined Benefit Plan Disclosure [Line Items] | |
| 2024 | 700,000 |
| Nonrelated Party [Member] | |
| Defined Benefit Plan Disclosure [Line Items] | |
| 2024 | 20,000,000 |
| Nonrelated Party [Member] | Loans Payable [Member] | |
| Defined Benefit Plan Disclosure [Line Items] | |
| 2024 | $ 20,000,000 |
Operating lease asset and liability for our operating lease were recorded in the consolidated balance sheet as follows: (Details) - USD ($) |
Dec. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Assets | ||
| Total lease asset | $ 292,990 | $ 434,330 |
| Current liabilities: | ||
| Operating lease liability | 188,184 | 175,520 |
| Long-term liabilities: | ||
| Operating lease liability, net of current portion | 139,099 | $ 305,259 |
| Total lease liability | $ 327,283 |
Future lease payments included in the measurement of operating lease liability on the consolidated balance sheet as of December 31, 2023, for the following five fiscal years and thereafter as follows: (Details) |
Dec. 31, 2023
USD ($)
|
|---|---|
| Lease | |
| 2024 | $ 221,069 |
| 2025 | 150,680 |
| Total minimum lease payments | 371,749 |
| Less effects of discounting | (44,466) |
| Present value of future minimum lease payments | $ 327,283 |
The table below presents certain information related to the cash flows for the Company’s operating lease for twelve months ending December 31, 2023: (Details) |
12 Months Ended |
|---|---|
|
Dec. 31, 2023
USD ($)
| |
| Lease | |
| Operating cash flows for operating leases | $ 306,803 |
LEASE (Details Narrative) - USD ($) |
12 Months Ended | ||
|---|---|---|---|
Mar. 04, 2020 |
Dec. 31, 2023 |
Dec. 31, 2022 |
|
| Lease | |||
| Remaining lease term | 20 months | ||
| Expiration of lease | Aug. 31, 2025 | ||
| Lease renewal term | 5 years | ||
| Discount rate | 14.80% | ||
| Rent expense | $ 295,223 | $ 279,005 | |
JOINT VENTURE AGREEMENT (Details Narrative) - Rockwell [Member - Second Rockwell Note Amendment [Member] - Rockwell Note [Member] |
Dec. 31, 2019 |
|---|---|
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |
| Debt previous payment due date | Dec. 31, 2019 |
| Debt revised payment due date | Jan. 31, 2020 |
SUBSEQUENT EVENTS (Details Narrative) - $ / shares |
12 Months Ended | |
|---|---|---|
Mar. 05, 2024 |
Dec. 31, 2023 |
|
| Subsequent Event [Line Items] | ||
| Options granted | 1,074,500 | |
| Subsequent Event [Member] | ||
| Subsequent Event [Line Items] | ||
| Stock price | $ 0.06 | |
| Option Plan 2024 [Member] | Subsequent Event [Member] | ||
| Subsequent Event [Line Items] | ||
| Options granted | 29,837,858 |